Irrespective of the outcome of the call to boycott Chinese products by certain groups in India, India-China trade could be poised for a rough ride. A recent study carried out by United Nations Conference on Trade and Development (UNCTAD) suggests that the global exports of commodities to China could plunge 46 percent, by $15.5 billion to $33.1 billion in 2020 if compared with annual growth projections before the coronavirus pandemic hit.
The study expects most of these fluctuations to happen in primary commodities, which constitute the bulk of India's exports to China. Ores, slug and ash, mineral fuels, bituminous substances, organic chemicals and cotton were among the key products (in value terms) that were exported to China during 2019-20.
The UNCTAD study points out that total exports (to China) are being dragged down primarily by the dramatic drop in Chinese demand for energy products, ores and grains. "Imports of liquefied natural gases, for example, could fall by up to 10 percent in 2020 compared with a projected increase of 10 percent before the COVID-19 outbreak. Iron imports are still expected to increase, but growth could fall by two-thirds, from a pre-coronavirus annual growth projection of 19 percent to just 6 percent", the study says.
Iron ore and mineral fuel commodities alone contributed to over $4 billion out of the $15 billion worth of Indian exports to China between April 2019 to February 2020. Cotton exports accounted for another $722 million during the same period. Some two-thirds of developing countries are commodity dependent, reveals UNCTAD data. However, India does not figure among the countries listed out in the UNCTAD data as the commodity dependent developing countries which are most vulnerable. For such countries, the drop is projected to be between $2.9 billion and $7.9 billion, which would constitute a 9% loss in terms of annual growth rate.
"Assessing the impact in China says a lot about possible general tendencies," says Marco Fugazza, an UNCTAD economist who conducted the study. "It provides important information that may help policymakers anticipate what may happen globally." "There have been few assessments done so far at a relatively disaggregated product level using up-to-date information," he says, adding that UNCTAD awaits similar statistics from other big markets, such as the European Union, to expand the analysis.
The study points that export opportunities for several agricultural products could improve also, compared with expectations before COVID-19. Soya bean demand for China, for example is now projected to grow by 34 percent - 10 percentage points more than earlier forecasts. The data gives hope that some COVID-19 effects on trade could be positive, at least for some exporters.