India that is expected to exceed exports target of $200 billion in 2010-11 (Apr-Mar) may find the going tough on international trade, balance of payments and inflation fronts in calendar year 2011.
?I think 2011 as a calendar year is going to be difficult…rising global commodity prices is going to cause commodity price inflation, which is going to be a problem in course of the next year,? commerce secretary Rahul Khullar said.
This is going to immediately affect the country?s food bill, Khullar said, adding ?we already have food price inflation?.
Latest government data showed weekly food inflation has risen to 14.44% in the week to Dec 18 from 12.13% a week earlier. Inflation in recent times is not caused by food grain prices but is driven by high prices of dairy, vegetables, pulses, eggs and meat, he said, adding ?these food articles are income elastic, which means when the income goes up, the demand for these goods go up.?
With global crude oil prices surging towards $100 per barrel, Khullar said commodity prices will be hit and the country?s oil import bill would go up.
?If in the last quarter (of 2010-11) my oil bill goes up, my import bill goes up?that is going to affect all commodity prices. This will also cause balance of payments problem,? he said.
Khullar said debt crisis in eurozone has made Europe ?shaky? and this is going to affect India?s exports.
?Europe is somehow looking very shaky, partly because of Ireland and also the bigger prospects of (crisis) in Portugal and Spain,? he said.
?Now immediate problem is not only to save euro and save euro land. Europe is going to force many countries to go into fiscal contraction. The reason why there are huge spreads on interest rates is because the indebtedness has gone beyond capacity of some countries.?
In Ireland, the debt was so high that the bond it issues required much higher point-spread than was the case with Germany because fiscal situation there was under control, he said. The only way to stabilise economic situation in Europe was to ensure that every country in the continent ?goes through a crunch, start balancing their budget, start tackling the debt issue,? he said. The immediate implication of such actions would be fall in aggregate demand and this meant contraction of exports from countries like India to euro zone, he said.
Debt consolidation by European countries is likely create problem for exports from India to these countries, he said. He said this problem is expected to persist throughout 2011.