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Trade tensions between Washington and Beijing are unlikely to aid Indian exports as there is a stark difference in the nature of commodities exported by the two economies, India Ratings and Fitch wrote in a joint report published on Friday.
The ongoing trade war could lead to China dumping goods at predatory prices in emerging markets, including India, and potentially disrupting the domestic demand-supply dynamics in the country, the agencies said.
Products such as electronic goods, iron, steel and organic chemicals would be most affected, analysts at the two agencies wrote.
India Ratings and Research is a 100 percent subsidiary of the Fitch Group.
Two of the world’s largest economies are locked in an increasingly acrimonious trade dispute that has seen them level escalating tariffs on each other’s imports in the middle of negotiations, adding to fears about risks to global growth and knocking financial markets.
“A fall in Chinese exports to the US could potentially put downward pressures on the Chinese yuan. A likely devaluation of the yuan could stimulate a competitive depreciation in the Indian rupee, failing which the competitiveness of Indian exports could be affected,” they said.
The rupee has lost just about 0.3 percent so far in 2019 as the currency had gained on the back of large foreign portfolio inflows earlier in the year.
A stronger rupee, however, would prove to be a concern for exporters.
India’s imports of steel, capital goods and polymer from China could potentially increase as Chinese exports to the United States start losing traction.
India Ratings expects demand-supply dynamics in these sectors to get skewed unfavourably over the medium term.
“Nonetheless, the impact is difficult to quantify at this point in time and will be contingent on the Chinese production/capacity utilisation levels, global demand-supply scenario and a host of other evolving factors.”
The United States must show sincerity if it is to hold meaningful trade talks, China said on Friday, after US President Donald Trump dramatically raised the stakes with a potentially devastating blow to Chinese tech giant Huawei.
source (TDS)
