India’s Shifting Export Market and Global Economy Change Under Pandemic

India the only major Asian economy that’s grown its export share since the start of the tariff wars in 2018 is the one with the fewest trade links to China. India’s share of world exports rose to 1.71% in the first quarter of 2019 from 1.58% in the fourth quarter of 2017, data compiled by Bloomberg show. The share of every other economy among Asia’s 10 biggest exporting nations fell in the same period.

The two largest goods traded by India are mineral fuels (refined or unrefined) and gold (finished gold ware or gold metal). In the year 2013-14, mineral fuels (HS code 27) were the largest traded item with 181 billion USD worth imports and 64.685 billion USD worth re-exports after refining. In the year 2013-14, gold and its finished items (HS code 71) were the second largest traded items with 58.465 billion USD worth imports and 41.692 billion USD worth re-exports after value addition. These two goods constitute 53 per cent total imports, 34 per cent total exports and nearly 100 per cent of total trade deficit (136 billion USD) of India in the financial year 2013-14. The services trade (exports and imports) are not part of commodities trade. The trade surplus in services trade is 70 billion USD in the year 2017-18.

Part of the reason for India’s outperformance is that it’s not as integrated into global manufacturing supply chains as peers, which means exporters are cushioned from rising trade tensions in the region.

It’s a sentiment that was flagged by central bank Governor Shaktikanta Das in an interview.

“India is not part of the global value chain,” he said. “So, U.S.-China trade tension does not impact India as much as several other economies.”

China is the biggest buyer of goods from South Korea and Japan, whose share of world exports have fallen the most in Asia. For India, China is the third-largest market, after the U.S. and the U.A.E.

“Our biggest advantage is that our product basket and market basket are both quite diversified,” said Rakesh Mohan Joshi, a professor at the Indian Institute of Foreign Trade in Delhi.

Trade tensions between the U.S. and China have given India an opportunity to ramp up exports to both countries, according to Ajay Sahai, director general and chief executive officer of the Federation of Indian Export Organisations.

India’s exports to the U.S. grew at the fastest pace in six years in the year ended March 2018, while exports to China surged 31%, the second highest annual pace of growth in more than a decade, data from India’s Ministry of Commerce show.

“China is more willing to give market access to India than ever before,” said Sahai, pointing to increased access for products such as rice, fruits and vegetables, with potential for greater exports of pharmaceuticals and automobile components to China.

On the other hand, India’s exports to the U.S. could lose momentum. President Donald Trump has criticized India for its tariffs on U.S. products, and withdrew trade concessions on $6.3 billion of Indian goods on June 1. India responded with higher tariffs on about 30 American products.

India stands at number 16 in the list of global trading partners and the nation is running with its pace to reach under top 10 in the list but the covid-19 pandemic has hit not just Indian economy but the entire world economy. The all of world would take steep financial dive with this epidemic before reaching on its initial status, till then let’s hope for the betterment of not just India, but the whole of world and the severely impacted victims of this contagious virus.