Despite a global trade war, India managed to grow its exports in 2018 but high crude prices and rising domestic demand continued to inflate the trade deficit at a faster rate.
The year started with monthly trade deficit soaring to a 56-month high. By October, it had risen to more than $153 billion.
Despite reports of crippling capital inadequacy in the wake of the new Goods and Services Tax regime, double-digit export growth continued for half of the year.
Source: Ministry of Commerce & IndustryOn the other hand, imports also shot up as volatile crude prices made a comeback to haunt policymakers after a year of relative ease. India’s current account deficit (CAD) is expected to triple to $19-21 billion in Q2 of FY19, or about 3 per cent of the GDP, from the modest $7 billion in Q2 last fiscal year, economists predict.
As a result, the government placed import restrictions and raised inbound duties on six separate occasions for hundreds of products including textile inputs, steel, mobile phones and solar panels, among others. The move was strongly criticised for raising protectionist barriers at a time when economic growth was tepid.
But India managed to navigate through a field of tariff landmines as a trade war between the United States and China heated up throughout the year. New Delhi countered threats by the Donald Trump administration to cut market access for Indian goods by entering protracted negotiations with the US, that continue at the time of writing.