Last few years have been bad for export based economies like China, South Korea, and Japan etc. The reason behind this is the wave against globalization in western world. Since 1980, the global trade has grown at a much faster pace than the economy of the world. There was a general consensus among leaders across the world that free trade benefits all. But election of anti-globalization leaders like Donald Trump, Theresa May had pushed back the trend. Trump administration is vehemently opposed to free trade. It is slapping tariffs after tariffs on Chinese exports to United States. Therefore the global investors are pulling out of Asian economies like China which is heavily dependent on exports based economic growth. The US-China trade war had negative spillover effect on economy of every economy except a few. India is among those countries which does not seem to losing much in global trade war.
The Indian engineering exports to United States has grown by 20 per cent during the April-May 2018 period despite the US-China trade war. Engineering Exports Promotion Council (EEPC) released a statement, stating “Indian engineering exports have managed to grow by close to 20 per cent for April-May, 2018, reflecting a ‘so far so good’ scenario even as the US-China tariff war has spread to some key trading markets in Europe, Canada and Mexico and shows no signs of abating early. In fact, US ranked number one exporting destination for Indian engineering products in May and registered a cumulative expansion of 19.75 per cent for the April-May period.” EEPC is a premier trade and investment promotion organization sponsored by the Ministry of Commerce & Industry. As an advisory body to Indian government on engineering sector it contributes to policies and acts as an interface between the engineering industry and the government. The positive results in engineering exports come in the backdrop of intensifying trade war between United States and China as both countries slapped additional tariffs on goods worth 70 billion. The cumulative engineering exports to the US increased to $1.86 billion from $1.56 billion in the same period the previous fiscal. EEPC Chairman Ravi Sehgal said in a statement “It is so far so good, making it imperative for us to keep engaging with the major world trading powers and staying on course to remain champions of free trade as mandated in the World Trade Organization.”
The Indian export to United States is mainly in services sector. Earlier, the Trump administration had expressed discontent over trade balance which is heavily skewed in favor of India. The American government also slapped some tariffs over goods exported from India but it did not take any substantial action on services exports. The Indian exports to United States like software services or the Business Process Outsourcing (BPO) are hard to replace because American companies do not have enough infrastructure to do these works in their country. They do not have cheap skilled labor who could work in software companies. The software industry have powerful lobby in American government and they will not allow the Trump administration to slap tariff on services exports, because neither they have alternative to Indian software exports nor it is feasible for them to do this by themselves. So we can expect a robust export growth in services sector despite the global trade war. The trade war is mainly harmful for export of goods because it is easy to replace. But Indian exports are mainly in services sector so the trade war will have little impact on it.
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