The US–China Trade War:

Impact on INDIA

The Indian economy is the world's sixth

largest economy. Indian exporters and
businesses have significant skills and
capabilities in foreign markets.
Emerging economy, highly skilled manpower,
mixed economy, eCommerce, strong
agricultural background, huge market,
potential customers, fast-growing economy,
huge size market, business outsourcing, the
service sector's contribution is highly visible,
stability in growth, good GDP contribution,
and so on are some of the key facts about the
Indian economy.
The Indian government maintains strong
international connections with other nations.
The United States is one of India's leading
military allies, while China is one of its  major
economic partners. India has built and
maintained positive relationships with
international organisations.
The Biden cabinet, which took office in
January 2021, not only kept the high tariffs in
place, but further tightened trade restrictions
on China by adding to the "Chinese
enterprises list" of companies with whom US
citizens and businesses cannot conduct
business without a licence. It also barred US
investments in 59 Chinese companies
engaged in "defence and surveillance
technology."
The trade war serves as a "natural
experiment" in determining whether next-in-
line countries are ready to become global
industrial powerhouses. The trade war was
expected to shift commerce away from China
and toward other exporting nations,
particularly those who competed with China
for the US market.
Some of China's East Asian neighbours, such
as Vietnam and Indonesia, South Asian
countries, such as Bangladesh and India, and
Latin American countries, particularly Mexico,
compete with it.
How India is impacted by US-China
trade war
According to experts, this will have no
negative impact on India. On the contrary, it
will provide India with a multitude of
opportunities. However, it isn't entirely
correct. India has experienced both negative
and beneficial effects.

NEGATIVE EFFECTS
The stock market throughout the world went
into shock and began to drop the day the
Trump administration announced the tariff
hike.
The stock markets may experience a short-
term impact. The Bombay Stock Exchange's
benchmark Sensex has been sliding in step
with global markets worried by the ongoing
trade conflict between the United States and
China.
The trade may have a larger negative impact
on India's economy, as the country's economy
may experience changing trends. The overall
economic growth of all countries would
decrease, resulting in a drop in Indian exports
due to lower demand for commodities, owing
to higher finished product prices, which
would lead to a rise in consumer goods prices.
This may cause an imbalance in the basic
economic principle of demand and supply.
India's exports and imports account for
roughly 42% of its GDP, and the country
already has a current account deficit due to a
lack of foreign investment.
The rupee, the Indian currency, has already
reached its lowest level against the US dollar.
The rupee will be impacted much more by the
trade war. The trade war has put a lot of
stress on the Indian economy, despite the fact
that India's domestic market is vast. This type
of instability is also bad for the Indian
currency.
Apart from that, India has been directly
affected by the trade war. The United States
blamed India for unfair trade practises. As a
result of the sanctions, India's steel exports
have decreased.

OPPORTUNITIES FOR INDIA

By replacing Chinese exports, India has the
potential to be a substitute for the United
States. It has the potential to compete and
make inroads in the textile, clothing, gems,
and jewellery industries. Furthermore, China
has imposed duties ranging from 15% to 25%
on U.S. product exports, while the Most
Favoured Nations (MFN) have received tax
discounts ranging from 5% to 10%. India has
more competitive trade opportunities due to
the addition of 6 to 35 duty concessions
under the Asia Pacific Trade Agreement
(APTA), which it joined in 1975.
The increased prices of oil threatens India's
current account deficit which can have an
impact on India's macroeconomic stability.
However, the trade war between the United
States and China may benefit India by
lowering oil prices, which will provide
significant relief to the Indian government
and macro industry. The United States, as one
of the world's biggest oil producers, will find it
difficult to compete in a market as large as
China. In this case, India might potentially fill
gaps left by the United States by acting as a
substitute.