India’s GDP growth is driven by consumption and not by international trade. In fact, India has a trade deficit, it imports more than exports. When there are trade wars, it greatly affects those countries like China, Germany and Japan whose economies are export driven.
For India, if our exports are affected it would affect Pharma and IT but take a close look. Most of pharma exports are low priced generic drug. There are not may places you can make it cheaper than in India. Similarly, IT service exports are driven by the talent availability along with low cost. Again, you can’t easily get those millions of English speaking IT engineers at the cost which India operates anywhere else. Given these competitive advantages, though these two sectors will see a setback they don’t vanish. Other exports such as Textiles, Jewellery, Agri commodities have loyal consumer base for Indian exports. They too will see headwinds but their survival may not be under threat.
When it comes to imports, though oil & gold have the lion share but there are lots of other stuff like industrial equipment, automobile spares, etc. which in the times of trade wars becomes expensive and create a fertile ground to make them in India. That, over a period, will drive investments, creates new jobs and saves import bill. Remember that auto industry was non-existent in the 1950’s in India and now our car makers produce indigenous designs made for Indian consumers. Similarly, our defense spending, which is mostly spent on imports now, can slowly transform into the one which drives domestic industry growth. Since trade wars make imports expensive, it makes commercial sense to produce them out of India, wherever possible.
I hope and wish that India makes use of the opportunities provided by the trade war and come out stronger.
For India, if our exports are affected it would affect Pharma and IT but take a close look. Most of pharma exports are low priced generic drug. There are not may places you can make it cheaper than in India. Similarly, IT service exports are driven by the talent availability along with low cost. Again, you can’t easily get those millions of English speaking IT engineers at the cost which India operates anywhere else. Given these competitive advantages, though these two sectors will see a setback they don’t vanish. Other exports such as Textiles, Jewellery, Agri commodities have loyal consumer base for Indian exports. They too will see headwinds but their survival may not be under threat.
When it comes to imports, though oil & gold have the lion share but there are lots of other stuff like industrial equipment, automobile spares, etc. which in the times of trade wars becomes expensive and create a fertile ground to make them in India. That, over a period, will drive investments, creates new jobs and saves import bill. Remember that auto industry was non-existent in the 1950’s in India and now our car makers produce indigenous designs made for Indian consumers. Similarly, our defense spending, which is mostly spent on imports now, can slowly transform into the one which drives domestic industry growth. Since trade wars make imports expensive, it makes commercial sense to produce them out of India, wherever possible.
I hope and wish that India makes use of the opportunities provided by the trade war and come out stronger.
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