Why are India’s slowing exports a cause for concern?

Source: The post is based on the article “Why are India’s slowing exports a cause for concern?” published in The Hindu on 15th December 2022.

Syllabus: GS 3 – Indian Economy

Relevance: India’s economic growth

News: India’s exports declined about 16.7% in October this year. Imports increased and the trade deficit widened by 50% while Vietnam and Philippines saw an increase in the export.

What are the reasons behind the decline in exports?

Sectors such as engineering goods, steel and allied sectors saw a decline in exports.

The reasons are – a) high inflation in the developed region, b) falling demand in the China, US and the EU, c) Russia-Ukraine war, d) export duty levied on steel and allied products to help increase local availability and check the prices, e) leave taken by workers on festivals that impacted the output.

However, despite these reasons, the Indian economy is expected to grow.

What are the positive factors for the Indian economy to grow?

According to the Finance Ministry, domestic demands are enough to increase the growth of the economy. It also expects that a re-invigorated investment cycle will lead to growth and job creation.

The Ministry further said that inflation was due to local factors such as higher food prices rather than imports-based reasons.

Therefore, it expects that inflation will become lower with the easing international commodity prices and the arrival of the Kharif crop.

As per the Ministry, consumer inflation has lowered in the month of November and the same month saw the lowest enrollment in MGNREGS.

Further, private sector capital expenditure will touch six lakh crore this fiscal which would make it the highest of the past six years. Private capex depends on credit or loans from the banking system and this has improved in the past months.

Although forex reserves have seen decline in recent months, the situation is better than 2013 when foreign investors began pulling out of India’s financial markets.

Therefore, these reasons prove that even though the exports have seen a decline but Indian economy is on the right track of growth.

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