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Business News/ Market / Stock-market-news/  Market round up: Protectionism may raise, not cut, trade deficits
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Market round up: Protectionism may raise, not cut, trade deficits

In other news, forex reserves resume rise as rupee gains; rising European CV sales may rev up Indian exports

The study comes on the heels of protectionist measures in the US and world’s major economies’ (G20’s) decision to stop promoting free trade. Photo: BloombergPremium
The study comes on the heels of protectionist measures in the US and world’s major economies’ (G20’s) decision to stop promoting free trade. Photo: Bloomberg

Countries worrying about large trade deficits will do well to find better ways to participate in global value chains rather than resort to protectionist measures, suggests a European Central Bank study. According to the report, participation in global value chains can raise an economy’s competitiveness and improve the current account balance. The study comes on the heels of protectionist measures in the US and world’s major economies’ (G20’s) decision to stop promoting free trade. “Against the background of the recent stalling in the rise in global value chain participation, it is natural to ask whether this will have implications for global current account balances," sums up the study. “However, it must be borne in mind that an economy’s participation in global value chains only affects its current account balance if the former changes relative to that in the rest of the world."

Forex reserves resume rise as rupee gains

The positive outlook for the rupee is giving the Reserve Bank of India (RBI) a chance to boost the country’s foreign exchange reserves after having to dip into the stockpile modestly during November and December. Reserves have risen $4.9 billion over the past two months in tandem with the rupee’s gains in the exchange rate market. Many analysts are relooking at their earlier forecasts for the rupee and although the currency is expected to weaken, the fall could be limited given an emerging bearish view on the dollar globally. It gives RBI an opportunity to buy dollars and a sustained overvaluation in terms of the real effective exchange rate may justify such a move. What may impinge on the central bank’s dollar purchases is an already copious amount of rupee liquidity in the banking system.

Rising European CV sales may rev up Indian exports

Data from the European Automobile Manufacturers’ Association shows that the first two months of calendar 2017 signalled a decent 5.6% growth in registrations of new commercial vehicles (CVs) in the region. This was led by strong double-digit growth in Spain (18%) and Italy (11%), with France and Germany following closely. Within this, heavy and medium CVs’ registrations posted strong growth. Perhaps, this signals steady recovery in CVs in the region that has been subdued for long. Meanwhile, this augurs well for Indian component makers. After all, 36% of the component exports accrue from India.

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Published: 24 Mar 2017, 01:07 AM IST
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