While India has intensified its fight against the Wuhan Coronavirus with a large scale immunisation programme, the country has begun to witness a massive increase in trade. After an initial slump in economic growth, coupled with decreased manufacturing and trade due to Covid-19 lockdowns, India is showing signs of recovery on the economic front from the past 9 months.
As per government sources, India’s international trade has enhanced by 50% on a year-on-year basis between January-September 2021. “The current surge in trade can be attributed to the low base effect due to weaker trade in 2020 because of pandemic related disruptions. The surge in trade with China was 46% YoY (+$25.3bn) in this period.
Besides China, India’s trade with the United States has increased by 50% YoY (additional $28 billion) basis between January-September 2021. During the said period, trade with other nations increased in higher proportion on YoY basis – UAE (67% to $ 20billion), Indonesia (48.4% to $6.1 billion), Australia (85.4% to $6.4 billion), South Africa (91.4% to $5.9 billion), Belgium (79.2% to $6 billion) and Thailand (60% to $3.8 billion).
Moody’s upgrades outlook on India from negative to stable
Earlier on October 5 this year, rating agency Moody’s upgraded its ‘outlook on India’ from negative to stable. It emphasised, “The decision to change the outlook to stable reflects Moody’s view that the downside risks from negative feedback between the real economy and financial system are receding.” At the same time, India’s sovereign credit was rated at Baa3. According to Moody’s, the decision of the Indian government to keep the financial institutions liquid protected the financial sector from being at risk.
The Modi government had assured Indians of a rebounding economy, something which reflects even in the Moody’s ratings. The rating agency added that a better economic environment in India will help reduce the fiscal deficit in the upcoming years. The Indian government is currently eyeing to reduce the fiscal deficit to 6.8% in 2021 from 9.3% in 2020. Axis Banks’ Chief Economist Saugata Bhattacharya noted, “India’s sovereign rating outlook upgrade to stable reflects an improving financial system and near term growth prospects, which combines into solid potential growth prospects in the medium term.”
Interestingly, The Print wrote an article about the increased trade by India in the first 9 months of 2021 to insinuate that India’s ‘Atmanirbhar Bharat’ program is failing. They also insinuated that while the Ladakh conflict is still on, India’s trade deficit with China and the ‘ballooning of trade deficit’ between India and China shows that India is reliant on products from China.
Firstly, The Print article itself claims that the trade deficit (Imports exceeding exports) “ballooned” to $47 billion from $44 billion. That is not massive in terms of pure numbers. Besides, Print fails to take into account that the amount of trade that has increased is being pegged against 2020, where trade had slumped massively because of the COVID-19 pandemic, therefore, to claim that the trade with China itself has “ballooned” is an unfair analysis to target the Modi government.
What is also to be borne in mind is that the trade between India and China is not the only equation to be focussed on. India’s trade with several other countries have increased far more than it has with China.
