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"By Harsh MehtaThe prolonged US-China trade tensions have taken a bitter turn, escalating to a point that could cost the global economy big time. Amidst the trade war, the new set of US sanctions and travel bans due to China’s human rights abuse have added fuel to the already raging fire. The new IMF chief, Kristalina Georgieva, warned in her speech at the IMF headquarters of a “synchronized” global slowdown in 2019 that would impact 90% of the world’s economies, including India, one of the fastest growing economies. “Everyone loses in a trade war”, Georgieva asserted in her speech. According to a report by DBS bank, “developments on the US-China trade dispute and other protectionist policies, present both a challenge and opportunity for India”. ETBFSI discusses the benefits and repercussions that could affect India amidst the intense trade tensions.How can India benefit out of US-China trade war?According to a discussion report by ISID, “there are opportunities for India in the short term to medium term”.1. Trade TractionIndia can get a good trade traction opportunity owing to the various trade sanctions and counter-sanctions enforced by the two warring economies. According to the DBS report, “out of the total US imports, China accounts for 16-17% of the share, while India makes up for 2%”.The report also indicated that India could potentially earn up to $5 billion from the trade conflict. This means that India can reap trade benefits on the goods that have tariffs imposed by the US, owing to India’s higher trade exposure to the States. 2. Redirection of Investment Flows In addition to the trade benefits, India also stands to gain from the investment inflows owing to the trade conflicts. The trade war would help India to create a strong foothold on the foreign direct investments (FDI’s). As per the DBS report, the US FDI in India increased in 2018, accounting for around 6% of total investment flows. The easing of India’s FDI regulations will provide an additional boost to the investment inflows into the country. What are the hurdles that India faces amidst the trade war?The IMF chief stated that the escalating US-China war could impact the global economic activity to a tune of $700 billion by the end of 2020. India may face the repercussions of the prolonged trade war, despite the benefits and opportunities. Georgieva also asserted in her speech that the effects of global synchronized slowdown are more pronounced in India. The rising consumer prices due to the increased tariffs by the US on imported goods could negatively impact the rupee against the dollar. The Federal Reserve could be compelled to increase the interest rates due to the imposed tariffs that would subsequently weaken the rupee. According to ISID discussion note, “The rupee may touch as low as Rs72-80 against the dollar in 2019”.The ongoing trade conflicts (removal of India from the preferential trade list) with the US coupled with India’s protectionist policies could affect the overall productivity and economic activity, particularly the private sector. ConclusionIndia may not be directly impacted negatively due to the US-China trade conflict, yet the escalating trade tensions, if unresolved, could start affecting the global economies in terms of economic parameters like trade deficits and balance of trade. For the time being, India can capitalise on the trade boosts and investment inflow opportunities brought in by the trade conflicts. Follow and connect with us on Twitter, Facebook, Linkedin, Youtube"
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