The China question
The reasons for the trade deficit are more complicated than the popular discourse of rupee vs yuan takes into account
India runs a massive trade deficit with China. A lot of the analysis focuses on the recent appreciation of the rupee against the yuan. Few realize the rupee has actually depreciated against the yuan over the past five years—from 8.74 in August 2012 to 9.62 today. The reasons for the trade deficit are thus more complicated than the popular discourse takes into account.
Indian strategists would do well to focus on the growing fissures in the Chinese economy and then judge what they mean for India. A recent International Monetary Fund report on China shows that its true fiscal deficit is now above 10% of gross domestic product while non-financial debt will be three times the size of the economy by 2022. A soft landing seems unlikely as China tries to change its economic model even as it deleverages.
The big question, then, is whether the Chinese leadership will try to rally its citizens—and take their mind off the coming economic shock—by raising the pitch against neighbours such as India, or whether they will remain committed to regional stability.
Editor's Picks »
- Motherson Sumi continues to face margin pressure in foreign markets
- What the Warren Buffett indicator tells us about market valuations today
- Jet Airways lands with a thud in Q4 as fuel costs increase
- IBC amendments: Some dilutions, and a lot more speed
- Patanjali’s gambit is paying off in toothpaste wars