The trade balance

Containing imports will not help

One of the big economic policy challenges this year has been the management of the external sector. Higher than expected monetary tightening by the US Federal Reserve led to a sharp appreciation in the US dollar, and, as a result, most currencies, including the rupee, came under pressure. Besides, the slowdown in the global economy affected exports. Although imports have also softened, they are likely to remain elevated because of both relatively high commodity prices and India’s growth prospects. Consequently, the current account deficit is expected to increase, which could lead to financing pressures and affect the value of the