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Dr. D. Y. Patil Vidyapeeth, Pune
(Deemed to be University)
Global Business School & Research Centre
Tathawade, Pune 411033.

Impact of US-China trade war on Indian economy

Impact of US-China trade war on Indian economy

International Trade war between USA and China and how it helps India to improve its international trade.

Dr. Babasaheb Jadhav
May, 29 2021

International trade is the exchange of goods and services across the nation. Now a day’s international trade becomes a challenging issue not only in developing countries but also in developed countries as well because of trade deficit, the balance of payment deficit, GDP growth, high rates of tariffs, heavy import and export duties, higher foreign exchange rates, terrorism, government policies, a crisis like a pandemic, etc. Indian economy is no exception to this.

International trade is known as the ‘engine of growth for the economies in the competitive edge. The cold war between the US and China slowly and gradually turned into the Trade War because of declining shares of the United States of America in the market, rising Chinese international trade, economic aggression, Made in China strategy 2025, dream of superpower, etc. are the major reasons behind the escalation of the trade war.

The trade war between the US and China, the world’s two biggest giants, slows down the world economies at a larger scale.

The United States' former President Mr. Donald Trump sees China as a major enemy, a hurdle in the growth and economic rivalry in front of the US economy. In the interview, he stated that because it is an economic enemy, China has taken advantage of the US like nobody in history.

The US has had a huge trade deficit with China for a long time. The effect of a trade war is much more than a deficit because it is a battle of power and economic dominance among the top two countries.

The trade tensions between the US and China have resulted in some opportunities for Southeast Asian nations. Indian economy could be a beneficiary too. This trade war will help India to tap the international market very easily.  

  • India could increase its trade particularly on which the US has imposed heavy tariffs on Chinese goods and services.
  • The United States and China are major trade partners of India in international business and can fulfill the huge gap of trade deficit through export.
  • Diversification of investment flows in automobile, agriculture, equipment, healthcare, electronics & garments manufacturers to seek India as one of the sound alternative manufacturing destinations.
  • India needs to fast-track innovative governance policies and infrastructural facilities to attract foreign investors.
  • India is the only country in the world that can match the scale of operations after china and can meet the market requirements on time.
  • India can seek more opportunities in the enhancement of information and communication technology, eCommerce, the chemical industry, outsourcing, and the automotive sector.
  • China is more willing than ever before to provide market access to Indian exporters and Indian exporters have all the capabilities and potentials to fulfill international demands.

Indian economy is the 6th largest economy in the world. Indian businesses or exporters have significant strengths and capabilities to deal with international markets.

Some of the key facts of Indian economy are emerging economy, highly skilled manpower, mixed economy, eCommerce, strong agricultural background, huge market, potential customers, fast-growing economy, huge size market, business outsourcing, the contribution of the service sector is highly visible, stability in the growth, good GDP contribution, etc.

Indian Government has sound international relations with other countries. The United States is one of India's biggest military partners and on the other hand, China is one of its biggest economic partners. India has developed and maintained a good rapport with international organizations.

The Indian government has introduced various schemes to promote new start-ups or businesses like make in India, start-up India, stand up India, skill India, digital India, and self-reliant India, etc.

India is one of the highly admired destinations or hubs for investment and businesses. The studies stated that the entire world is looking towards India as a path maker or path shower to the rest of the world. Indian economy is marching towards the same and the years are not far to be a world superpower.

The great saints of India, Swami Vivekananda once told to a group of journalists at the Michigan University,

“This is your century right now, but the twenty-first century will be the century of my mother India”. 

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