Pushing Products From US Not to Have Chinese Goods Replaced by Indian - Prof

The Confederation of Indian Industry has said that Indian products may become more competitive amid the ongoing trade disputes between China and the US, adding that India should focus on categories such as machinery, vehicles and transport parts for export to the US.

Sputnik discussed this with Pravakar Sahoo, professor of economics at the Institute of Economic Growth (IEG), Delhi.

Sputnik: In what ways can the trade war between China and the United States impact the Indian markets?

Pravakar Sahoo: In the short-run, it might just help some of the Indian products and it might open markets for the Indian exports in some of the categories where China has imposed tariffs. But if it's a long-term trade war and a full-fledged trade war, [then] it may not be good for India, because if there's a tariff war, then more and more numbers of products [could be subjected to] higher tariffs, which would lead to an increase in prices in the US and that would be followed by higher interest rates. What this means is that basically not only will it increase the cost of products in the US and slow down [economic] growth, which is not good for the world, but at the same time, once the interest rates go up in the US, there will be capital outflow from developing countries, including India.

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So, yes, a trade war between the US and China would help India in the short-term, there may be some openings for Indian products in the American market; but in the long-term, it's not good for India. The second point is that with all these trade wars happening, particularly starting with the USA, this is to give a push to domestic production. Chinese exports have been replaced by Indian exports. This may be the same case; the US might just put tariffs on Indian products in the coming months in the same sectors.

Sputnik: What sectors of the Indian market will feel the most impact in the ongoing dispute between the US and China?

Pravakar Sahoo: We see some of the sectors that may be influenced - precious metals, textiles, garments, jeans and jewelry where India has a comparative advantage and there's competition between India and China in the US market. If the comparative advantage of the Chinese products goes down in these sectors because of tariffs, then Indian products may be more competitive in terms of price in the US. Some of the sectors could get benefits out of the trade war between the US and China.

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Sputnik: Is there the potential for the demand on these products to actually increase amid this ongoing trade dispute between Washington and Beijing?

Pravakar Sahoo: The fact that the US has imposed some tariffs gives an opportunity for Indian exporters to catch up and have a better market share in the US. That also depends on how quickly we can take the advantage in the US market. There're problems in India as well. We have to remember that it's very difficult to catch up with the volume. Trade between the US and China is something like ten times greater than trade between the US and India. I don't really think that India can replace Chinese exports to the US in most of these products, but there may be some benefits or some gains for Indian exporters in some of the products where the tariffs have been imposed.

Sputnik: Some experts have noted that with the US imposing additional tariffs on Beijing, Indian products may become more competitive; is that actually the case?

Pravakar Sahoo: Yes, of course, I agree with the point that additional tariffs imposed on the same products or on different categories of products would be certainly beneficial. That would make Indian products or Indian exports more competitive. My second point is that in the short-run, maybe India would immediately benefit, it would make Indian exports more competitive, but as we go on, the US also has India on its list. All of these policies are designed to push production in the USA and they wouldn't like to have Chinese exports being replaced by Indian exports. There may be tariffs imposed on Indian products. I agree that in the short-run Indian exports could become more competitive.

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Sputnik: What's your prognosis moving forward for these geopolitical events happening in terms of the trade war? Do you think that in long-run India will gain or do you think that status quo is going to be maintained and India will just have to continue as an emerging market?

Pravakar Sahoo: Trade wars were never a success, it is not a win-win situation, it is always a lose-lose situation. If the trade war goes further and there is a full-fledged trade war between the US and China, it is certainly not good for India. Why am I saying this? Because it creates uncertainty in the trade regime, in world trade. Over the last year, world trade has slowed down. Since 2011, given the growth of the world economy, world trade has not been going hand in hand. For emerging countries, all these protectionist measures were taken by the USA and [measures] to counter them - Germany, Canada and China have done that.  It is not good for the emerging countries that are looking to the external market for their products.

The views and opinions expressed by Pravakar Sahoo are those of the speaker and do not necessarily reflect those of Sputnik.