Five things to watch this year

This is not a prediction piece.

- RAJESH KUMAR

The aim is to discuss the top five issues that are likely to dominate economic discourse this year.Trading ties: India and the European Union (EU) are expected to finalise the free trade agreement (FTA) next week. Even if certain sensitive sectors are left out of the FTA, it will be a big breakthrough for both sides. However, there is still no clarity on the trade deal with the United States (US), which has imposed prohibitive tariffs on India, partly for importing Russian oil. The US is India’s largest trading partner, and a delay in the agreement will hurt the Indian economy. Besides goods trade, the deal also has a bearing on foreign direct and portfolio investments. Foreign selling in the stock market, for instance, over the past several months has put significant pressure on the rupee. Further, it would be worth watching whether India can substantially reduce overall tariffs, which, economists argue, is necessary to boost exports sustainably. Since India is open to signing big FTAs, including with the EU, dropping tariffs in general should now be relatively easy.