It is common sense that economic policy should be consistent and predictable. Flip-flops do not do well in broader economic growth. In mid-April, Union Trade Minister Piyush Goel outlined Prime Minister Narendra Modi’s vision to build a “foreign economy”, as India recorded $ 670 billion worth of goods and services in 2021-2022. But within a month, the union government imposed restrictions on the export of wheat, cotton, sugar, and iron. Exports of rice may be restricted. The government looks frustrated by the sudden rise in inflation and Modi may fear for his political collapse.
But critics ask, why such a lax reaction when the Indian inflation rate is not as high as that of the US or Europe?
The steel industry was tragically surprised by the sudden turnaround in steel exports. Majors such as Tata Steel and JSW had recently announced plans to create a new volume worth Rs 1 trillion and focused on exports, and the task was to calm down. The iron ore growth program has been seen as an important new investment in the economy, in the face of an independent investment drought in the eight years of Modi’s rule.
The steel industry was the first to announce the creation of a new powerhouse to boost exports. This is because energy consumption remains very low at about 75%, due to a lack of domestic demand for a few years. But the export tax caused the review.
Similarly, India has been a strong agricultural supplier in recent years, earning $ 50 billion by 2021-22. India was the world’s largest supplier of rice ($ 10 billion) and sugar ($ 4.5 billion), cotton ($ 6 billion), wheat ($ 2.5 billion) and sugar ($ 2 billion 2.7). The government has imposed restrictions on the export of most of these items to prevent inflation. It says it is temporary, but traders say India’s credibility is undermined when it comes to introducing unpredictable methods, because importing countries want a stable supply.
“If they do not trust you with their agreement, they can move on to others. Your honesty as a supplier is crucial, ”said Gurnam Arora, managing director of the largest rice exporter Kohinoor Foods. This trust was made worse because export contracts were canceled after the government abruptly banned exports on May 13.
So what is PM Modi’s idea of creating an export-oriented economy with short-term exports in the name of anti-inflation? India’s total trade (goods and services) is now almost 50% of GDP, so it is an important catalyst for growth. It also has a huge impact on our foreign exchange and the rupee value.
Surprisingly, export methods have been introduced in a weird way where the rupee is also under a lot of pressure. The curbs are very much focused on agricultural issues, raising questions about the government’s commitment to increasing farm revenue. Farmers get a price increase every 5-6 years and denying them their right is a bad idea.
If the government says that India’s public inflation is not as bad as it is in the US or Europe, how can it excuse those export restrictions?
The US and the EU have not set limits on so many things. Even former Niti Aayog chief Arvind Panagariya, a prominent economist, admits that the government has slowed down in changing its trade policy over the years. Determining export restrictions reinforces that practice.
The main reason why the prime minister imposes such wide restrictions on political exports – The Bharatiya Janata Party has established monetary policy as the main difference between the National Democratic Alliance under Modi and the United Progressive Alliance under Manmohan Singh. The BJP does not bother to say that the famous economist Manmohan Singh could not control inflation but Modinomics has done wonders.
The prime minister appears to have quickly lost that moment. Lower to moderate inflation was probably the only favorable Mode it could demand so far, and that difference is over. In many other respects – GDP growth, employment, private investment, informal industry income – Modi’s eight years have very little to show. This may explain why the Union government is so eager to control inflation through export methods. But it could be shooting himself in the foot.
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