Global headwinds for indian economy

Global headwinds for indian economy

Chinese and global slowdown hurts all nations.

When America sneezes, the rest of the world catches a cold. When its Twitter-happy president declares a trade war targeting the world’s second-largest economy, China, casualties pile up on every shore. Thus, India’s June trade numbers show a 9.7% fall in exports, the first contraction in nine months. The trade deficit is rescued by a 9.1% fall in imports, reflecting sluggish domestic demand. The biggest import drops were recorded in crude oil, uncut precious stones and machinery. So, the trade war, initially expected to help economies like Indonesia, Malaysia, Vietnam, Bangladesh, Sri Lanka and India, as capital sought ways to relocate from China, has not played according to script.

As China’s Q2 GDP growth slumped to a 27-year low of 6.2%, its demand slowdown dented India’s exports by more than 14%. China has been India’s biggest trade partner: the Washington-Beijing battle was bound to spill over to New Delhi and other trading economies. Reflecting the overall global slowdown, shipments to the UAE and Hong Kong fell 15.3% and 9.7% respectively. In June, the US scrapped preferential tariffs for Indian exports under the Generalised System of Preferences (GSP). This is expected to impact merchandise exports soon. The US sanctions against Iran have added to global economic turbulence. Now, the US is on the warpath against Europe, provoked by its moves against US tech giants.

Now is the time for India to put its emerging role as one of the world’s significant players to mobilise diplomatic consensus in Europe, China, Japan and the rest of Asia to persuade President Donald Trump to stop playing a unilateral wrecking game on world trade, and for Beijing to abandon some of its intellectual property-related armtwisting to facilitate reconciliation with the US. Tariffs and currency wars are not abstract concepts. The upheaval leads to economies slowing, businesses crashing and ordinary people losing jobs. This can lead to social unrest worldwide, an outcome nobody wants. Jaw-jaw, not warwar, is the way ahead.