US-China trade war: 151 items of Indian exports set to gain, says research

Policy push may see the exports edge out costlier US rivals in China, as trade fight escalates: Commerce dept research

As many as 151 items of Indian exports to China have the potential to replace identical products India’s northern neighbour imports from the US, an internal research paper of the Commerce Department has said.

The paper, reviewed by Business Standard, has studied the effect of the ever-escalating trade war between Beijing and Washington DC, and identified opportunities for Indian exports to China.

Assessing India’s export capabilities and matching them 

with China’s largest imports from the US, the government has broadly identified 774 items on which immediate policy action can be taken to boost exports. 

“These are such in which China’s imports from the US are substantial and India’s exports to the world are also substantial,” the report says.

China's imports of these 774 products from the US are worth $20.4 billion. 

On the other hand, while India's global exports of these products were worth $32.8 billion, they fell steeply to $2.9 billion, suggesting a huge opportunity for Indian exports to grow, a senior Commerce Department official said.

However, the department has zeroed in on 151 items, in the trade of which India has the potential to edge out US exports to China.

New Delhi has secured market access for these products in China, where Indian goods significantly compete with American ones, the report pointed out.

Revised trade basket

A previously commissioned report in 2017 took the same approach, arguing for the mapping of imports of major trade partners like China and using the data to push trade policy.

A basket of revised exports to China has the potential to significantly boost export earnings and bridge the trade deficit, which was $53.5 billion in 2018-19.

With a burgeoning middle class and rising labour costs, China is expected to relinquish its dominance over the labour-intensive and low-end manufacturing space in the near future. Industry in India is following this development in China. 

“We are looking to harness our strengths in labour-intensive sectors, where India enjoys a significant advantage over other developing nations,” an official said.

In 2018-19, India's highest export earners to China were organic chemicals, refined petroleum, cotton, plastics, and iron ore. These, along with other raw materials, constituted for more than 70 per cent of India's exports to China, said Ajay Sahai, director general, Federation of Indian Export Organisations.

Policy hurdles

But even as the trade deficit continues to balloon, this August marks the fifth anniversary of India signing an agreement achieving a bilateral trade balance with the nation by 2019. The five-year programme for economic and trade cooperation is a joint medium-term road map for promoting trade and investment, signed between the two countries in September 2014.

However, since the agreement is “non-binding”, the scope for deliberations with regard to reducing the trade deficit depends significantly on the presence of a free environment for discussion, an official added.

In what is now called the largest trade war in economic history to date, the US and China have announced higher tariffs on the import of each other's goods in multiple rounds starting July 8, 2018.

Currently, US tariffs exclusively on Chinese goods stand at $250 billion. Despite this, the US’ trade deficit with China hit a record $419 billion in 2018, up from $375 billion in 2017.