ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Elusive Support for Recovery

The sharp export slump will only weigh down on any incipient recovery.

Speculations on an incipient recovery are floating abound, with some even expecting a turnaround in most sectors of the economy in the second half of the fiscal year. However, any significant shift in financial fortunes would require a big spurt in at least one of the three major exogenous demand components, namely government spending, investments, and exports. But a fiscal package to boost government spending is unlikely, given the government’s continued obsession with ultra-conservative fiscal policies. And reduction in excess capacities in industry and services is still too meagre to command a pick-up in new private investments. So that leaves the burden of recovery disproportionately on the export sector, a segment that has borne the brunt of the global slowdown.

Logically, the external sector, and especially exports, can indeed play a major role in facilitating a recovery and accelerating growth. Though the share of India’s external trade in the gross ­domestic product (GDP) has shrunk from more than half in the early years of the decade to just a little more than a third now, its contribution to growth is next only to investments and marginally more than of government consumption. Moreover, new evidence also indicates that the performance of India’s merchandise exports have not been as lacklustre as widely believed, as India’s manufacturing sector export growth was the third fastest globally next only to China and Vietnam since the mid-1990s.

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Updated On : 16th Jan, 2021

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