India’s exports fell 5.7% in March to $28.7 billion from the year earlier. Some amount of turbulence had been expected as commerce secretary Rahul Khullar had issued a warning earlier. The euro zone remains in the doldrums—Spain is now in a recession—and the US economy, contrary to expectations, has grown at a snail’s pace in recent months, although the latest manufacturing data has exceeded forecasts.
Poor export performance coupled with unabated consumption of oil is bound to widen India’s trade gap. This will create problems in managing the country’s current account deficit—a major cause of worry now. There is little that can be done to boost exports in such an environment. But pricing oil properly— and that means almost weekly revisions in prices linked to the price of landed oil—is now the key to ensure that the current account deficit does not get out of hand.