DAILY NEWSPAPER ANALYSIS

(DNA)



02 July 2019


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Does U.S. want India to import more?

By Aspire IAS

Does U.S. want India to import more?

Theme: India-U.S. Trade relations

  • US President Trump has unleashed a trade war against many countries based on his electoral promise of ‘America First’.
  • As a result, the US government has imposed higher duties on imports to spur local manufacture and increase jobs in the U.S.
  • The same spirit is also behind the move to pressure India to import at least $10 billion a year more from the U.S. over the next three years.

India – US trade volume:

  • According to the U.S. Census Bureau, India imported $25.7 billion from the U.S. in 2017 while it exported $48.6 billion to the largest economy in the world.
  • The U.S.’s latest demand from India is to cut its trade deficit by close to half, through increased purchases of civilian aircraft and natural gas.

How does it affect India?

  • Such a policy of the US could be disastrous for India — not only will India’s exports to the U.S. suffer, but it would have wasted precious dollar resources in signing up for imports under pressure.
  • Even if the U.S. continued to grow, an increase in imports by India, merely to address the trade gap, would have a telling effect on the exchange rate.
  • Indian government officials have estimated an extra $26 billion expenditure due to rising oil prices.
  • Oil importers buy dollars to pay for their imports. That has contributed significantly to the falling rupee, which has lost as much as 14% this year, making it the worst performing currency in Asia.
  • Spending an extra $10 billion a year on imports from the U.S. would mean further pressure on the rupee.
  • A falling rupee makes life difficult for other Indian importers. This would have a domino effect on the rest of the economy.
  • Rising prices could dampen consumer demand, resulting in poorer profit margins for industry.