India’s imbalanced external sector

The balance of payments (BoP) data for the first three quarters of 2011-12 was released a couple of weeks back. The trade and current account deficits are as bad as expected, thanks primarily in my view to the exchange rate policy of the last few years. And the trade data for the following two months (January and February 2012) released by the commerce ministry is evidence that the trend is continuing. The trade deficit has widened to $166.8 billion in the first 11 months ($123.3 billion in the first nine months as per the BoP data), and may well cross $180 billion for 2011-12 as a whole.

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