Economic troubles for China will not be great news for India, which cannot be in ‘sweet spot’ as there would be more negatives than positives from the ripples of a Dragon dragging the shaky world economy, Assocham has warned.
“While it is true that fall in commodity prices, linked to China’s slow demand, is a positive for India, the development is not all that positive for a host of metal and iron ore producers such as SAIL, Tata Steel, NMDC and upstream oil producers. A sharp fall in iron ore, steel and copper prices has equally hit the Indian manufacturers as any other company in the world,” said an Assocham paper, which analysed the impact of the problems in China on Indian economy.
If a bubble-like situation erupts from China, the impact will be seen all around the world to which the Indian economy is too well entrenched into, the Assocham paper has pointed out. China is number one merchandise trader in the world with over $4.16 trillion worth of trade, followed by the U.S. with $3.9 trillion. “If there is a shake-out, a slew of sectors in the global markets, which get their sizeable chunk of revenue from China - tourism, hotels, education, health, and others - will feel the immediate impact.
“Then, the kind of cost competitiveness which the Chinese companies provide to several manufacturing, semi-process industries such as electronics, electrical, and telecom equipment will go missing from the global supply chain,” the paper has noted. “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 $one trillion of our global engagement in goods, services and investments,” feels Assocham Secretary D. S. Rawat.
“In none of these industries, the space vacated possibly by the Chinese companies can be occupied by India which has not so far invested seriously in these sectors and several other manufacturing verticals,” it has pointed out. “Even if the Chinese get temporary jerks, they are not going to disappear from the scene. Their capability to impair is good enough to stage a comeback. The Indian enterprise, as of today, has its own problems of large debts, aggravated by high interest rates, slow demand, inability to pass on the costs and a big pressure on profit margins,” it has noted.
With $94 billion imports and barely $12 billion exports, India runs a huge trade imbalance with China, the paper has added.
