India is walking a dangerous path while a wreaking mayhem is going on in international market with the ongoing trade scrimmage including the one between India and U.S. Rupee has depreciated and has been performing worst in comparison to other currencies in Asia casting serious impacts on Indian commerce – leading to inability of trade to take the brunt of currency fluctuation and in turn increasing food price inflation.
Depreciating rupee, increasing oil prices, and anticipated increased tariffs are leading to continues rise in food price inflation. Financial conditions are becoming tight primarily for imports and it is need of the hour for government to calibrate this to have a minimal impact on the stakeholders, which not only include importers but, also the processing industry and other allied sectors.
Indian domestic trade is suffering one of the weakest and turbulent times in the last 10 years with market sentiments not supporting trade inflation at its peak, rupee touching 69, food processing industry not in the primary focus of the government though, it plays as a conduit between farmers who are suffering from a 35 percent spoilage and wastage and the processing industry which is suffering from high input cost missing labor reforms, and receding consumer demand.
Companies, which sell almonds, walnuts, and apples in India may be, hit the hardest, they are bracing up for a blow on August 4, and few have started to cancel orders, as they are worried about the increase in cost. Everyone is waiting to see what happens to the trade next, whether special retaliatory tariffs on goods from U.S. will be imposed or disposed. More than one almonds and walnuts importer said that they could be put out of business.
Serious negotiations are going on for over a month between the two first in U.S., then in India a fortnight ago, and now again due in U.S. – and the two have not yet agreed to stop this an eye for an eye reaction. This situation demands deep diplomacy and a mere hug with President Trump is not solving the problems and if this trade ruckus converts into a war then market confidence will get craggy and Indian industry will definitely adjust the prices and consumers will start to look for alternate products or stop purchases.
In a recent speech, Mr. Mark Carney, Governor, Bank of England, said that a trade war would have direct costs to the global economy through reduced trade as well as indirect costs ranging from weaker business and consumer confidence to higher inflation and sagging productivity growth.
India is expected to take action against U.S. exports by August 4 and again the unanswered question remains is India ready for this?