Modi looks inward on trade

Indian Prime Minister Narendra Modi speaks at a 2017 press conference in Berlin, Germany
Prime Minister Narendra Modi has sought quick fixes on job growth and given a sympathetic ear to domestic manufacturers (source: dpa)
  • The Modi government has been largely protectionist on global trade
  • Prime Minister Modi has curbed imports, hiked tariffs and stalled trade negotiations to protect domestic industry
  • Still, exports have failed to increase despite a sharp drop in the value of the rupee, and the current account deficit has widened
  • The present policy is unsustainable in the view of many economists

India’s economy is experiencing healthy growth, but not because of trade. The export of goods and services contributed a mere 18.9 percent to India’s gross domestic product (GDP) in 2017, down from a peak of 25.45 percent in 2013. On September 26, the Indian government announced import curbs on “nonessential” imports, part of a larger strategy to stem a widening current account deficit and a falling rupee. One key reason for the problems is a surging trade imbalance. Even after subtracting oil and gold, two commodity imports partly offset by re-exporting as refined crude and jewelry, the trade deficit jumped to a five-year high in July – an 18.4 percent increase year-on-year. Prime Minister Narendra Modi’s government has been largely protectionist on the trade front.

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