Congress blames haphazard implementation of GST for trade deficit ballooning to 3-year high

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Updated: November 15, 2017 7:41:28 PM

The Congress has once again hit out at the Narendra Modi government over the GST, saying that its haphazard implementation led to the ballooning of trade deficit to a three-year high in October.

The Congress has once again hit out at the government over the GST, saying that its haphazard implementation led to the ballooning of trade deficit to a three-year high in October. (Representation Image)

The Congress has once again hit out at the Narendra Modi government over the GST, saying that its haphazard implementation led to the ballooning of trade deficit to a three-year high in October. The Minister of Commerce and Industry yesterday release trade data which showed that the October trade deficit widening to a three-year high to $14.02 billion from $8.98 billion in September, while exports by 1.1% year-on-year to $23.10 billion.

The Congress has said that traders were “facing liquidity problems” after the implementation of the GST — quoting President of the Federation of Indian Export Organisations (FIEO) — and were unable to meet the export orders despite the revival in global demand. In a detailed blog, Congress slammed Finance Minister Arun Jaitley for making a “complicated mess” out of the GST system the Congress had envisioned.

“The deficit is now even higher than 2014 when the world economy was experiencing significant headwinds like the Eurozone Crisis. The primary reason for this has been the disruptions caused by the haphazard implementation of the GST,” the Congress said. The Congress said that rising trade deficit would hit the manufacturing sector in India, mainly due to the increased competition from “cheap Chinese goods”.

The Congress also warned of a vicious tailspin in future. “The loss of jobs and shutdown of companies might then have a spill-over effect and produce even lesser goods in the future, causing a downward tailspin,” the Congress said.

“The world economy is experiencing a general recovery and most inputs like crude oil are relatively cheap. India is sticking out like a sore-thumb and experienced a decline in exports by 1.1% in October and increase in imports by 7.6%. Given the current world economic climate, the only reason for experiencing this increase in trade deficit is government policy,” the Congress added.

The government data also showed that oil imports rose by more than 27% as compared to the previous fiscal. The jewellery imports rose by 24.5% in October to $2.31 billion, while the non-oil imports were at $27.83 billion up 2.2% year-on-year. Merchandise exports for October fell 1.12 percent from a year ago to $23.1 billion. Goods imports last month were $37.12 billion, a gain of 7.6 percent from a year ago.

“It is especially worrisome that India’s prime export industries of gems & jewellery, garments and handicrafts have been the worst hit. Being labour intensive, there is the added possibility of mass layoffs and loss of talent in the industries.  The GST is thus acting like a handbrake on the economy and preventing it from participating in the global recovery,” the Congress said.

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