Trade war may not help Indian exports

Chennai: The US-China trade war is not going to be beneficial for Indian exports. On the contrary, India faces a threat of dumping by China.

India is unlikely to benefit much from the ongoing trade war as there is a stark difference in the nature of commodities exported by India and China to the US. Pharmaceutical products, and gems and jewellery accounted around 30 per cent of the Indian exports in 2018 to the US, while electronic goods and capital goods accounted 47 per cent of the Chinese exports to the US in 2018, according to India Ratings and Research.

Capital goods account for only 3.71 per cent of India's exports to the US and electrical and electronic goods do not even figure in the export list.

On the other hand, any slowdown in Chinese exports to the US due to higher tariffs could result in a commensurate rise in the country's exports to other emerging countries, including India. With Chinese industrial production growing at around 5 per cent over the last few years, Chinese exporters have started penetrating into alternate markets.

Imports by other Asian emerging markets from China grew 20.70 per cent in 2018 against 12.75 per cent in 2010. Chinese manufacturers' have been able to export goods at a lower price compared to the domestic manufacturers in these markets.

This risk is further exacerbated by the benign domestic demand conditions. Ind-Ra expects the contraction in Chinese trade flows to the US is likely to result in dumping of key commodities such as electronic and electrical components, steel, chemicals, plastic products and other intermediate goods.

India's share of imports from China in total imports of steel, polymer and capital goods could potentially increase as Chinese exports to the US has started losing traction.

The impact could percolate through lower international prices, thereby putting pressure on domestic prices due to diversion of supply from China to other importing countries.