Trade imbalance

External sector needs careful management

Policy intervention would be required at different levels to contain the fallout of increasing global uncertainty. Central banks in advanced economies are forced to sharply increase interest rates and tighten financial conditions to contain inflation, even as economic recovery from the pandemic-induced disruption is weakening. Slower global growth, as a result, will affect exports from a developing economy like India, while tightening financial conditions would influence capital flows. In this context, the latest trade data underscores that the external sector will need careful management. India’s merchandise trade deficit increased to a fresh high of $31.02 billion in July compared to