Global recovery still fragile: Finance Ministry

The Finance Ministry has sounded a word of caution on world trade recovery, even as global recession appears to be on its way out.

“Global recession seems to be lifting. But, a note of caution is needed, as trade recovery is still vulnerable and fragile given the fact that it is mainly government support and policy driven,” said senior economic advisor in the Finance Ministry H.A.C. Prasad here on Tuesday.

Mr. Prasad, the main author of the chapter titled “International Trade” in the Economic Survey, said policies like the cash for clunkers scheme in the U.S. and similar schemes for the auto sector in other countries pushed demand.

The cash-for-clunkers scheme was designed in the U.S. to provide stimulus to the auto industry by giving car owners subsidies for trading in their old cars for new ones.

In fact, the Economic Survey said the turnaround in trade growth is largely due to lower base effect of the last year (2008) which was in fact a “lost year on the trade front as the exports of earlier years were mercilessly frittered away by the onslaught of the global recession.”

The fragile nature of the country’s export recovery could also be gauged from monthly imports figures of its trading partners in pre-crisis period of 2007 and post-recession months of 2009.

Mr. Prasad said monthly imports in 2007 were relatively higher than the corresponding monthly imports for most of the trading partners of India in 2009.