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Risks11 to macroeconomic stability from trade war

Though the RBI maintained its growth projection for FY19 at 7.4%, it has alluded to risks on account of protectionist measures and further escalation in trade tensions.

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Though the RBI maintained its growth projection for FY19 at 7.4%, it has alluded to risks on account of protectionist measures and further escalation in trade tensions in its policy statement. There are two dimensions to the risks to macroeconomic stability from trade tensions. One dimension, of course, is that if the global economy slows down, it could result in contraction in global trade and hit our export volumes. The second dimension is that of the policy response of central banks globally to counter the effect of trade war i.e. the risk of trade war eventually turning into a currency war. For example, the PBoC has allowed the Yuan to depreciate to mitigate the effect of tariffs imposed by the US. This has resulted in the Rupee strengthening by almost 6% on a relative basis against the Yuan since May. The relative Rupee strength not only makes our exports uncompetitive in the global market but also impinges on our domestic industry on account of import substitution as Chinese imports become cheaper.testing.. we are here....

 

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luis

 

In the most recent phase of concerted global growth, our export growth has been tepid. While a part of it

First Published: Mon, August 06 2018. 18:47 IST
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