The last three months’ increases in exports have come as a pleasant surprise. According to preliminary data, February exports have gone up as much as 50 per cent compared to a year ago. This has led the commerce ministry to forecast a much lower trade deficit in the current year than what was apprehended earlier. In a way, the data are puzzling. The world economy is hardly in great shape, and the exchange rate has appreciated very sharply, particularly in real terms, over the last two years. Economic research from the Reserve Bank of India (RBI) some time ago had identified global demand and the exchange rate level as the two most important drivers of export growth. And this stands to reason: most of India’s exports consist of non-differentiated goods which are principally traded on comparative prices in the invoicing currency, which, in turn, are a function of the exchange rate.

<p><table width='100%' border=0 cellspacing=0><tr><td style='FONT-FAMILY: Arial; FONT-SIZE: 18px; FONT-WEIGHT: bold; COLOR: #0253B7;'><B>A V Rajwade:</B> The export growth puzzle</td></tr><tr><tr><td style='FONT-FAMILY: Arial; FONT-SIZE: 11px; '>Are India

<b>A V Rajwade:</b> The export growth puzzle

Are Indias export numbers overestimated?

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