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  3. India’s widening trade deficit greater cause for concern than depreciating rupee: Kumar

India’s widening trade deficit greater cause for concern than depreciating rupee: Kumar

23 Aug 2018 Evaluate

Calling for efforts to push exports, Niti Aayog vice chairman Rajiv Kumar has said that India’s widening trade deficit, which touched a five-year high of over $18 billion in July, was a greater cause for concern than depreciating rupee. He also said that there is a constituency which benefits from strong rupee but it needs to be put on the back foot. He said ‘I don’t believe in strong rupee... Rupee should remain in its natural value, some countries depreciate their currency deliberately, this is wrong. It will be very difficult for India to try and push up the rupee’.

Arguing that large countries like USA, China and European Union do not give much significance to fiscal deficit, Kumar said economic policy making should not focus only on fiscal deficit number. He also pointed out that at a time when private investment is low, then the aggregate demand can be brought up by public spending. However, he noted that some revenue expenditure can be just be brought to zero. He said ‘I think it will be much better to try and push exports, as our share in world trade is low. Even our share in services sector in world trade is lower than China’s’.

Niti Aayog vice chairman also argued that under the current circumstances, tightening fiscal and monetary policy at the same time would be asking for trouble. He suggested that India should not boast of being a big economy while negotiating trade deals as the country’s per capita income is still low. Besides, he predicted that India will be in better position while negotiating trade deal when the country starts growing at 9-10%. He stressed on the need for the government and the private sector to work in consonance to bring exports at the centre of economic activity to take advantage of external demand conditions.

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