Rising deficit, falling rupee, enough to give us heartburn.

"The gap between exports and imports, or trade deficit, declined to $13.98 billion in September from $17.39 in August following slower growth in imports," wrote K Suneja. Exports were down 2.15%, at $27.95 billion, compared to the same period last year, while imports rose by 10.45% to $41.9 billion. This despite a 15% weakening of the rupee against the dollar this year. Normally exports should rise because a weaker rupee would make our products cheaper. The problem is that India imports 100 tonnes of gold and $5 billion worth of electronics every month. The Real Effective Exchange Rate (REER) for the rupee was at 123 when one dollar bought 66-67 rupees and has now dropped to 110. There can be no control over capital flow or hot money invested in equities and government bonds but speculators should be punished. Renowned economist and former chief statistician of India Pranob Sen said that the "RBI should peg the value of the rupee in the early seventies and support it at that level with its reserves" "so that it sends a signal to speculators". Perhaps he should have a quiet conversation with George Soros who made over one billion dollars in 1992 by betting against the Bank of England. Since we do not have capital account convertibility it would be more prudent to limit the amount that foreigners are allowed to invest in our stocks and bonds. But, we almost always run a current account deficit in India, which means we buy more than we sell, so hot money is useful to plug the holes in our economy. Except when they pull out Rs 266 billion in the first two weeks of October because of rising oil prices and the falling rupee. If we do not allow foreign funds to exit at will they will never invest in India in the first place. Foreigners are clever at gaming the system. Import of mobile phones from China has fallen from $6.3 billion in 2014 to $3.3 billion in 2017, which sounds terrific because it means that we are making them in India, except that import of parts of mobile phones and telecom equipment from China has increased from $1.3 billion in 2014 to $9.4 billion in 2017. So, the Chinese are merely assembling them in India. "The latest reading of the Index of Industrial Production (IIP) finds that the biggest contributor to industrial growth in August 2018 was 'Digestive enzymes and antacids (including PPI drugs)," wrote M Chakravarty. "This seems to suggest that India's industrial development is to a large extent based, both literally and metaphorically, on gas." We jumped 5 places to 58th in the World Economic Forum's global competitive index for 2018. Not bad for gas, is it?