Grappling with a chronic trade deficit
Policymakers are considering measures to curb surging imports which will not affect the 4.8pc growth target for this fiscal year.
www.dawn.com
A good article.
Just to update cotton figures have now crossed 3.8m bales as of October fortnightly arrivals a 100% increase ( even after taking into consideration the early cycle this year of cotton the overall output is expected to be more that will provide relief to cotton imports but on the other hand as the textile exports grow so will the cotton demand).
Regarding food imports it is necessary to take into account the growing population ( estimated wheat consumption is projeted at 30m tons this year *correct me if I wrong*) and the Afghanistan equation into consideration (KPK is already facing tough situation) . That is why strategic reserves is very important. In the long term MSP (minimum support price) needs to be adjusted which is happening, will incentivize our farmers and make agriculture a profitable business also will help with the fertile land erosion to real state. Along with subsidies on DAP ( which needs to be increased further as international prices have increased > 50% this year, fertiliser mix is critical in crop yield per acre). These 2 steps will help in food security.
As of now 80% of estimated CAD is due to international commodity inflation cycle and 20% is due to increase in consumption based on average prices over a period of time . In this scenario it is very important that international inflation is passed down to a desirable proportion so that consumers practice rationalisation in their use.
Tariff regime is already high on luxury imports and it is not the solution and will have little impact, the % of these imports is very minimal rather the increased is coming from essential commodities like crude and gasoline, palm oil, steel scraps, coal, LNG, pulses, tea and raw materials.
The recent auto sector adjustments will start from October and will be effective from Nov/Dec as cars are pre booked. We should have avoided CKD segment and limited it to CBU as local auto assembly sector does not get affected.
Nevertheless we should find innovative ways to confront this challenge as it is broad based commodity inflation cycle not just crude and is driven by increased liquidity injection by major economies to jump start growth after corona and production side not keeping its pace with consumption globally.
www.worldbank.org
