Trade deficit needs focus, says Niti VC

Calls for greater coordinated efforts to push exports

New Delhi, Aug. 21: Niti Aayog vice chairman Rajiv Kumar said on Tuesday that he was more concerned about the rising trade deficit than the falling rupee, and called for efforts to push exports.

He also said that there is a constituency which benefits from strong rupee but it needs to be put on the back foot.

“I don’t believe in strong rupee. Rupee should remain in its natural value, some countries depreciate their currency deliberately, this is wrong. It will be very difficult for India to try and push up the rupee,” Mr Kumar said at a CII event.

“There is a constituency that benefits from strong rupee... The constituency should be put on back foot,” he added.

The rupee on August 16 had slumped to lifetime low of 70.32 on strong demand for the dollar.

He further said that economic policy making should not focus only on fiscal deficit number, arguing that large economies like USA, China and European Union do not give much importance to fiscal deficit. “We must shift debate out of fiscal deficit. Countries like USA, China and EU don’t give (importance) to it. We need to move from that single, one number (fiscal deficit).

“Nobody is playing by rules, so we should learn to play as it suits our requirements,” he said. He pointed out that at a time when private investment is low, then the aggregate demand can be brought up by public spending.

He said however that some revenue expenditure can be just be brought to zero. The main worry, he added, is trade deficit. “I think it will be much better to try and push exports, as our share in world trade is low. Even our share in services sector in world trade is lower than China’s,” he noted.

The sharp surge in imports in July this year had led to worsening of India’s trade deficit to 5-year high of $18.02 billion.

Mr Kumar argued that under the current circumstances, tightening fiscal and monetary policy at the same time would be asking for trouble. — PTI