Business Environment, 4th Edition by Pearson

Foreign Trade Policy and Balance of Payments | 251

global economy. The fallout for the Indian economy has been a sharp deceleration

in exports and a slowdown in GDP growth. Import demand however has remained

resilient because of the continued high international oil prices that did not decline,

unlike what happened after the Lehman meltdown of September 2008. The high

value of gold imports, driven mainly by the ‘safe haven’ demand for gold that has

led to a sharp rise in prices, contributed to the high import bill and widening of the

trade deficit.

The trade deficit, as a result, increased to US$189.8 billion in 2011–12, which

was 10.2% of the GDP. With invisible surplus of US$111.6 billion (6.0% of GDP), the

current account deficit widened to r ...