U.S.-China trade war likely to affect India’s export landscape, Crisil warns

iNDICA NEWS BUREAU-

Trade restrictions planned by the incoming U.S. President Donald Trump could lead to aggressive exports by China to other Asian markets, including India, according to a report by Crisil.

This shift is likely to create tough competition for Indian exporters in both regional and global markets, potentially slowing India’s export growth.

The report highlighted that “in view of the proposed steep tariff hikes on Chinese goods by the incoming United States President, coupled with the expected slowdown in the Chinese economy, this will trigger aggressive exports from there to the Asian markets, including India”.

Geopolitical uncertainties, including the U.S.-China trade tensions, continue to pose risks for global trade. Meanwhile, India’s trade deficit has widened this fiscal as imports have consistently outpaced exports.

The report added that India’s export performance has remained unstable during the current fiscal year. While merchandise exports showed steady growth in the first quarter, they contracted in the second quarter. There was a brief recovery in October 2024, but exports declined again in November and December.

In December 2024, India’s merchandise exports fell by 1% year-on-year to USD 38.01 billion, following a 4.8% decline in November. The fall was driven by significant drops in gems and jewellery exports (-26.5%) and oil exports (-28.6%).

However, core export growth of 8.3% helped cushion the decline, though it was lower than the 11.8% growth recorded in November. Key sectors within the core category, such as readymade garments, ores and minerals, handicrafts, and coffee, showed strong growth.

On the positive side, India’s surplus in services trade and robust remittance inflows provide some relief and are expected to keep the current account in a safe zone. However, the rising merchandise trade deficit remains a concern that needs close monitoring.

The Crisil report emphasized that trade dynamics in the coming months would depend on how China redirects its exports and how India adapts to the resulting challenges.

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