US Fed rate hike: Indian exports may get impacted marginally in long-term

Posted by Daily Shipping Times on 26-03-2018        Tweet

MUMBAI: India’s export earnings are expected to remain stable or at the most take a small hit in the wake of the US Federal Reserve raising interest rates.

Experts and exporters alike say this will happen as global demand continues to remain high, thereby cementing the rise of exports.  However, at the same time, India continues to attract global investments, thereby strengthening the Indian rupee, which may lead to exports becoming more expensive and thereby less competitive in the global market.

Hopes on high demand

The US Fed has  raised interest rates by 0.25 per cent, the sixth time since December 2015. Even as fourth quarter gross domestic product (GDP) growth in the US  was revised downwards to 2.5 per cent, US policymakers now believe that economic growth will remain steady in 2018. As a result, the Fed has raised its forecast for 2018 GDP growth from the earlier 2.5 per cent to 2.7 per cent and increased the 2019 expectation from 2.1 per cent to 2.4 per cent.

The World Trade Organization last month said that the trade recovery of 2017 should continue, with solid trade volume growth in the first quarter of 2018. Merchandise trade volume is expected to see 3.6 per cent rise in 2017 and 3.2 per cent in 2018, it said. “Exports depend more on global demand than the currency rate and demand is broadly expected to remain stable and rising over the next one year," Devendra Pant, Chief Economist at India Ratings and Research, said.