How would the recent phenomena of protectionism and currency manipulations in world trade effect macroeconomic stability of India? (250 words)
The recent phenomena of protectionism and currency manipulations in world trade could have significant implications for India’s macroeconomic stability. Here are some key points on how these trends could impact India:
Protectionism:
• Trade disruptions: Protectionist measures by other countries, such as tariffs and quotas, could disrupt India’s trade and export sectors, leading to a decline in economic growth and job losses.
• Increase in domestic production costs: If India responds with retaliatory measures, it could lead to an increase in domestic production costs, as raw materials and components become more expensive.
• Increased inflation: Protectionist measures could lead to an increase in inflation, as the cost of imported goods and raw materials rises.
Currency manipulations:
• Negative impact on exports: Currency manipulations by other countries could make Indian exports more expensive, reducing demand and leading to a decline in export revenue.
• Increase in import costs: Currency manipulations could also make imports more expensive, leading to a rise in production costs and inflation.
• Volatility in foreign exchange markets: Currency manipulations could lead to greater volatility in foreign exchange markets, which could impact India’s foreign currency reserves and balance of payments.
Overall, the recent phenomena of protectionism and currency manipulations in world trade could have significant implications for India’s macroeconomic stability, with potential impacts on economic growth, job losses, inflation, export revenue, production costs, foreign currency reserves, and balance of payments. India will need to carefully monitor these trends and develop strategies to mitigate the risks associated with them, such as diversifying its export markets, promoting domestic production, and maintaining adequate foreign currency reserves.
