T has been more than a year and a half now that exports have been falling consistently. Initially the government took the line that this is a temporary state of affairs, then argued that the declines have to do with falling commodity prices. But the declines are continuing in spite of the fact that commodity prices bottomed out a while ago. The net result is a growth in the trade deficit, which stood at $15 billion in 2013 and has grown to $17bn at the end of fiscal year 2015. Today we have exporter associations sending out SOS messages and professional economists telling us that this is a disastrous state of affairs. The fact that the situation is developing precisely at a time when the government is declaring victory in its efforts to turn the economy around, and basking in the approvals of international media, credit rating agencies and the IMF, simply shows the level of disconnect that has developed between economic policymakers and stakeholders, particularly those from the real sector of the economy.

Exporters typically point to the rising cost of doing business as the main reason, while more recent reports by economists have pointed towards an overvalued rupee. The State Bank has pointed towards declining commodity prices, as well as growing competition from SE Asia and the IMF has flagged falling commodity prices, energy shortages and the exchange rate as the cause. The fact that such a wide spectrum of causes is being pointed to by different stakeholders industry and creditors shows the lack of any real understanding that exists regarding this crucial weakness in the economy. This is surprising since the matter at hand is hardly so complex as to defy understanding, and the lack of comprehension creates policy weakness. The government needs to take better stock of the downward trend in exports because it is a key employment creator as well as an earner of foreign exchange. Continuing inflows of foreign exchange, through remittances and borrowing, are apparently creating a sense of complacency at the finance ministry.

The government is correct to note that it has stabilised a rapidly deteriorating economic situation at the time when it came into power, but it is now past the midpoint of its rule; more needs to be done to consolidate the gains and put the economy on a sustainable footing.

Plugging external deficits through borrowing, privatisation receipts and remittances is not the answer.