[Answered] Discuss how China-USA trade rivalry is not good for global economic growth especially India’s growth?

Demand of the question
Introduction. Contextual Introduction.
Body. How US-China rivalry not good for economic growth of world and India? How should India balance?
Conclusion. Way forward.

The rivalry between the world’s principal global power, the United States, and its rising challenger, China, is now out in the open and is likely to deepen. Strategic competition has intensified in the past two years to cover trade, technology, naval activities in the South China Sea, and diplomacy. Domestic opinion in both countries have hardened, and there is little sign that differences would be mitigated soon. This has enormous strategic implications for all, including India.

How US-China rivalry not good for economic growth of world and India?

  1. Relocation of Companies: US tariffs are likely to induce foreign-invested companies to relocate from China. Vast majority of China’s exports are still accounted for by foreign-invested companies. This would hurt manufacturing and would hurt economic growth.
  2. Reduced Capital flows: Due to China US rivalry, economies will go for Protectionist measures that will impact overall capital flows.
  3. Weakening of rupee: The rupee will be weaken more due to decreased capital flows. This will make imports costly and will put strain on Indian purse.
  4. Economic growth: Current global economic order will be dismantled. Thus could impact India’s exports and imports impacting its economic growth.
  5. Inflation: This would reduce supply of finished goods and raw material which will increase the general price for the consumer. This would lead to inflation. Moreover, the burden of increased tax from the duties will also be borne by the final user.
  6. Stock markets: Share market will go down as seen recently through drop in stock markets, due to the cautious approach of the investors. Also flow of foreign investment may be reduced.

How India should approach US and China?

  1. India should develop a balanced foreign policy outlook for both the nations focussing on its economic growth and development.
  2. India should push US on visa reforms and on increasing foreign investment in India.
  3. Strategic defence deals at lower price should be pushed using India’s increased strategic significance in the region.
  4. India should exploit this opportunity to emerge as new manufacturing hub by pushing US companies through better and easy regulations supported by labour reforms.
  5. India should focus on the US market for items in the categories of machinery, electrical equipment, vehicles and transport parts, chemicals, plastics and rubber products. The supply chains in China for all these products are likely to shift to other economies.
  6. India should correct its negative balance of trade with China through increased exports of pharmaceuticals and agricultural products to China, as the situation presents right time for India to further its cause.
  7. India can focus on numerous goods for expanding its exports to the US and China markets following the hike in duties by both countries on imports from each other.
  8. Foreign direct investments from the US and China should be encouraged by boosting confidence of firms in India’s business climate. In the domestic industry, it is important for India to enhance productivity while adding technology to its domestic production in the identified products.

India is a major emerging power in the world. With present US-China rivalry it should not miss an opportunity to further its Make in India initiative and emerge as an export hub. What is needed is proper policy push and reforms in indian market.

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