India at risk: As US emerges major export partner, policy shocks may hit growth

By: |
Published: March 19, 2019 1:04:03 PM

US President Donald Trump recently announced his intention for withdrawal of Generalised Special Preferences (GSP) status benefit on exports from India due to lack of reciprocity, putting at risk the duty-free import of thousands of goods from India into the US.

India’s exports to the US have grown, and so have policy risks. The US has of late emerged as India’s major export partner, with its share in India’s exports far surpassing that of China and UAE, exposing India to growth risk from any policy disruptions, a report said.

The total share of indian exports to USA stands at 16 per cent, followed by UAE and China for which it stands at 9.2 per cent and 5.1 per cent respectively, said a CARE Ratings report on the foreign trade profile of India during first 11 months of FY19.

US President Donald Trump recently announced his intention for withdrawal of Generalised Special Preferences (GSP) status benefit on exports from India due to lack of reciprocity, putting at risk the duty-free import of thousands of goods from India into the US. Commerce Secretary Anup Wadhawan said that the move will not impact the Indian exports significantly.

However, the data showing increasing exports to US from India since 2014 reflects that any policy affecting the trade between the two nations will have an impact on growth, said CARE report.

Soaring trade deficit widens current account deficit:

Moreover, the total trade deficit, which fell since the year 2014, has begun to rise again. India’s total trade deficit fell from $126 billion in FY15 (11 months) to less than $100 billion in FY17; but then it grew sharply to $148.6 billion in FY18 and further to $165.6 billion in FY19 (11 months), noted CARE Ratings.

The trade deficit for the current entire year is likely to be the highest since 2012-13 when it surged to $190 billion, said the report. This will have a significant bearing on the country’s current account deficit and in turn balance of payments which will then get reflected in the fundamentals that affect the exchange rate, the report added.

READ ALSO: Holi offer: Jet Airways, GoAir, IndiGo offer discount, cashback; here’s how to book cheap flight tickets

Although there has been an increase in exports too, along with increase in imports, the overall trade deficit deficit shows an upward tendency.

The government had been engaged in discussions to arrive at a solution on the issues raised by the US, including those on sectors such as medical devices, dairy products and the IT sector, India had said earlier.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.