IN THE spring of 1991, Indian officials desperate to fend off a balance-of-payments crunch secretly airlifted 20 tonnes of gold confiscated from smugglers into the vaults of UBS, a Swiss bank. That crisis prompted liberalising reforms that helped integrate India into the global economy. By 2013 India’s exports as a percentage of GDP had nearly quadrupled, to over 25%, not far from the global average. But an exporting funk since then has pushed the figure to its lowest level in 14 years. Paired with a rise in imports, the trend has revived questions about the competitiveness of Indian firms—if not the government’s ability to finance a growing current-account deficit.
A repeat of the 1991 drama is not in the offing. India’s economy today is growing at a world-beating pace. Its central bank holds enough foreign reserves to pay for nearly a year’s worth of imports. Foreign investors are on hand to finance both government and corporate borrowing….
