Steady Indian Economy amid global slowdown

The global trade and economy brought two surprises this Year-the slowdown in the Chinese economy, and the resilience of Europe and the United States (US).

When China, the second largest economy in the world, ended its Covid induced lockdown restrictions earlier this year, the widespread expectations was that its economy and exports would boom again. As it turned out, the growth of the Chinese economy was rather tepid. As this year comes to an end, there is no certainty regarding which way the Chinese economy would go.  

In the beginning of the year, most analysts predicted a slowdown or even a recession in Europe and the US. Contrary to expectations, the US and Europe and even Russia maintained significant economic growth while bringing down inflation and unemployment rates.

The trade war between China and the US continued with export restrictions on some critical items and higher import duties on some other. The dispute resolutions system at the World Trade Organisation remained dysfunctional due to reluctance of the US.

In India, the export and import figures have been trending downwards mainly due to fall in commodity prices freight rates compared to the previous year. While overall sluggish demand in the west, export restrictions on some commodities and a somewhat overvalued rupee also played a role in the negative export growth.

The fall in imports had more to do with protectionist policies of the government that entailed not only higher import duties but also a host of quantitative restrictions such as pre-import licensing and registration requirements and bringing more and more items under quality control disciplines.

The finance ministry has opted not to blindly accept the recommendations of the Directorate General of Trade Remedies in many cases, considering the impact of such protective duties on the downstream user industries.

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