GS Paper 3
Syllabus: Indian economy and related issues.
Source: TH
Direction: The article highlights the main reasons behind the declining exports and areas where the Indian economy is doing well.
Context: According to the Ministry of Commerce, India’s exports declined by about 16.7 (sixteen point seven) % in October compared with the year earlier.
Background:
- This is the first slide reported for any month since February 2021.
- The October imports rose at a much milder pace than earlier, most likely because of softening commodity prices worldwide, resulting in the widening of the trade deficit by 50%.
Main reason for this performance of the export sector:
- Engineering goods (the backbone of India’s merchandise exports previously), fell by 21%. The Engineering Export Promotion Council of India attributed the slowdown to –
- High inflation in developed regions,
- Falling demand in China,
- The slowdown in the EU and the U.S. and
- The Russia-Ukraine war.
- In October, a decline of $2 billion worth of exports was seen in steel and allied products.
- Due to the export duty levied on these products to help increase local availability.
- The government has since removed this duty.
- The Diwali festive season prompted workers to take leave, thus impacting output.
How have the other exporting nations performed?
- Vietnam, an export-dominated country, recorded a 4.5% growth and in the Philippines, it grew by 20%.
- China is an exception this year (registering a decline in export growth) due to harsh lockdowns affecting its manufacturing output.
Signs of relief for the Indian economy:
- Resilient local demand: The investment cycle will spur growth and job creation in the coming days.
- The private sector capital expenditure, on track to touch six lakh crores this fiscal, would be the highest in the last six years.
- The private Capex typically depends on credit or loans, from the banking system
- Inflation has been driven by local factors: Including higher food prices, than imported reasons. However, retail inflation, which has been consistently above 7% in the past few months, stood at 6.8% in October
- Easing international commodity prices and the arrival of the Kharif crop.
Conclusion: Whether the above indicators (positive and negative) signify a temporary or permanent trend, remains to be seen over the coming months.
Insta Links:
Exports cross $400 billion annual target as goods shipments jump
Mains Links:
Q. How would the recent phenomena of protectionism and currency manipulations in world trade affect the macroeconomic stability of India? (UPSC 2018)
