Chennai: The US is expected to be India’s largest merchandise trade partner for the second straight year in FY20. While Indo-US trade continues to grow, Chinese trade has shrunk even before coronavirus started affecting the shipments. This is going to be beneficial for India’s overall trade balance as India has a trade surplus with the US against a trade deficit with China.
Till the end of December quarter, at $68 billion, India’s bilateral trade with the US has gone up above $64 billion with China. While both exports and imports to the US have been growing in the past few years, imports from China have been showing a declining trend.
In 2018-19, the US had become India’s largest partner with a total bilateral trade of $87.9 billion, leaving behind China with a trade of $87 billion in the second position. Until 2017-18, China has been India’s largest trade partner.
The trade with China is likely to get further affected in the March quarter owing to the Coronavirus infection that has hit shipments between both the countries.
“Since the trade war started between the US and China, demand for Indian products has gone up in the US. There are multiple product categories for which our exports to US have increased whilst the increase in imports is mostly due to oil products and raw diamonds,’ said Pawan Gupta, founder of Connect2India.
“Overall withdrawal of Generalised System of Preferences and higher tariffs on steel products did not have major impact on exports,’ said Ajay Sahai, director general and CEO of Federation of Indian Export Organisations.
While exports to the US grew from $47 billion FY18 to $52 billion in FY19, imports grew faster from $26 billion to $35 billion. This narrowed down the trade surplus from $21 billion to $16 billion. Till December, exports stood at $40 billion and imports at $27 billion.
“The import of defence equipments and aircrafts from the US is likely to grow in the coming years. We have grown our exports in several categories, especially those in which there is tariff war with China. However, capacity is an issue as far as Indian export growth is concerned,’ said Sahai. However, he does not see the trade surplus with US turning into deficit at least in next five years.
In case of China, imports to India shrunk from $76 billion to $70 billion while exports grew from $13 billion to $16 billion. The trade deficit narrowed down from $63 billion to $53 billion. In the first three quarters of the current fiscal, the exports have already crossed $13 billion and imports stood at $51 billion. “Trade war and coronavirus is an opportunity for India to increase its production and capacity. Though we have seen some investments happening in sectors like electronics, India is still awaiting large investments,” added Sahai.
