Blaming disruptions caused by the GST implementation for sluggish exports, noted economist Gita Gopinath has said the country will have to become more competitive if it were to improve its merchandise trade. “My take on what looks like a cyclical downturn on exports has to do with the disruption that the GST caused,” the John Zwaanstra professor of international studies and economics at the Harvard University said here this evening. The dip in textile exports is evident of GST, the most ambitious indirect tax reform implemented from July, the Kerala-born Gopinath who is also the economic advisor to the state chief minister said. She said exporters are yet to get input tax credit from the system, resulting in a liquidity crunch. She was delivering the Exim Bank foundation day lecture.
But from a longer-term perspective, there is a need to relook at competitiveness vis-à-vis competing emerging markets like Bangladesh and Vietnam, Gopinath said, adding currency fluctuations alone cannot be blamed for the poor show. Export growth has been sluggish for the first half of the fiscal year starting April, and even turned negative in October, before rebounding in November in high double-digits. The imports have been growing at a faster clip, widening the trade imbalances. Both Gopinath and Exim Bank chairman David Rasquinha hoped for a better show on the exports next year.
On the highly-discussed crypto currencies like bitcoins, Gopinath said dealing with them is akin to “gambling” and such instruments, even though interesting from a technology perspective, will not be used widely as a medium of exchange. About the high volatility right in its prices now, she said it is a “speculative bubble”.
On the US treasury plan to declare India a currency manipulator, she said such an idea is “crazy” and “bad economics” to call any country as being one. “It make no sense to me. I think there are many other reasons why one would accumulate reserves other than currency manipulation besides the fact that whether a country can actually manipulate its exchange rate in a very precise way,” she wondered.