World Economy

Global Trade Tensions May Have Meager Effect on India

Global Trade Tensions May Have Meager Effect on IndiaGlobal Trade Tensions May Have Meager Effect on India

India is in a “good position” to deal with any fallout from global trade tensions and with right policies can reach an 8%-plus growth rate and hold it, according to a UN economist monitoring the country.

If global trade is impacted negatively due to trade tensions in the near future, “India is in a good position to navigate it,” Sebastian Vergara, the United Nations Economic Affairs Officer, told IANS in an interview.

Asked about the projection of a worst case scenario of global growth falling to 1.8% if the trade wars got out of control, he said, “India will, of course, be affected, but the effect will not be very strong, because of the productive structure of the Indian economy and because its driver of the growth nowadays is private consumption.”

Last week, Dawn Holland, the head of the UN Global Economic Monitoring Branch, warned that if the trade war initiated by US President Donald Trump were to spiral out of control with retaliatory measures spreading to other sectors and to countries, the global economic growth next year could plunge to as low as 1.8% next year.

But she also told IANS, “India is slightly sheltered from the spillovers” because it is “not nearly as open to trade as many of the other East Asian economies are.”

However, the UN projection for global growth next year under current conditions is 3.2%.

Vergara said India’s service sector exports—which includes back office operations software and technology services—are not vulnerable to the protectionist trends in the medium term. India’s services sector exports remain globally competitive and have a huge potential, he added.

“For India, despite the short-term tensions, the prospects in the medium term for the export of services are excellent, so India needs to take advantage of that competitiveness,” he said.

Vergara said the economic situation in India is improving, with, growth predicted to increase faster this year at 7.5% and 7.6% next year. But that is below its potential. “The Indian economy can grow at least at 8%, not just for a year or two, but for 15 years,” he said.

“India has to have that growth rate as its target and it can then really achieve a big jump in its development and become an engine of (global) economic growth in the medium term,” he added.

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