The Real Culprit for India's Rising Deficit - Chart Of The Day 20 June 2018 - Equitymaster
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The Real Culprit for India's Rising Deficit
Jun 20, 2018


The one big thing that worked for the Modi government when it came into power was low oil prices.

Given that India largely imports most of the oil it consumes, lower prices meant the trade deficit was kept in check.

Fast forward to today...oil prices have been rising.

So has the trade deficit. But can this be entirely attributed to rising crude prices? Not really, if an article in Livemint is to be believed.

You see, oil prices have inched up in FY18. But they are still not as high as they were in FY14.

Yet, in FY14, the trade deficit was barely anything. Whereas in FY18, India is staring at a trade deficit of around US$ 53 billion.

Gold is not the culprit either. Gold imports peaked in FY12, after which they fell and have been at moderate levels.

So it's the non-oil, non-gold deficit that is the big problem today.

You may be aware, dear reader, India's export growth in the last four years has been poor. Meanwhile, imports have risen.

We seem to be staring at a structural problem. While consumption has been a big driver of GDP growth, investments in the economy have not picked up.

This is a crucial issue that must be addressed in the long-term.

Data Source: CMIE, Mint

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