Virus Outbreak Gives India Chance to Boost Share of Global Trade
(Bloomberg) -- As the coronavirus pandemic shakes up global supply chains, India is in a position to grow its exports market share with a little help from the government, according to Nirmal Bang Institutional Equities Pvt.
India, which has for long struggled to grow its share in global exports from the current 2% level, can ramp up share in sectors such as chemicals, iron and steel and automotive products where it already has a global footprint, Teresa John, a Mumbai-based economist at Nirmal Bang, said in a report. The economy is also in a position to increase its global footprint in textiles and electronics, she wrote.
But for that to happen, John says there’s a need for India to reduce import duties on intermediate goods, as a one percentage point cut in average manufacturing tariff can increase backward global value chain participation share in exports by 0.4 percentage points. India, on the other hand, has increased import tariffs over the last two years to curb cheap goods from abroad and support small- and medium-sized local manufacturers.
“Raising tariffs to encourage domestic production may not be the optimal solution as components may continue to be imported,” John said. India may also need to revisit its special economic zone policy to encourage development of clusters that will cater to both the domestic and export markets, she said.
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