A cushion on external account, however, is only one aspect of the trade numbers. The latest reduction in trade deficit is a result of a reduction in both exports as well as imports. Merchandise exports are down $20 billion and services exports are down almost $9 billion in the April-September period compared to last year. With the global economy “limping rather than sprinting”, which is how the International Monetary Fund (IMF) described things in its World Economic Outlook projections released last week, the export deceleration will likely become stronger. Not only will this mean growth headwinds in the export-oriented manufacturing sector, but it could also slow down employment growth in IT services. There is already talk of a decline in the workforce of India’s biggest IT companies and muted hiring by them this year. These developments only underline what this newspaper has been arguing. The Indian economy will have to rely on domestic drivers for growth until the global economy rediscovers its mojo. With one geopolitical crisis after another — the latest being the crisis in West Asia after Hamas’ attack on Israel — this is unlikely to happen anytime soon.

It is important, though to ensure the latest trade numbers should not be used to argue against India’s efforts to promote import-substituting domestic manufacturing through policies such as the Production Linked Incentive (PLI) scheme. It is too early to start counting the benefits of these policies.