New Delhi: The enmity between America and China is not hidden from the world. Trade war has been going on between the two for a long time. To take advantage of this, India has made efforts to promote its manufacturing sector. But, these efforts have proved unsuccessful. Other Asian countries have benefited more from this trade war. This has come to light in a new study. According to Oxford Economics, India’s total share in US imports increased by 0.6 percentage points to 2.7% between 2017 and 2023. Whereas during the same period, China’s share declined by about 8 percent to less than 14%.
Vietnam benefited the most
However, Vietnam has been the biggest beneficiary of trade diversion. Its total share in US imports increased by 1.7 percent to 3.7% during this period. Taiwan and South Korea have also outperformed India by increasing their share of US imports by 1 per cent and 0.7 per cent, respectively.
This study also presents the challenges faced by Prime Minister Narendra Modi. He is trying hard to promote the lagging manufacturing sector of the country. Its share in gross domestic product (GDP) has remained stagnant at 17% for more than a decade.
Research also suggests that India may find it difficult to make significant gains if Donald Trump becomes US President and carries out his threat to impose 60% tariffs on Chinese goods.
“The US-China trade war has so far improved India’s export prospects only to a limited extent,” Oxford Economics economist Alexandra Harman wrote in a note. The hope that an escalation of the conflict could boost the lagging manufacturing sector has been dashed. ‘India’s export strength lies largely in ‘old economy’ sectors, where growth prospects are limited and competition is fierce.’
Where is India lagging behind?
India has made considerable progress in promoting electronics exports to the US. But, import of spare parts from China has also increased. This shows that there has been very little value addition in domestic manufacturing.
According to Oxford, China is expected to account for about a third of India’s imports of electronics, machinery and chemicals and pharmaceuticals in 2023. 67% of India’s imports for components such as some semiconductor devices came from China.
“This puts India at risk of being subject to US trade sanctions, as other third countries such as Vietnam are already experiencing greater US protectionism,” Oxford said in its report.
It said India has not been able to attract a large share of global foreign direct investment, even though FDI inflows into China are low.