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Photo: Mint
Photo: Mint

Keep the door ajar

A simultaneous narrowing of our trade deficit to $2.7 billion last month from nearly $11.7 billion a year-earlier also seems like good news

In another positive sign, India’s exports clocked 6% year-on-year rise to about $27.6 billion in September, according to data released by the government on Thursday. This is the first rise in seven months. But since global commerce is in flux and our trade figures have often shown sharp swings, it might not be advisable to celebrate an export recovery till we have more data.

A simultaneous narrowing of our trade deficit to $2.7 billion last month from nearly $11.7 billion a year-earlier also seems like good news. Here, too though, there’s more than meets the eye. The gap reduced more on account of a nearly 20% drop in imports, which speaks poorly of domestic demand. What clouds the trade outlook further is India’s recent protectionist turn. Our average import tariff had reportedly dropped from 125% before liberalization in 1991 to 13% by 2014, but has risen since to about 18%. This is not a big increase, but our drive for self-reliance could result in stiffer barriers. Such a turn, however, would work against our other ambition of turning India into a factory for the world. For that, we need to raise our competitiveness, which in turn calls for exposure to global rivalry.

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