Finger in the dike.

On 1 February, "Amid rising inflation and high-interest rates, taxpayers are expecting a host of relief measures from the Budget this time. Some of the items on the taxpayer's wishlist from this year's Budget include an increase in basic income tax exemption, higher deduction limit in Section 80C, sops for homebuyers, a separate deduction section for life insurance." TN. "Net export depends on what is happening globally." ET. "Consumption has been the main driver to date; but as inflation begins to bite, this is bound to slow down. Investment, especially private sector investment, has not picked up as we hoped earlier. That leaves government spending" which is "constrained by the extent of funds available to the government" and by "the amount it can borrow without upending the market by pushing up interest rates". "Advance estimates by NSO project India's nominal GDP growth for FY23 at 15.4 percent against the Budget estimate of 11.1 percent, thanks to the high inflation of FY 23. The estimated nominal GDP of Rs 273 lakh crores (Rs 273 trillion) against the Budget estimate of Rs 254 lakh crores (Rs 254 trillion) is the bounty bestowed on the finance minister by the unusually high GDP deflator (a mix of CPI and WPI inflation) of around 8.5 percent," wrote VK Vijaykumar. That led to very high tax collections which may not be repeated next year. "Alas, the bad news is that India's current account deficit for the July-September quarter skyrocketed to a terrible 4.4% of GDP, up from 1.3% in the corresponding quarter a year earlier. This was way above the official comfort level of 2.5%," wrote Swaminathan SA Aiyar. So, what is to be done? "Fiscal caution should replace adventurism. The RBI should let the rupee weaken. India needs a competitive currency, not a strong one." The RBI has been selling dollars to stop the rupee from weakening because that will increase prices and make inflation worse. "India's foreign exchange reserves rose by a whopping $10.417 billion to $572 billion in the week ending on January 13." ET. It was $645 billion in October 2021. However, India's trade data for the first 8 months of 2022-23 have been revised. "The import bill for April to November 2022 is now estimated to be $493.5 billion. This amount is about $1.7 billion higher than initial estimates. Total merchandise exports are at $298.3 billion, nearly $12 billion higher than that originally estimated." The Wire. The trade deficit has been reduced to $25.6 billion for $30 billion originally estimated. News media are predicting an increase in customs duty on "electronic items, vitamins, helicopters, plastic goods, jewelry and high-gloss paper among others". DH. Previous two budgets also increased tariffs on a range of imports. This is apparently to reduce the trade deficit with China. Unfortunately, "While trade in 2022 between China and India touched USD 135 billion, imports from China were at USD 118.5 billion and exports at USD 17.48 billion. The trade deficit crossed the USD 100-billion mark." This is despite ever increasing customs tariffs on imports. China's consumer price inflation rate was 1.8% in December, investing.com, compared to 5.72% for India and 6.7% of FY23. ET. A relatively stronger rupee with inflation nearly 3 times that of China's makes China's goods cheaper regardless of tariffs. Only helps domestic industries to increase prices further. A finger in the dike has never helped. Or even two fingers.