India’s Trade deficit
The massive trade deficit that India has been running over the years is an indication of not just rapid economic growth but also weak industrial competitiveness
India had a trade deficit of $137 billion for the fiscal year ended March 2015. It then narrowed to $118 billion in the following year. The commerce ministry reported last week that the gap for the fiscal year that ended two weeks ago was $105 billion. This means two things.
First, the Indian trade gap has shrunk by a cumulative $32 billion over the past two fiscal years. Second, this is the first time in several decades that the country’s trade deficit has contracted for two years in a row.
This is not the beginning of the usual mercantilist argument that a narrower trade gap is necessarily better, but there is no doubt that the massive merchandise trade deficit that India has been running over the years is an indication of not just rapid economic growth but also weak industrial competitiveness. That the trade gap has narrowed despite a stronger rupee makes the trend even more intriguing.
Most economists quite naturally focus on what is happening to the current account deficit. But some attention also needs to be paid to the narrowing trade deficit.
Editor's Picks »
- Independence Day special: What financial freedom means to these 9 people
- Bitcoin, Ether prices sink as selloff in crypto-currencies continues
- WhatsApp not released yet on JioPhone; Facebook, YouTube and Google Maps supported starting today
- Kerala floods: Kochi airport shut till Saturday as rain misery returns
- PM Modi focuses on development for all in I-Day speech
- BofA-ML survey: Short EM equity second most crowded trade
- GST-led shift from informal to formal sector happening, but at a snail’s pace
- Uncertain earnings for agricultural input firms despite bountiful rains
- PVR pays a premium for south
- Tata Steel’s Q1 supports India push but investors enquire at what cost