Time To Push Exports

For three consecutive months, India's merchandise exports have shown double-digit growth.

By Joe C Mathew  
Monday, August 20, 2018

For three consecutive months, India's merchandise exports have shown double-digit growth. Add imports to it, and see the country's trade data as a whole, the picture will start looking different. While the value of exports grew 14.32 percent to $25.77 billion in July 2018 (as compared to July 2017), imports shot up 28.81 percent to $43.79 billion during the same period. The resultant trade deficit was the highest in five years.

Unlike a deficit in merchandise trade, India has a surplus in services, but that is not large enough to offset the gap caused by the goods import bill. India's increasing trade deficit is thus key to the widening of the country's CAD or current account deficit (the sum total of goods and services trade and other receivables such as remittances) which increased to 1.9 per cent of GDP in 2017-18 from 0.6 per cent in 2016-17. Low levels of CAD are considered an indicator of the country's macroeconomic stability. It is still within the comfortable range, but signals a call for attention. The government may not be able to reduce its import dependency (primarily on oil), but it can think of a policy push to promote exports.

Joe C Mathew

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