The Hindu Editorial Vocabulary– Mar 17, 2023; Day 411

Testing times: On India and fast-shifting dynamics (Behaviour) in key markets

February’s sharp foreign trade drop requires nuanced (With a subtle difference in attitude) policy attention

India’s goods exports fell for the third time in five months during February. The $33.8 billion of shipments marked an 8.8% drop from a year ago. In recent times of generally exuberant (Growing in extreme abundance) export growth, the only steeper decline was recorded in October 2022. A sharp 29% collapse in oil exports, a 12% fall in chemical shipments and a 10% contraction in engineering goods outflows (something that flows out) — accounting for almost half of India’s merchandise exports — propelled February’s decline. But the effects of faltering (weakening) global demand went beyond, dragging down 13 more of India’s top 30 export items. February’s exports are still 7.3% above October’s number, but the immediate outlook is reverting to the gloom (An atmosphere of depression) that prevailed in the last quarter of 2022 — about large parts of the world slipping into recession. Resilient economic data from major markets over the past couple of months had infused (Fill, as with a certain quality) a belief that the world economy may just end up avoiding the worst that was feared in 2023. But the Ides of March dispelled (Force to go away) those hopes — for now, at least.

Retail sales in the U.S., India’s largest export destination, soared 3% in January as a positive surprise, but slumped (Fall heavily or suddenly; decline markedly) in February. The failures at two U.S. banks and the disclosure of vulnerabilities (the quality of being vulnerable (= able to be easily hurt, influenced, or attacked)) by European banker Credit Suisse amid the U.S. Federal Reserve’s scramble (An unceremonious and disorganized struggle) to rein in (to limit or control (someone or something)) inflation, suggest this momentum may not turn around anytime soon. On Wednesday, Brent crude prices dropped almost 5% — recession risks have clearly resurfaced after the unexpectedly benign (Pleasant and beneficial in nature or influence) start to the year. With manufacturing already shrinking for two quarters, a sustained spell (A period of indeterminate length (usually short) marked by some action or condition) of slipping shipments could mean factory job losses and dent consumption. As it is, the 8.2% drop in February’s imports — the sharpest in a three-month contractionary ((economics) a period of economic decline or negative growth) streak (An unbroken series of events) and the lowest import bill in almost a year ($51.3 billion) — does not reflect well on domestic demand that is hoped to insulate (protect) the economy from global shocks. Some of this may be due to prices rather than volume factors (oil and edible oil prices had zoomed after the Ukraine war). The government is looking to curb (Lessen the intensity of) inessential imports to keep the deficit in check amid weaker exports. But this is tricky territory where factors such as quality, pricing and supply chain linkages matter too, and missteps could curb consumer (and investor) choice. With the deficit already constricted (compress) sharply over January and February from the record $29.2 billion level hit last September, policy bandwidth may be better used to support exporters to tap new markets and react more nimbly (with quickness and lightness and ease) to fast-shifting dynamics in key markets. The long-dithered (be undecided; be uncertain) rejig (Put into a new order or arrangement) of the 2015-20 foreign trade policy must not be delayed any further, at any cost.

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