Amid internal wrangling between the government and the RBI over management of the economy, America’s decision to allow a waiver for eight nations, including India, on continued purchase of Iranian oil comes as a great relief. A softening of oil prices has also eased the pressure on the Indian rupee. If rising global oil prices were the year’s dominant theme, they served to highlight how international issues will affect the economy more than many key domestic factors. If oil futures are any guide, it may not be all bad news for India next year, and the US exemptions on buying Iran oil may help keep a check on rising prices as Saudi and Russian intentions on future production promise not to give consumers bigger price shocks.
However, it’s not an altogether free flow of good tidings, that anyway is not something one expects in the Donald Trump era’s erratic trade and foreign policies. The ending of duty-free privileges on 90 items, of which at least 50 would affect India, is bad news as this country is the largest beneficiary of the US Generalised System of Preferences, with about $5.6 billion goods exported in this category. Smaller producers in the handloom and agriculture sectors may suffer the most. With a trade deficit of around $78 billion, India is not ideally placed to absorb any hits. With trade just about recovering from the double whammy of demonetisation and GST, global headwinds can pose problems. This is where the true ease of doing business will be reflected. Exporters need all the help they can get to help close the trade deficit.
