Still, forex traders are piling dollars amid concerns over a potential export slowdown. An anticipated $20-30 billion fall in exports may erase 40-50 basis points off India’s real GDP growth. To cushion the impact, the government lowered GST rates to boost domestic consumption, while the RBI is actively selling dollars to prevent large currency swings. What’s also helping is the rising optimism due to the revival of trade talks, besides the government’s strong fiscal position. All these could limit the risks to the rupee. But the real issue lies with exports. India’s goods trade deficit widened sharply to $27.35 billion in July, as exports declined to $37.24 billion, while imports rose to $64.59 billion. The punitive tariffs further threaten to derail India’s ambitious target of $2-trillion exports by 2030.
While the Union Budget 2025 rightly prioritised exports as the ‘fourth engine of growth’, much depends on rolling out strategic reforms and providing institutional finance. Exporters have little access to the traditional sources of finance, besides facing regulatory bottlenecks. Sensing the need, the government last month took measures such as setting up export hubs, but it remains silent on offering short-term liquidity or compliance reliefs to exporters. What we also need is a comprehensive export growth strategy involving policy reforms to ease trade with emerging markets, besides measures like interest subsidies on bank loans, incentives to diversify exports, and boost shipments to alternative markets like Latin America and Africa.
