Since India is a part of global system, such a trade war can have impact on its growth rate, economist Gita Gopinath said.
A full-blown trade war will definitely have an impact on India, economist Gita Gopinath told ET Now. As the US slows down due to trade war, India’s economy will also see an impact, the professor at Harvard University said. The worries related to trade war have now started to hold ground, and with tariffs being put in place, the entire scenario looks disruptive, she added. Not only the international trade but central banks, interest rates, inflation and other variables will also see an impact of a full-blown trade war, she said. It’s also not clear by what extent this trade war can be limited, she said.
Since India is a part of global system, such a trade war can have impact on its growth rate. Even if tariffs are not being imposed on India directly, just because rest of the world including the US may slow down will have an impact on India, she said.
Non-performing assets (NPAs) are posing big problem for India and with new bank fraud cases coming to light, larger problem related to governance at these financial institutions is emerging, she said.
CLSA on trade wars
Meanwhile, global brokerage CLSA told ET Now that trade wars are unlikely to impact India in any way. Macroeconomic numbers point to limited impact on the Indian economy, CLSA added.
What Macquarie said
Donald Trump’s trade war will hit the US economy hard and force it into a recession, Macquarie said citing a research paper by Peterson Institute for International Economics (PIIE). In case of the trade war escalating, and China and Mexico retaliating through reciprocal trade barriers,only the US is to lose ultimately, the report said. “ A full-blown trade war with China and Mexico will only plunge the US economy in recession,” the paper said. The paper is written PIIE economists Pedro Nicolaci da Costa and Eitan Urkowitz. It will also lead to lower incomes, reduced consumption and investment flowing into the US, the paper said.