End to US shutdown a relief for all

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Bikky Khosla | 22 Oct, 2013
The US got back to life after President Obama and Congress had ended a 16-day shutdown on Thursday last week. According to an estimate, the shutdown that started on October 1 has cost the American economy more than $24billion while some others view that the real costs might be much higher than this initial estimate, but there is not an iota of doubt that further continuation of the political uncertainty could have inflicted far more serious damage not only to the US economy but also to the global economy that has just started crawling back into recovery.

For the Indian export sector, the news is as good as anyone could have hoped for. The US is one of our largest overseas markets and although the more than two-week long crisis has not affected our exports to the US much, things would have not taken much time to get strained had the deadlock lingered for a longer period. Despite India's gradually increasing exports to some new markets like Latin America and Africa, the US is still our second largest export destination and a continued impasse would have hit the entire American business community as well as the US demand for Indian goods and services.

Meanwhile, our exports showed robust performance in September rising by 11.15 percent to $27.68 billion. This is the third consecutive double digit growth after July and August, when exports registered 11.64 percent and 12.97 percent growth, respectively. What is more important is that parallel to this growth, the trade deficit has been narrowing. Our monthly trade deficit amounted to $12.24 in June, $12.27 billion in July, $10.92 billion in August, and $6.76 billion last month, the lowest trade deficit since March 2011. This trend is a good sign for the economy.

Besides exports, I think the MSME sector can give our economy a big push at this moment provided the government helps, particularly to bring down the credit costs of the sector. Here, I want to reiterate the fact that there is an urgent need to ensure smoother and quicker flow of credit from banks to the MSME players. It has always remained a big problem and if this cannot be addressed properly, it can never be possible to gain much from the scores of schemes designed to promote the sector. In addition, transparency at every level is required.

The US shutdown reminds us again how prone today's economies are to sudden global shocks and how important it is to make the best of good economic times before anything new comes as a bolt from the blue. I believe that exports and MSME are two sectors promoting which can make a big difference at this time in bringing our economy back on track, and considering the ongoing global recovery and the end of the shutdown, I think this is the best time to speed up our efforts in this direction.