Terms of Trade: Reforms, reality and rationality
India is reflecting on 35 years of economic reforms amidst rising trade deficits and potential crises. The current economic situation is exacerbated by a terms-of-trade shock from the war in West Asia, raising concerns about balance-of-payments. Structural changes are needed to prevent future economic challenges and to address the root causes of the current crisis.
- ▪India has experienced periodic downturns since its economic reforms began 35 years ago.
- ▪The current crisis is influenced by a terms-of-trade shock and pre-existing capital flow issues.
- ▪The merchandise trade deficit has increased since the reforms, despite a rise in dollar earnings from services and remittances.
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Terms of Trade: Reforms, reality and rationalityIndia marks 35 years of economic reforms amid rising trade deficits and a potential crisis, highlighting the need for structural changes to avoid future issues.Updated on: May 20, 2026 3:33 PM ISTBy Roshan KishoreShare viaCopy link This year marks 35 years since India embraced large-scale economic reforms. India had been moving toward economic liberalisation since the 1980s, but the quantum jump occurred when the economy faced the prospect of a sovereign default and suffered the ignominy of shipping its gold to London as collateral for an emergency loan. There have been periodic downturns in India’s economic journey since. But the broad direction has only been upwards and onwards.
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