Trade proximity to China hits advanced economies, but India immune to global headwinds

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Updated: October 23, 2019 11:12:02 AM

Countries like Japan, which depends on China for nearly 20 per cent of its exports, has much more to lose in the rage of trade war.

china, trade with china, japan trade deficit, trade war, us-china, exports, importsAmid the trade war, Japan — a developed economy — has unexpectedly swung into a trade deficit of JPY 123 billion in September 2019, from a trade surplus of JPY 124.1 billion in the same month a year earlier.

India, though stuck with domestic demand shortage, has remained mostly immune to rough global headwinds, even as a global economic slowdown has cast its shadow over several nations’ economies. Countries like Japan, which depends on China for nearly 20 per cent of its exports, has much more to lose in the rage of the trade war. On the other side, India has only 4 per cent dependence on China for exports, hence a slowdown there doesn’t make much difference to the country. Since India is a developing economy, domestic factors contribute much more to the overall economy, unlike the economies of developed countries, which depend on trade to a large extent.

Amid the trade war, Japan — a developed economy — has unexpectedly swung into a trade deficit of JPY 123 billion in September 2019, from a trade surplus of JPY 124.1 billion in the same month a year earlier. The street expectation was a JPY 54 billion surplus. This was the third straight month of the shortfall in Japan, as exports slumped 5.2 percent, falling for the tenth consecutive month. Japan’s GDP growth has not even crossed the 1 per cent mark since July 2018.

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“Since Japan is already an advanced country, it majorly depends on global conditions but India’s economic growth largely depends on the domestic conditions and hence has little to do with the global conditions,” Madan Sabnavis, Chief Economist, Care Ratings told Financial Express Online. Global headwinds may hit India in terms of investments, trade, and current account, but not much on the GDP part, he added.

Recently, Finance Minister Nirmala Sitharaman said that despite a slowdown in India, the country’s economy is doing better than the other economies. Apparently, higher dependence on trade would have been a double-edged sword for India.

“Japan and India fare differently on global parameters. Japan’s exports to China is much larger than India, hence a slowdown in China is poised to affect Japan much more than India,” Sameer Narang, Chief Economist, Bank of Baroda, told Financial Express Online.

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