Effect of COVID-19 on economy

Reading time: 6-8 minutes.

History has witnessed several pandemics over the centuries, but few as widespread and as disruptive as the ongoing 2019-20 coronavirus outbreak. The virus was first identified in Wuhan in Hubei district of China in late December 2019 and has since found its way to nearly 196 countries and territories across the globe. It causes the ‘Coronavirus Disease 2019’ or ‘COVID-19’ which is characterised by acute respiratory infection, particularly fatal for infants, people of advanced years and those with underlying medical conditions.

 Although it is primarily a situation of grave health crisis, the outbreak has caused in its wake major socio- economic disruptions, with far- reaching consequences. According to a United Nations prediction report, the world economy emerging out of the crisis will see 25 million people out of work and dramatically slashed rates of wages for workers. It warned that the world should prepare for a “significant rise in unemployment and underemployment in the wake of the virus”. As these rather worrisome facts and figures keep emerging, let us explore the factors that shed some light on how a common virus has managed to bring large economies to their knees within such a short span of time.

Pandemic status of COVID-19

The coronavirus has a very high rate of transmission as is evident from the fact that as on 25th March 2020, mere 3 months from the first reported case, there have been around 4, 71,300 known cases of infection worldwide and 21,300 deaths. China, which is the epicentre of the disease, and the European countries of Italy and Spain along with the USA have been the worst hit, cumulatively accounting for around 55% of total number of current cases worldwide.  It was declared as a ‘pandemic’ on 11th March, 2020 by the World Health Organization. A pandemic is defined as “an epidemic occurring worldwide, or over a very wide area, crossing international boundaries and usually affecting a large number of people” A number of countries have imposed a state of total lockdown, including travel restrictions, amid efforts to quarantine citizens in order to prevent community transmission. Indian Prime Minister Narendra Modi announced a complete lockdown of the country commencing on 25th March for a period of 21 days, threatening penal consequences for violators. With people forced inside their homes and business activities suspended, a shutdown of the global economy is looming large.

How is it affecting the economy?

Israeli historian Yuval Noah Harari says ‘this storm will pass… but the choices we make now could change our lives for years to come

As nationwide lockdowns and state- imposed curfews continue- major exports are suspended, shopping malls are left deserted and the lights in theatres and cinema halls have gone dark- it comes as no surprise that unemployment is headed for a historic high. Closure of these establishments have, in turn, hit those businesses, big and small, that were engaged in supplying utilities and services to them- developing a vicious cycle of economic inactivity.

The Chinese economy, owing to its prolonged fight against the viral outbreak, has gone down by about 10% in the first quarter. Estimates of the margins by which US and the European economies are likely to go down are of similar magnitudes, i.e. perilous double- digit drops in GDP, that too assuming that the virus would be contained by the end of second quarter and measures would be relaxed.

As far the Indian economic scenario is concerned, Prime Minister Narendra Modi has asked top verticals within the government, including the Niti Aayog, the Economic Advisory Council to the Prime Minister and Finance Ministry to assess the economic impact of the novel coronavirus. The economy is forecast to grow 5% in current fiscal year, the slowest in 11 years. The Economic Survey had forecast 6-6.5% rise in financial year 20-21, but Covid-19 has hurt recovery prospects. Ill- effects of the pandemic have not spared the Forex and Bond markets either.

The first brunt of the blow would be borne by the tourism, transport and hospitality sectors- leading to a gradual stagnation of the supporting industries. Consumption slowdown is obviously followed by drop in production, which is further aided by the fact that the outbreak has caused workers to flee to villages culminating in unavailability of labour.

Entrepreneurs operating small and medium sized enterprises find themselves in particularly deep waters as poor cash- flow and negligible revenues over prolonged periods are slowly pushing them towards a point beyond recovery and possible permanent closure.

 As the health pandemic is slowly unfolding into an economic pandemic, the world is waiting for the governments to respond, as their support is extremely crucial to ensure that this temporary economic shock does not turn into a permanent one. According to former RBI Governor Dr. Raghuram Rajan, the situation must be dealt with in short- term, achievable steps as it is hardly an appropriate time to roll out big, ambitious projects. Available fiscal resources must be channeled into healthcare first- in securing supply of protective gear and hygiene products, expanding available facilities and building quarantine spaces.

The next step would be identification and allocation of resources for providing monetary benefit to the vulnerable sections of the society- such as the impoverished and the immigrants- who are struggling to keep body and soul together during these trying times. Equally important is to ensure the survival of small and viable businesses, which are fast losing their stronghold in the economy, by providing monetary incentives and subsidized loans to create a bridge between now till they manage to overcome the crisis and secure economic momentum. 

Steps being taken by government & critical analysis

The first step towards mitigating any mishap on part of the government is resorting to clear communication and educating the people about the gravity of the situation. The Indian government must put across very clearly to every citizen that this is a period of national emergency and that pro- active role sought from all of them. Comprehensive data must be released to guide actions, as one cannot hope to win a blind fight.

 In terms of policy decisions, the Prime Minister announced on 24th March, 2020 that Rs. 15,000 Crore has been pumped into the healthcare sector for provision of testing kits, protective gears for doctors, nurses and paramedics and also for expanding the available facilities and increasing accommodative capacity. Although the amount allocated seems substantial, it must be weighed against the fact that there is considerable uncertainty over the duration of the pandemic- currently available estimates of adverse effects of the outbreak might have to undergo sizeable revisions. 

India is yet to announce any substantial and far- reaching policy decision to combat the approaching economic slowdown. In this respect, it can take cue from other leading economies that are rolling out counter- measures. For instance, in the US, Federal Reserves has cut its interest rates to near zero to help consumers and businesses to access cheaper loans. Taking into account an upcoming inevitable rise in NPA’s and possible delinquencies, there is a large demand that the RBI slash its rates before announcing next fiscal policies to manage the country’s plummeting risk and investment capacities. It can also offer partial guarantees to commercial banks, so that they remain incentivized to lend to businesses, particularly the smaller ones.

However, every policy must be implemented only after taking into careful consideration all possible consequences, since one must not forget that the country is currently dealing with a financial system that is severely impaired and efforts must be directed towards rebuilding it and avoiding any path that may lead to further collapse.

Conclusion

The coronavirus outbreak is perhaps the biggest crisis that our generation has had to face. Although the situation demands quick and decisive actions on part of authorities as well citizens, one must not forget to weigh the long- term consequences of these actions. The goal today is not merely to overcome the immediate threats to our health, but also lay to the foundation for a safer world, to emerge on the other side stronger than ever.

Every cloud has a silver lining, and in this situation it can be found in the fact that the entire world has been presented with a profound purpose to unite, and exhibit the kind of compassion which was thought to been buried beneath the frenzy of modern, selfish way of life. One can only hope that humanity is able to derive valuable lessons from this ordeal and that each of us hold life and freedom in the highest regard hereon.

Author: Adrita Biswas from ILS Law College, Pune.

Editor: Ismat Hena from Faculty of Law, Jamia Millia Islamia.



Supreme Court on CAA

Reading time: 6-8 minutes.

On 22nd January 2020, the Supreme Court, while dealing with the record 1444 petitions related to the Citizenship Amendment Act, refused to grant a stay on the Act, thereby declining to take note of the anti-CAA protests that are going on in the entire country.

The Centre has been given four weeks’ time period to file a comprehensive response. The court also said that the petitions will be heard by a five-judge Constitutional bench. The bench, however, agreed that the petitions from Assam and Tripura should be heard separately as the grounds of their agitation are different from the rest of the country.

Mr. Kapil Sibal, while arguing against CAA-NPR, also requested the court to postpone the process of conducting NPR by two months as it is bound to begin in April 2020. However, the court was of the opinion that “an interim order would be as good as a stay order”, therefore refusing to grant such order. The CJI said that the matter is “uppermost in everybody’s minds” and that “the CAA (law) will always remain subject to the outcome of the petitions”.

The controversy around CAA-NPR

The Citizenship Amendment Act benefits the people of Hindu, Sikh, Jain, Buddhist, Christian and Parsi religion who have sought refuge in India on or before 31 December 2014 after facing religious persecution from the countries of Pakistan, Bangladesh and Afghanistan. The Act, however, leaves out Muslim refugees.

The Act has been protested against and challenged on the ground of violation of the Fundamental Right to Equality guaranteed to every person in the territory of India and also on the grounds that it violates the principle of Secularism in India by discriminating against the Muslim refugees.

The NPR (National Population Register) is a register of the residents of India where the enumerator will collect the demographic and biometric data of the individuals living in India following which, a list of ‘doubtful citizens’ will be prepared. This would pave the way for the preparation of NRC (National Register of Citizens) which would, in turn, assess whether the ‘doubtful citizens’ are illegal migrants or not.

Whether there is a direct link between CAA and NPR depends on what the data for NPR will be used for. However, it has been inferred that if the people of the aforementioned religions, other than those from Islam, fail to prove their citizenship after the process of NPR-NRC, then they would easily be given Citizenship under the CAA, which would amount to discrimination against the Muslims.

Arguments in favor of CAA-NPR

The BJP leaders, including the Home Minister Amit Shah and Prime Minister Narendra Modi, time again replied to the criticism received by the CAA by stating that the CAA is simply a law of giving citizenship. It does not deprive any citizen of their citizenship. Moreover, the religions as mentioned in the Act have been given citizenship because these are the minority religions in the countries of Pakistan, Afghanistan, and Bangladesh and have been persecuted since long ago.

Similarly, Sadhguru in an interview also said that at the time of partition of India and Pakistan there were approximately 23% of Hindus residing in West Pakistan whereas 30% of Hindus residing in East Pakistan or Bangladesh. This number has come down to merely 3-4% over the years due to their religious persecution. In his words, “it was about time that India showed some compassion” towards them.

As regards, the NPR, Prime Minister Modi has time and again assured the people of India that NPR-NRC has never been discussed by the party leaders and is not going to be implemented any time soon. However, Amit Shah has on many occasions confirmed in his speeches that the NRC for the whole country is on its way.

In conclusion, the protests and the nationwide agitation are still premature as there is no certainty whether the NPR or the NRC would be linked with the CAA or not. The guidelines or dates to conduct the NRC- NPR have not yet been finalized. Hence, it is wrong to assume that these would be a threat to the country.

Arguments against CAA-NPR

The CAA was challenged before the Supreme Court on three grounds. Firstly, it was contended that CAA violates the Right to Equality as the principle of reasonable classification of three countries mentioned in the Act is not sufficed. Secondly, the date i.e. 31 December 2014 is arbitrary and has no legitimate reason. And thirdly, the discrimination against Muslims has violated the principle of a secularist state of India embodied in the Constitution.

Apart from this, the Act itself nowhere mentions the word ‘persecution’ as has been used by BJP leaders for justifying the move.

The process of NPR-NRC is perhaps an unplanned move as was demonetization. The fact that both Amit Shah and Narendra Modi have given contrasting statements regarding the conduct of NPR-NRC is the testament to the same. Moreover, Amit Shah has confirmed that documents like Aadhar Card, Passport, Voter Card and Pan Card etc. would be not applicable for proving the citizenship of the doubtful citizens. Therefore, the citizens, especially poor people, would have a hard time proving citizenship. The people who voted for the government are now being questioned about their citizenship, which is highly illogical. According to a report by OECD, India has already suffered a loss of 2.8 lakh crore rupees last year due to economic slowdown. Furthermore, the government has allocated 4000 crore rupees (approx.) for the conduct of NPR, adding to India’s sinking economy.

Significance of this development by the Supreme Court

“The CAA will always remain subject to the outcome of the petitions”, said CJI Bobde while hearing the case. The court refused to grant a stay on both CAA and NPR as was requested by the petitioner’s counsel.

The Court said that granting an interim order is not the solution to the issue. Even if this case is put on stay, the petitions are being continuously filed and each of those cannot be subject to an interim order. Furthermore, refusing to pass any order without the Centre’s response, the Court has directed the Centre to file a reply within four weeks.

Therefore, till any decision is reached upon by the Supreme Court, it is safe to assume that the NPR would not be postponed or halted and the process will likely begin at the scheduled time, beginning in April 2020.

Probable future

Given the circumstances, if CAA and the NPR get implemented, then it could lead to an upsurge in the protests causing unrest throughout the country.

The poor people would be adversely affected as was the scenario at the time of demonetization. The population of India would expand giving way to furtherance of the economic slowdown of the country.

This might also prove as a way to deport the Muslim population of the country and lead one step towards the BJP’s dream of converting India into a ‘Hindu Rashtra’.

However, from a positive outlook, it would perhaps rule out the illegal immigrants from India and would provide citizenship to the minority religions of Pakistan, Afghanistan, and Bangladesh.

Conclusion

All in all, the Citizenship Amendment Act and the National Population Register have been implemented and are valid until the Supreme Court rules otherwise. The Anti- CAA protests have caused huge unrest in the country and are nowhere near the end. In this scenario, all eyes are on the Supreme Court to do justice to the people of India.

On one hand, the CAA has been alleged as discriminatory towards the Muslims whereas, on the other hand, the NPR is a whole new challenge for the people. The Supreme Court is yet to decide the constitutionality of both the acts but for now, these pose a great threat to the peace and safety of the people of the country.

Author: Prachi Gupta from University Institute of Legal Studies, Panjab University, Chandigarh.

Editor: Ismat Hena from Faculty of Law, Jamia Millia Islamia.

PMC Bank scam

Reading time: 6-8 minutes.

The Supreme Court bench comprising of Chief Justice S A Bobde along with Justices B R Gavai and Surya Kant after considering submissions by the Solicitor General Tushar Mehta partially stayed order of Bombay High Court and allowed the release of HDIL promoters Rakesh Wadhawan and Sarang Wadhawan from Arthur Road Jail in Mumbai to their residence. Such release shall be done under supervision of jail guards. The ‘unusual order’ was passed in light of public interest litigation.

“Until further orders, there shall be a stay of the directions given by the Bombay high court in paragraph 15 (xv) and (xvi) which relates to the release of the accused from the jail of impugned order dated 15 January 2020.”

However, the other notions of High Court regarding appointment of committee for supervision of sale of assets of accused shall be in operation. The High Court set up a 3 member committee for valuation and sale of encumbered assets and property attached by EOW (Economic Offences Wing) of HDIL for speedy recovery of dues payable by the entity to the PMC Bank at the earliest.

Background of the case

Punjab and Maharashtra Co-operative Bank, a scheduled commercial bank is situated in 6 states with extensive network of 137 branches. The total deposits of the bank revolve around 11,617.34 crore rupees. The higher management of the bank advanced huge loans to financially stressed HDIL and its group entities.

EOW filed the chargesheet of 32,959 pages against 5 persons in fraud case of 6,300 crore rupees, holding witnesses of 340 people. Persons charged included HDIL Director Rakesh Wadhawan, his son Sarang, former PMC bank Managing Director Joy Thomas, former bank Chairman Waryam Singh and former Bank Director Surjit Singh Arora. It was claimed that the ‘whistleblower’ was an insider; a senior official.

What exactly was the scam?

HDIL promoters colluded with the management of bank to draw loans from Bhandup branch. Despite non-payment of loans, the bank did not classify them as ‘non-performing assets’. Moreover, bank created fictitious accounts of other companies who borrowed small amount of money and presented fake reports to hide from supervision and regulations.

In the financial year 2018-19, the bank showed annual profit of 99.69 crore rupees and bank reported 315 crore rupees as advances as non-performing assets which adumbrated a good performance as compared to public sector banks. However, the bank created fake annual reports to hide bad loans.

The laundering case for purchase of real estate or ‘evergreening’ of previous loans, relates to the transfer of about 70% of total credit facilities of Punjab and Maharashtra co-operative bank to HDIL and related entities. The bank scam roundabouts at Rs. 4,355 crore with total Non-Performing Assets amounting to 73 percent. The bank allegedly favoured its promoters and allowed them to operate ‘masked or bogus accounts’ protected with password.

Around 21,049 banks accounts were opened to conceal 44 loan accounts in fake names to hoodwink RBI. Not only was this but the bank’s software (opine) also used to interfere with these bank accounts. Only few people used access code to conceal the visibility of dummy accounts. The laundered money was used by them for their personal gains like purchase of real estate outside and within the nation.

Legal provisions involved

The chargesheet was filed against the accused under Sections 420 (fraud), 201 (destruction of evidence), 477A (falsification of accounts) of Indian Penal Code (IPC). Further, sections 408, 419, 467, 468, 120(B) of IPC was added in the FIR filed by EOW.

Developments in the case so far

The Enforcement Directorate working with Mumbai police has attached the movable properties; which comprises of 15 luxury cars, a seven seater speedboat along with two aircrafts and a yatch. It further gave consent for sale of airplanes and the yatch but claimed that it cannot tamper with the vehicles as its disposal would be adjudicated under Prevention of Money Laundering Act (PMLA).

A special committee worked continuously for three months and led to the arrest of 12 people so far. To smoothen the situation, RBI placed restrictions on lending and withdrawal of amount. Earlier the withdrawal limit was restricted to 1000 rupees but gradually it was fixed at 50,000 rupees to provide relief to innocent account holders.

Probable future

RBI possesses regulatory responsibilities over such co-operative banks and hence it further mires the problem. Only few banks are under the restrictions and hence a direction is vital for future course. The bank’s chairman served on board for around 10 years and any indictment in such a case would undermine the quality of oversight on such banks. Demonetisation has caused a major gain of deployment of public savings in the financial sector.

But such scams are dissolving the benefits and causing loss to the economy. Transparency in action is the need of the hour to fix the mess and a systemic repair is essential to prevent laundering of money. The money laundered must be regained back from the defaulters and strict punishment should be given so that it does not happen in future.

Conclusion

This was not the first time when PMC bank got infamous for a scam and left without any action. Founder chairman Sardar Gurucharan Kochhar had informed about the irregularities of about crore in 1993. He claimed had RBI taken stringent actions then, a strong lesson would have gone to the people and would not have committed this scam.

RBI acted in favor of innocent depositor after financial irregularities, problems in internal control and under-reporting which came into its notice. Few people conceive this move as political one ahead of Maharashtra election. However, despite making it a political issue it should more be concerned with the loss of money to the economy and the fraud done to the nation.

Stringent action is the need of the hour so that a message is circulated to people and fear to process such scam for personal gains.

“Politician-banker nexus, poor governance and slackness on part of watchdogs are some of the pressing issues which must be taken care of sooner”.

The recommendations of RBI Panel under R. Gandhi, former deputy governor of apex bank should be taken into consideration. It focuses on the notion that the umbrella organization must be created and institute board of management to cater the needs.

Other recommendations are hinted by the amendment in the Banking Regulation Act to provide more powers to RBI over such cooperative banks, empowering apex bank to wind up banks independent of regulators under laws of cooperative societies. Even Nirmala Sitharaman promised a legislation to cater such scams.

The scams are increasing manifold but what most shocking was involvement of such cooperative banks. Earlier public sector banks and private sector banks were involved. However, cooperative banks are coming at forefront which is disastrous for society. People will lose faith in the banking system of the economy which is more disastrous for a developing nation.

Author: Naina Agarwal from Rajiv Gandhi National University of Law.

Editor: Ojasvi Agarwal from Jindal Global Law School, Sonipat.

Decoding Brexit: What’s in it for India?

Reading time: 5-6 minutes.

Boris Johnson, the UK’s new Prime Minister will be dealing with a lot of issues left over by his predecessor, Theresa May. May was forced to resign after the UK’s lawmakers rejected to ratify the Brexit deal that she secured with the EU three times and also failed to agree on any alternative outcome.

At a glance, Johnson’s Brexit plan is simpler than May’s: Get a new agreement with the EU or crash out on October 31 with no deal. Given that the EU has said numerous times that May’s deal, formally known at the Withdrawal Agreement, is not open for negotiation, no deal seems on the cards.

When Parliament returns from its summer holiday on September 3, Johnson could well face a motion of no confidence in his government. It’s a vote that Johnson and his team can’t expect to win. He currently has a parliamentary majority of just one and some of his own Conservative lawmakers have implied they will put blocking no deal ahead of party loyalty.

But why is Britain willing to leave EU in the first place?

Brexit is the abbreviation of the term “Brtiish Exit” from the European Union. It mirrors the term Grexit, a term which was coined and used to refer to the possible exit of Greece from the EU. Britain decided to leave the EU after the result of the referendum which stated that 51.9% of the voters favoured exit of Britain.

A referendum denotes voting in which everyone of voting age can take part, normally giving a ‘yes’ or ‘no; answer to a question. After growing calls from many MPs of the Conservative Party and the UK Independence Party (UKIP), the referendum was finally held on June 23, 2016. A similar referendum was held in 1975 in which 67% of the voters voted to stay in the EU.

While there is no specific reason why Britain took this decision, people who voted for leaving the EU argued that it was necessary to protect the country’s identity, its culture, independence and its place in the world. They essentially were opposed to immigration of people into Britain for work related purpose. The Eurozone crisis added to their resentment.

Which international law is involved in Brexit?

Article 50 is a clause in the European Union’s Lisbon Treaty that outlines the steps to be taken by a country seeking to leave the Union voluntarily. Invoking Article 50 kick-starts the formal exit process and serves as a way for countries to officially declare their intention to leave the EU.

The procedure applies to each of the 28 nations of the EU; “in accordance with its own constitutional requirements’. The first step along the road to departure is for the departing Member State to notify the European Council of its intention to do so. The UK did this on 29th March 2017, after the assent of 498 MPs in the House of Commons. The next step was for the EU to negotiate and conclude a Withdrawal Agreement with the departing state, setting out the arrangements for its withdrawal.

What can be Brexit’s repercussions on Indian economy?

Brexit was one of the biggest global macroeconomic events in June 2016. The decision of Britain shook markets worldwide and had a major economic impact. This was clearly reflected in rebound the Indian stock markets showed post referendum results.

The UK has been an attractive centre of business and international finance due to its strong legal system and contract enforcement practice. India is one of the top investors with UK on account of UK being part of the European Union. With its strong investment climate and relationship with EU, it was considered the gateway to do business in Europe.

Many Indian companies like Rolta, Tata Steel, Bharti Airtel Ltd (UK) have set up operations in the UK and derive revenue from European operations. A no-deal Brexit is likely to cause some disruption in the operations and may also cost a few jobs. Jaguar Land Rover plc, owned by Tata Motors ltd. plans to eliminate 4,500 jobs in response to sales slowdown caused by Brexit and slowing Chinese demand.

Indian companies would need to recalibrate European operations, like setting up an additional operating company within European Union. This means short term disruptions will have a financial impact, as also take up management time. Similarly, Indian companies who have used London as their base to raise capital abroad may face issues and may need to work harder on the process.

Given that this risk has been around for a while, Indian investments in 2017 were at the highest level since 2008. This is partly driven by the depreciation of GBP (British pound sterling) against the rupee post the Brexit vote. Indian companies will need to focus on their merger and acquisition deal efforts across Europe while tackling the British market.

India would also need to negotiate a free trade deal with the UK as it proposes to retain the same goods and services schedules post Brexit. The concessions agreed upon by WTO members’ prior to Brexit may not hold the same value once Brexit happens.

All the additional costs and tariffs agreed upon may need to be rescheduled. India exports around USD 9.6 billion worth of goods and services to the UK. Though there may be other factors looming, Brexit may be another reason why the trade surplus of USD 4.6 billion in 2017 almost dropped by half to USD 2.5 billion in 2018.

The road ahead…

India sees the British exit as an opportunity to expand its trade and economic relations with the UK. British and Indian officials have been signalling that Brexit will make the conclusion of a bilateral free trade pact much easier. This is because Brexit provides a fresh opportunity to India to strengthen its economic relationship with the UK through an India-UK trade and investment agreement.

On the other side, a no deal Brexit and the uncertainty it produces would have many adverse impacts on the Indian economy in general and Indian businesses in the UK in particular. For instance, at present, roughly 800 Indian companies operate in the UK. The UK serves as an entry point for many Indian companies to the European market. A disorderly British exit would shut the direct access of these companies to the EU market. That may force some of the companies to relocate or shut down their businesses.

Finally, the doubt of a no deal scenario and risk aversion tendencies across markets can further depreciate the already fragile rupee. Economists note that the US Dollar would be the only currency that benefits from a hard Brexit and the subsequent uncertainty in global markets. Such an outcome will not only affect the pound sterling but the currencies of emerging markets as well, including the Indian rupee.

A no deal scenario will, therefore, have an adverse impact in the short term. However, in the longer run, Brexit is expected to provide an opportunity to India to reset its trade and economic relations with the UK and the EU.

-This article is brought to you in collaboration with Shivaang Maheshwari from Gujarat National Law University, Gandhinagar.

US-China Trade War: Effects on Indian Economy

Reading time: 3-4 minutes.

Chinese and American administrations have been at loggerheads for over a year now, failing to come to a consensus on trade issues. Ever since coming to power, Mr. Trump has time and again pointed out the heavy tariffs imposed by the Chinese on US goods. The Chinese administration too has been wary of Trump’s statement. Be that as it may, trade-related tension between the two economies has reached a war scale.

 Last year, Washington raised tariffs on $200 billion worth Chinese goods to 25% from 10%. Beijing retaliated with tariff on US goods. As the clouds of uncertainty gather, this post is an attempt to examine the possible repercussion of China’s trade war on Indian economy.

Is US-China trade war a blessing in disguise for India?

According to the trade experts, a new window of opportunity is emerging for Indian goods amid rising tension between the two gigantic economies. As per the recent reports, Washington is looking forward to replace Chinese exports with Indian products.

The high import duty imposed by Beijing has substantially affected the price of US goods. According to a study, as many as 203 Indian goods have an outright advantage of replacing Chinese exports to US. 

Surprisingly, China also is taking keen interest on opening larger avenues for Indian goods in its market. The reason behind such willingness of Beijing can be traced to the slow economic growth in the second quarter—6.2%, slowest in 27 years.

Even as the Chinese officials suffice the people of China with their rhetoric, fact remains that Beijing’s mammoth economy which used to strive on cheap labour and high volumes of export has started to slump. And in the process of damage control, Beijing is providing better access to Indian goods.

According to FIEO (Federation of Indian Export Organisations) President Ganesh Kumar Gupta, India’s export to Washington has risen sharply at 11.2% in the year 2018, while export to China showed significant growth at 31.4% in the same year. These stats bear testimony to the benefit ensuing from the trade war.

How can we Indians embrace this opportunity?

The Indian Government ought to adopt a meticulous action plan in order to benefit from the trade war. On the top of the list, New Delhi can increase its export to China and reduce the trade deficit which cropped up to $50 billion last year in a total trade of $71.5 billion.

Another imperative element is that China will strive towards replacing the US hegemony over software industry. India can be the alternative that China is looking for, be that as it may, it will an uphill task for Indian software industry to match the pedigree of US. However, the promise shown by the Indian software industry allows us to bear hope.

Challenges ahead…

While India is benefiting from the trade war between the two giants, it cannot stay immune from the aftermath of trade war. Noel Quinn, chief executive of global commercial banking at HSBC, mooted an interesting point that is pertinent to Indian economy.

He articulated that India will benefit from the trade war if investment that would have otherwise gone to China comes to India. However, he was quick to point that the potential for the negative impact cannot be ruled out as in its aftermath trade war will impact world trade dramatically and by extension, global growth of GDP.

In conclusion…

Perhaps, it is too soon to evaluate the complete outcome as the trade war will have further repercussion on the global economy, pushing it into greater abyss. But as far as Indian economy is concerned, the ramification of the trade war will depend upon the meticulous planning of the government and on India’s ability to meet demand and supply in the international market.