NEW DELHI: China’s economy is slowing and that could bring more bad news for India already hit by six-year low GDP growth in the last quarter.
The 'dragon nation’ is expected to try and dump products not only in India’s traditional markets abroad, posing a challenge to its faltering exports, but also in the Indian marketplace, making life more difficult for domestic manufacturers, already buffeted by a demand crunch.
Official Chinese data has it that its GDP fell to 6 per cent in the third quarter of this year, a multi-decade low, while profits for China’s firms fell some 9.9 per cent in October. Automobile sales in China have been contracting since July 2018.
“The problem is that we have seen in the past that China has dumped manufactures in other countries including India whenever its industry overproduced and that obviously affects us,” said Prof. Biswajit Dhar of the JNU, a member of the Board of Trade.
India’s merchandise trade fell for a third straight month in October, especially for products where China is a competitor such as textiles. Battered by a protracted trade war with the US, its exports have contracted by 1.3 per cent over the last year. Analysts believe this has made China desperate to sell in other newer markets.
“Look at its OBOR (One Belt-One Road) plans (to build a highway and seaport network across the globe connecting markets with Beijing) -- they are geared to sell Chinese produce,” pointed out Dr. N R Bhanumurthy of the National Institute of Public Finance & Policy.
For example, India traditionally exports automobiles and auto parts to Africa but China is eating into that market not only with its own car exports but also by dumping refurbished used cars there.
“What has heightened our problem is that foreign trade as a percentage of GDP has gone up since 2008, (the last time there was a global economic turmoil) implying we are now more vulnerable to global headwinds,” explained Prof. Dhar. Global trade makes up 44 per cent of India’s GDP
“The hard fact is that trade wars and related to that rise in protectionism, can shave off global and Indian economic growth,” said Aaditya Mattoo, the World Bank’s Chief Economist for East Asia and Pacific. The Bank has already estimated that India’s GDP could contract by as much as 1 per cent because of ongoing trade wars.
Though many believe that Chinese firms will dump in the Indian market either directly or through its subsidiaries in countries with which India has trade pacts such as ASEAN nations, Bangladesh and Sri Lanka, other feel that India has learnt its lessons from the steel dumping resorted to by China in the last decade or so.
“We have also learnt to play the tariff game and net, net will be able to protect domestic industry from attempts to sell cheap here,” said Bhanumurthy.