US doesn’t bode well for Indian economy

23rd June, 2019 11:32:56 printer

NEW DELHI: Trade tensions between India and the US are at risk of intensifying, posing concerns to Asia’s third-biggest economic power house. In recent months, the country’s growth has lost steam along with its title of the world’s fastest-growing major economy, analysts say.

India and the US have engaged in tit-for-tat tariff moves this month, escalating what has been a drawn-out trade dispute between the two countries. “If these issues are not resolved in an urgent manner, and given the present leadership in the US, there is a greater possibility that the trade tension might escalate to the next level,” says Deepthi Mathew, an economist at Geojit Financial Services, based in Kerala, report agencies.

Tensions between New Delhi and Washington have heated up ahead of US Secretary of State Mike Pompeo’s visit to India this week, where he will meet Prime Minister Narendra Modi.

On June 15, India imposed retaliatory tariffs on 28 products imported from the US including almond and apples – a move it had been threatening since last year. New Delhi finally acted on the threat after US president Donald Trump, starting June 5, scrapped India’s preferential trade status, which had allowed the country to enjoy duty-free benefits on hundreds of goods exported to America. In 2017, $5.6 billion (Dh20.6bn) of products exported from India to the US were covered by this programme.

Mahesh Singhi, the managing director of Singhi Advisors, an investment bank in Mumbai, says the trade tiff is an “unnecessary and avoidable development in an otherwise cordial trade relationship between the two countries”.

With India’s economic growth slowing to a five-year low in the quarter between January and March, Mr Singhi says the state cannot afford the situation “to spin out of hand”.

Exports to the US, which include diamonds, pharmaceuticals and textiles, are critical for India to maintain exports momentum.

The value of goods exported to India from the US is far lower, however, at $33.1bn in 2018.