Trade war effect: Indias exports increase more to China than the US

Trade war effect: On account of China-US trade standoff, the Indian exports increasing more to China (low base) than to the USA (high base) amidst the US-China trade war. Though the USA has entered its 121st month of expansion, the longest on record since the end of the 2009 recession, the growth is not stellar. China too is witnessing its slowest growth in recent history. The trade data between the two countries shows that in absolute terms Chinese exports to the USA have gone down from $42.6 billion in June FY18 to $39.3 billion in June FY19. Meanwhile, Chinese imports from the USA have declined from $13.6 billion in Jun’18 to $9.4 billion in Jun’19. The monthly growth of imports, however, has declined more as compared to exports. Although China will be impacted more like the base of its USA exports is much larger than its USA imports, it appears that the US is not going to remain unscathed. 

Elaborating upon the possible reason for this development at Indian exports Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser at SBI said, "Post the trade war, our exports to China have grown much faster than to the USA. While overall exports to the USA grew by 9.46 per cent to $52.4 billion in FY19, for China the growth was 25.6% to $16.7 billion. Looking at the products on which China and the USA have imposed tariffs on each other, India has made modest gains in capturing such market. " Dr. Ghosh explained that textile imports of the US has shifted from China towards other countries in South Asia. According to OTEXA, though India has gained in the first five months of 2019, Vietnam and Bangladesh have witnessed a much larger increase in exports to the USA. 

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Asked about how India benefitted from the Sino-US trade war Dr. Ghosh said, "Alternatively, cotton imports from the USA to China have declined for H1 2019 vis-à-vis H1 2018 and imports from other countries including Brazil, Australia and India have increased. Thus India has benefitted from US-China trade war by exporting more to China like plastic, cotton, inorganic chemicals and fish. Interestingly, India has a revealed comparative advantage in some of these commodities." However, he said that to further give a boost to exports, easy availability of credit is of paramount importance. Certain measures including an extension of the Interest Equalization Scheme to all categories of exporters and end to end digitization of the export process among others should aid our export credit growth.