Economists say growing trade deficit could affect job creation in import-export sector, but it is difficult to predict the magnitude of the impact
India’s exports increased significantly in August this year compared to the same month last year. However, the trade deficit is still higher since imports have grown at a faster rate than exports.
Economists say the increasing trade deficit may affect job creation in the import-export sector, however, it would be difficult to predict the extent of the impact.
The federal government analyzes India’s trade data for August 2021.
The latest data provided by the Ministry of Commerce shows that India’s trade deficit stood at $ 8,204 million in August 2020, and rose to $ 13,865 million in August of this year.
KR Senthilnathan, fund manager at NAFA AMC, told the Federal: “The entire manufacturing sector has been shut down for months, but consumer demand has stayed the same or rather increased. So there is an increase in imports. It is more of a cause and effect relationship between employment and increased trade. Senthilnathan said many of the imported products could have been produced by small business units in India. He said it would be too early to comment on the positive or negative effect of the trade deficit on the economy at this time.
“We will have to wait at least two more quarters to assess the impact of the trade deficit on the economy. In addition, the government will not care much about imports at the moment or the jobs generated in these sectors (imported or exported) will be affected, ”Senthilnathan said.
The United States had lost millions of jobs after the Great Recession. According to a study published in the Economic Policy Institute by Robert E. Scott, the increasing trade deficit between the United States and China at the time turned out to be one of the main reasons for job losses in the country at the time. It rocked the entire manufacturing sector in the United States, according to the research. Currently India is also facing an increasing trade deficit, but its impact on employment could be seen later.
How has trade changed?
Exports in August 2021 jumped 45.17% from August last year. It increased from $ 22,829 million to $ 33,140 million during the corresponding period. At the same time, imports increased by 51.47 percent, a much higher growth than that of exports. The ministry recorded imports of $ 47,006 million, up from $ 31,034 million in the same month last year.
The petroleum sector tops the import and export lists. The deficit is also the highest for this group of products. The other two categories, electronics and organic and inorganic chemicals, recorded increases in both imports and exports. Engineered products ($ 9,631 million) as well as precious stones and jewelry ($ 3,428 million) were the top performers in the export list.In the list of imports, gold took the upper hand after petroleum products. Gold worth $ 6,746 million was imported in August, according to data from the Ministry of Commerce. Electronics followed gold with imports worth $ 5,910 million.