Inflating export invoices is a tempting mode of avoiding GST. (Reuters Photo)

The big lesson for emerging markets from the taper crisis of 2013 was this: Don’t go into a US tightening cycle without your exporters bringing home truckloads of dollars. That’s why the most recent trade figures from India are both important and encouraging. Clubbed together with Indonesia, Turkey, Russia and South Africa on Morgan Stanley’s “Fragile Five” list four summers ago, it’s crucial for the country to crank up its export engines before the U.S. Federal Reserve starts shrinking its balance sheet. Seen in that light, the 26 percent surge in outbound shipments in September is an impressive performance that ought to allay concerns about India facing a possible dollar squeeze.

India exports, September +26%

Yet the figure is being met by skepticism because it comes close on the heels of the introduction of a new nationwide goods and services tax that’s been widely criticized for being ill-planned and badly implemented. Inflating export invoices is “a tempting mode of avoiding GST,” according to Neelkanth Mishra, the India equity strategist at Credit Suisse Group AG. By showing more of their sales as exports, manufacturers can claim bigger tax credits. While over-invoicing may certainly be part of the story, there’s an equally strong reason to give the published figures the benefit of the doubt. Although India isn’t part of the Asian electronics supply chain, its overseas sales track shipments out of South Korea very closely; and the latter surged to a record in September.

A sustained pace of double-digit export growth is crucial for India’s economy. The wave of excess domestic liquidity that engulfed assets following last November’s surprise cash ban is starting to ebb. Almost half of the $9 billion of foreign money that had flowed into the country’s expensive equities by July has left after a much-anticipated revival in corporate earnings disappointed investors once again. The $22 billion of overseas funds that have poured this year into bond markets would be at risk of reversal should U.S. real interest rates spike in 2018.

A botched GST has made life hard for small businesses — especially in the leather and textile industries — just as they were beginning to shrug off the effects of last year’s note ban. With memories of the 2013 taper tantrum still fresh, it will be reassuring for investors to know that at least the bigger exporters are able to overcome a strong rupee and take advantage of improving global demand, keeping the domestic financial system well-lubricated with dollars in the process. Should it transpire that September’s 44 percent surge in engineering exports was merely a tax-accounting artifact, there will be some serious disappointment.