How have US and Chinese tensions impacted the Indian economy?

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Since President Trump’s inauguration, he has made friends and enemies in high places around the globe. Perhaps the most influential of his sparring partners is President Xi Jinping of China. For the last few years, the two largest economies have been locked in a bitter trade battle. The dispute escalated with both countries imposing tariffs on hundreds of billions of dollar’s worth of one another’s goods. Beginning with Mr Tump’s tariffs policy aiming to encourage consumers to buy American products by making imported goods more expensive, this resulted in China imposing tariffs on American imports. These uncertainties around the trade war have impacted both local and global businesses, as well as affecting the global economy. 

Impact on India

As the two superpowers continued their bitter trade-war, it was reported by the United Nations that India gained $755 million additional exports, mainly of chemicals, metals and ore, to the US in the first half of 2019. With reports suggesting that India was the only Asian nation to have seen growth during the US-China dispute. This much-needed boost to the Indian economy came after five consecutive quarters of lower economic growth. Whilst India has a large internal market and is less dependent on the export sector compared with other emerging markets (EM), a US recession would still have a negative impact on the Indian economy. With the opportunity of investing in Indian markets declining, the importance of investing in foreign currency assets and markets is gaining in popularity

Pandemic halts progress

Following the signing of a preliminary trade agreement to ease tariffs in January, the frosty relationship between the superpowers seemed to have thawed. However, following WHO’s announcement that the outbreak of Covid-19 had been escalated to pandemic status, President Trump was quick to blame both WHO’s and China’s handling. This antagonism and the anti-China sentiment is once again having a negative impact on China’s economy as more countries become suspicious of the secretive state. 

India, however, was among the first to act in the midst of the pandemic by screening passengers, stopping flights and enforcing a nationwide lockdown. These pre-emptive measures not only helped stem the spread of the virus amongst one of the most densely populated countries but have also helped safeguard the economy. 

Future predictions

At the start of the year, India’s economy was forecast growth of 5.1% for fiscal year 2019/20 and 5.7% of 2020/21. However, following the outbreak of the pandemic, this will inevitably have a negative impact on predictions, despite the resurgence of the dispute between the US and China. 

Long-term, the predictions for India’s economic growth are somewhat stunted, not because of a potential armistice between the US and China, but because of troubled sectors within the country itself. Mainly the four segments of the economy: infrastructural companies, the banking sector, non-banking financial companies, and the property sector. 

Since the spread of Covid-19, every country has been plunged into a recession, with others plummeting deeper than ever before. Whilst the long-lasting effects are unknown, global co-operation is necessary for every country to survive. 

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