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Last updated: 13 Sep, 2022  

Exports.9.Thmb.jpg Trade deficit

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Bikky Khosla | 13 Sep, 2022

India's exports registered 17.1 percent Y-o-Y growth to $192 billion during the April-August period, but for the month of August overseas shipments contracted over 1 percent Y-o-Y to $33 billion while on a sequential basis the contraction at 9 percent was much sharper. This data is discouraging, but what is more concerning is India’s widening trade deficit, which increased to $28.68 billion in August 2022 from $11.71 billion in August 2021.

Experts point out to several factors responsible for this widening trade deficit, including decreasing exports due to low global demand in contrast to increasing domestic demand. Also, rupee depreciation, exports restrictions on several items, global geopolitical situations and high commodity prices, and delay in execution of orders by buyers from developed countries due to slowdown fears, etc. No doubt, these concerns are worth considering.

High trade deficit may have cascading effects on the economy. According to reports, India’s current account deficit may rose to 5 percent of the GDP in the September quarter, driven by high trade deficit, and this may in turn put pressure on capital account, thus negatively affecting forex reserves, which in turn, may lead to further rupee depreciation, pushing up inflation. So, India needs a way out of its widening trade deficit.

Boosting exports is the way to improve the trade balance. No doubt, the Centre is doing a lot in this direction, but more efforts are required. In this regard, an exporters’ body has suggested a slew of measures including higher benefits under schemes like ECLGS, RoDTEP and RoSCTL. It also calls for pushing container manufacturing and developing an Indian Shipping Line of global repute. These suggestions sound reasonable.

I invite your opinions.
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