India’s imports from the US jumped a massive 38% in the first quarter of this fiscal to $8.53 billion, while those from China dropped 4% from a year before, an outcome contrary to what analysts would have expected at a time when the world’s top two economies are engaged in a trade war.
While Washington’s protectionist moves are directed at India too, China is widely believed to be looking for alternative markets like India to offset its reduced exports to the US.
Clearly, the Trump administration’s insistence on greater market access is yielding results. The US emerged as India’s second-biggest goods import destination (after China) in Q1, having improved its position from the fourth-largest exporter to New Delhi a year before.
Of course, what made the growth in India’s purchases of American goods substantial was also the fact it came off an unfavourable base (imports had grown 33% in Q1FY1cool.gif, while exports to the world’s largest economy grew only 11.7% in the June quarter, showed the latest Commerce Ministry data.
This means India’s merchandise trade surplus with the US could shrink for a second straight year - something the Trump administration will cheer. India’s overall merchandise exports grew 14.5% in the first quarter, while imports rose 11.6%.
India’s exports to China jumped, unusually, by almost 62% in the first quarter of this fiscal to $4.03 billion, albeit on a relatively low base. As for imports, China still remains India’s largest destination, having accounted for goods supplies worth $17.36 billion in Q1, against the US’ $8.53 billion.
Interestingly, India’s exports to Hong Kong - considered a gateway to China - dropped 25% in the April-June period, while imports from Hong Kong rose over 8.8%. This suggests more Indian products are perhaps being shipped to China directly rather than through Hong Kong to bypass the traditional Chinese non-tariff barriers. In fact, at $14.69 billion, India’s merchandise exports to Hong Kong beat those to China last fiscal.
While the Trump administration has targeted New Delhi, among others, in a bid to set right the US’ trade deficit, New Delhi has been impressing upon Beijing to reduce the massive trade imbalance in the latter’s favour.
India’s goods trade surplus with the US dropped almost 6% to $22.9 billion in 2017 from the year before, according to US official data. India is one of the few countries with which US’ trade deficit has decreased in the last one year.
While China alone accounted for a massive $375 billion, or 46%, of the US goods trade deficit of $810 billion in 2017, India made up for just 2.8% and occupied the ninth spot in the list of nations with which the Trump administration seeks to pursue a trade balance agenda.
Meanwhile India and the US are working on a trade package. For India, greater access to the American market in food, farm, engineering goods, auto and auto parts segments hold promise in the long term (over five years), said a Senior Government official. The US sees good prospects for its companies in Indian civil aviation, oil and gas, education service and agriculture segments. India is seeking an exemption from the US’ additional tariff on steel and aluminium and has conveyed to the World Trade Organisation its desire for retaliatory action involving $235 million worth of American goods if the US doesn’t roll back the “unfair” duties.