China troubles may sound positive to India but impact may be negative: ASSOCHAM
Economic troubles for China will not be good news for India as there would be more negatives than positives from the ripples of a 'dragon' dragging the shaky world economy, The Associated Chambers of Commerce of India (Assocham) said. The industry body’s paper analysed the impact of the problems in China on Indian economy. According to their research, the dip in commodity prices is linked to slow demand in China. The news may not be as positive as it sounds for metal producers like SAIL, Tata Steel, NMDC and upstream oil producers. A steep fall in iron ore, steel and copper prices has an equal impact on Indian companies as any other manufactures around the globe. However, if a bubble situation erupts from China, all global economies along with India will suffer as China is the top merchandise trader with over $4.16 trillion worth trade, followed by USA with $3.9 trillion. The paper pointed out that, “If there is a shakeout, a slew of sectors in the global markets, which get their sizeable chunk of revenue from China-tourism, hotels, education, health, etc will feel the immediate impact. Then, the kind of cost competitiveness which the Chinese companies provide to several manufacturing, semi-process industries like electronics, electrical, telecom equipment, will go missing from the global supply chain.” Assocham chamber Secretary said, “The so-called de-coupling for India had proved to be an illusion. We as an economy are not at all de-coupled with close to $1 trillion of our global engagement in goods, services and investments.” Moreover, the paper added that the possible space vacated by the Chinese companies cannot be filled by our companies as India by far has invested much in this sector and other manufacturing sector. However, Chinese companies are capable of staging a comeback even after temporary jerks. On the contrary, Indian companies have their own set of issues like – large debts, high interest rates, slow demand, inability to the pass cost followed by huge pressure on profit margins. However, India runs a huge trade imbalance with China which accounts to 21% of our total imports and these imports are avoidable hence, we have not built manufacturing capabilities. India with $94 billion imports, barely exports worth $12 billion. As per the paper, “The 'Make in India' types of initiatives are a long haul and any disruption in essential imports from China can hit the Indian supply chain as well. Moreover, because of pre-dominance of the services sector in our GDP, it is the trade which drives the Indian economy. Trade, in turn, has become China-centric, which for right or wrong reasons, cannot be given a shake-out.” The Indian IT sector which will soon touch $100 billion mark in exports, would also suffer due to the economic jerks in China as most of the revenue for the Indian IT companies comes from the US, and nation is closely linked to China. World’s top two economies have goods trade engagement alone of over $600 billion with the American imports far-exceeding the exports. A huge level of US investment has been made in China , which would also get hit building a kind of domino impact.
July 13, 2015 | 2:57 pm IST.
to success.