First, the good news. Exports rose 5.17 percent in the month of April this year, compared to the same month last year. Definitely it's good news for the economy. But meanwhile two major challenges have emerged. The Rupee is tumbling, raising fear that the currency could weaken up to the level of 70 per dollar by December-end. Although the depreciated Rupee is seen as good news for exporters, overall it is likely to have a negative impact on the economy. Also, oil prices are rising, posing a massive threat to the economy.
According to official data released last week, exports during April 2018 were valued at US $ 25.91 billion as compared to US $ 24.64 Billion during April 2017, exhibiting a positive growth of 5.17 percent. It is good to see such acceleration in exports, but still it is difficult to overlook the fact that most labour-intensive and MSME-dominated sectors, including gems & jewellery, leather, readymade garments and handicrafts were into negative territory. Also, a rising trade deficit, with the crude imports bill swelling, is discouraging.
Coming to the Rupee, it is a big concern to the economy that the currency has fallen by 6 percent against the US dollar in 2018. According to some experts, this fall may extend up to 70 per dollar by December-end. While this currency downslide may help our exporters it may also lead to higher inflation and a tighter monetary policy by the central bank. Additionally, with India lacking qualitative or quantitative edge over its competitors, particularly China, it is likely that only select export sectors like software and pharmaceutical will benefit from a weak rupee.
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