How India's exports may benefit from US-China trade war

While the ongoing trade war between the US and China has sent alarm bells ringing, India can end up as a major beneficiary if it play its cards right.

While the ongoing trade war between the US and China, the world's biggest economies, has sent alarm bells ringing where global growth is concerned, India can end up as a major beneficiary if it play its cards right.

According to The Economic Times, a study by the commerce department claims that India can capture the Chinese commodity market vacated by US exports in the face of the higher import duties Beijing has slapped on them. In fact, the study has analysed and identified at least a hundred products where India can replace US exports to China, which totalled around $130 billion last year.

"These retaliatory tariffs provide a window of opportunity for enhancing India's exports to China. The purpose of analysis is to identify such lines," the commerce department reportedly said in the study. If Indian exports can successfully capture the US' share of the trade pie, the massive bilateral trade gap with China will also come down.

In the last fiscal, India's exports to China stood at Rs 86,015 crore, while Chinese imports totalled Rs 4.91 lakh crore. In other words, the trade deficit was well over Rs 4 lakh crore.

The products where US exports to China overlap with Indian exports are of particular interest. For instance, fresh grapes, cotton linters, flue-cured tobacco, lubricants and chemicals such as benzene, are a few lines where the value of US exports to China are pegged at above $10 million. India, too, exports these items to China.

"There is scope to increase our exports in these products because of the tariff differential and the substantial demand in China," an official in the know told the daily. The good news for India is that while China has imposed tariffs of 15-25% on these goods coming from the US, other countries are subject to only 5-10% duty - the most favoured nation (MFN) rate applicable for members of the World Trade Organization.

Moreover, India has been granted additional 6-35% duty concessions on the MFN under the Asia Pacific Trade Agreement, which makes Indian exports all the more competitive at present.

Then there are the products that India exports to the rest of the world except China, such as oranges, almonds, walnuts, durum wheat, corn and grain sorghum. Significantly, the US exports of these products to China are in excess of $10 million.

Take corn for example. India exported $143.6 million worth of the commodity to the world in 2017-18 while China imported $600 million of it in the same period. While American corn is subject to 25% duty, APTA countries can get up to 100% concessions on corn exports to China - and that spells a windfall for India.

Interestingly, just a day earlier, Union Minister of Commerce & Industry Suresh Prabhu had chaired a meeting of different exports stakeholders and ministry officers to discuss a strategy for doubling India's exports by 2025. The study could serve as a blueprint to getting there.

Edited By Sushmita Choudhury Agarwal