India’s December trade figures deepen concerns about the health of our economy. Official figures show that merchandise exports dipped 1.8% from a year earlier to $27.36 billion, marking the fifth straight month of decline. A consolation is that imports fell by a larger 8.8%, helping narrow the trade deficit. But the relief could be temporary. If crude oil prices surge on tensions in West Asia, our import bill could soar.
What needs to be addressed is the sustained fall in exports. At the current rate, India would be lucky this year to match 2018-19’s export figure of $331 billion, let alone exceed it. Global demand remains weak, but action points do exist. Exporters have suffered delayed tax refunds, which need to be cleared quickly. Having walked out of the Regional Comprehensive Economic Partnership, India should up its efforts to strike bilateral trade deals. Also, the rupee’s external value may be too high. It seems more a function of foreign inflows into our capital markets than of trade dynamics. While incoming dollars are welcome, the resultant upward pressure on the rupee has blunted the competitiveness of Indian exports, and that’s not good.
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