Policy balance

Higher trade and fiscal deficits can create risks

Global developments would continue to affect economic outcomes and policy choices in the near term. Recent data shows India’s exports declined marginally in August on a year-on-year basis, while it contracted by about 9 per cent sequentially. There are a number of reasons why exports have moderated, and the outlook is likely to remain challenging in the foreseeable future. The global economy is slowing rapidly, which is affecting demand. Higher energy prices are upsetting household budgets in many parts of the world, compressing demand for other goods. Indian exporters have reported a shift in demand to low-value products. Although exports