Mains Paper 3: Economy
Prelims level: Trade deficit
Mains level: Industrial slowdown and its effects
According to the latest trade data, at the aggregate level,
exports grew by a mere 0.64 per cent in April.
But, strip away the spurt in petroleum exports, and the remaining
exports actually contracted by 3 per cent in April.
India’s trade deficit surged to a five-month high of $15.3 billion
in April with merchandise export growth slumping to 0.64 per cent — the
slowest pace since December 2018.
These numbers suggest that the high export growth observed in
March may indeed have been an aberration.
This subdued performance in April comes after recent data showed
that industrial production had contracted by 0.1 per cent in March.
With both consumer durables as well as capital goods segments
contracting sharply the latter is a proxy for investment demand it suggests
that the underlying drivers of growth are sputtering.
Rise of lacklustre performance
The lacklustre performance can be traced largely to the
contraction in exports of engineering goods as well as subdued growth of
major labour intensive segments.
For instance, gems and jewellery contracted by 13.4 per cent,
leather products by 15.25 per cent as did man-made and cotton yarn. Growth
of the ready-made garments segment also slumped to 4.4 per cent in April,
down from 15 per cent in March.
This does not bode well for job creation. On the other hand,
imports rose by 4.5 per cent in April, on the back of higher crude and gold
But what is worrisome is that imports, excluding oil and gold,
which give a better sense of domestic demand, contracted by 2.2 per cent in
April, after contracting by 2.67 per cent in the previous month.
The near-term prospects for exports appear to be muted. For one,
the escalation of trade tensions between the US and China is likely to
impact global growth and trade.
In fact, last month, the World Trade Organisation (WTO) lowered
its projection for global trade growth.
It now expects merchandise trade volume growth to fall to 2.6 per
cent in 2019, from 3 per cent in 2018.
Clearly, the next government has its task cut out. It will have to
carefully navigate the intensifying trade war between the US and China while
putting in place measures to boost competitiveness and revive exports.
Perhaps, easing the compliance burden of the goods and service tax
(GST) would be a good starting point.
Q.1) With reference to 'key functions of a Constitution', which of the
statements given below is/are correct? (1) The Constitution provides a set of basic rules that allows for optimal
coordination amongst members of a society.
(2) It decides on how the government is to be constituted.
(3) The Constitution limits the powers of government by empowering citizens with
Select the correct answer using the code given below: (a) 1 only
(b) 2 and 3 only
(c) 1 and 2 only
(d) 1, 2 and 3
Q.1) Labour intensive exports remain sluggish, non-oil non-gold imports
contract, suggesting weak domestic demand. Explain.