India Under Pressure from the U.S. on Trade Policy
India has not escaped the scrutiny of the Trump administration when it comes to the two countries’ trade balance. India’s trade surplus in goods and services with the U.S. fell from USD 31 billion in 2016 to USD 28 billion in 2017. Although this was welcome news for the U.S., which wants to improve its overall trade balance with India, the reduction was not seen as large enough.
In recent months, the U.S. has put pressure on India over its trade policy, which it considers unfairly benefits Indian exporters at the expense of foreign producers. This comes at a time when the Indian external sector, which has benefited for years from supportive trade policy, is already under strain. India’s merchandise trade balance, for example, is expected to deteriorate to a record low this fiscal year, largely due to rising oil prices boosting imports. Moreover, delayed tax refunds and tighter trade credit standards are seen hitting exports.
On 28 May, a dispute commenced at the World Trade Organization (WTO)—the body responsible for the legal underpinning of international trade—between the U.S. and India. This is because the two countries failed to reach an understanding during the consultations that the U.S. requested in March over India’s export subsidy programs. Under WTO law, countries are permitted to subsidize exports until they reach a certain level of economic development. India surpassed that level in 2015, but the U.S. accused India of continuing those programs. Moreover, in May, the U.S. notified the WTO’s Committee on Agriculture that India appears to have illegally over-subsidized its rice and wheat farmers. Together, these cases point to an assertive U.S. stance against India.
Meanwhile, the U.S. pressured India in other ways in April. First, it announced that it was reviewing the low import tariffs granted to India under its Generalized System of Preferences scheme. Second, it continued to place India on its annual watchlist of countries with concerning standards of intellectual property protection. And, finally, it announced that it would begin monitoring India for possible currency manipulation practices. Furthermore, when the U.S. imposed its global steel and aluminum import tariffs in March, India, like most countries, was not exempt.
All in all, the U.S. appears to be turning up the heat on India over its trade policy practices, mainly to help reduce the large trade deficit it has with the Asian giant. Although this is unlikely to hit the competitiveness of Indian exporters in the short term, the greater concern for them lies in the longer-term consequences of potentially decreased government support and more competition from abroad. The overall effect on the already-poor trade balance is a concern for the broader economy.
5-year economic forecasts on 30+ economic indicators for 127 countries & 30 commodities.
Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinion of FocusEconomics S.L.U. Views, forecasts or estimates are as of the date of the publication and are subject to change without notice. This report may provide addresses of, or contain hyperlinks to, other internet websites. FocusEconomics S.L.U. takes no responsibility for the contents of third party internet websites.
Author: Edward Gardner, Economist
Date: June 5, 2018
TagsUK TPS Turkey precious metals China Economists Eurozone Colombia Commodities Investment Ukraine France Base Metals Commodities Company News Trade TPP Unemployment rate Asia Gold Asean Exchange Rate Israel Exports Economic Debt Precious Metals Commodities South Africa Housing Market G7 United States European Union Venezuela Vietnam MENA Eastern Europe election Energy Commodities Draghi GDP Forex Agricultural Commodities Canada economic growth oil prices Tunisia Lagarde Infographic OPEC Cannabis interview Oil Spain Copper Emerging Markets IMF Healthcare Iran Mexico Base Metals Sub-Saharan Africa USA Greece Major Economies Economic Crisis Africa Nordic Economies Bitcoin public debt Brexit Australia Portugal Central America Canadian Economy Economic Growth (GDP) Germany Italy Asian Financial Crisis Inflation Euro Area India Banking Sector Japan Cryptocurrency Consensus Forecast United Kingdom Argentina Russia Latin America Brazil chile
Hungary: Economic sentiment nosedives in January amid worsening consumer confidence https://t.co/woIQBDWlWv
17 hours ago
Ukraine: Industrial output sinks to over four-year low in December https://t.co/aDiQFSk4X5
17 hours ago
After a subdued 2019, economic growth is projected to gain some pace this year in Latin America… https://t.co/HVnwqVtqZJ
18 hours ago
Growth is seen ebbing slightly this year in Central America and the Caribbean as weaker momentum in the Dominican R… https://t.co/LxWBqR4tCz
1 day ago
Nigeria: Central Bank keeps policy rate stable in January but hikes cash reserve ratio to curb liquidity https://t.co/7XnJdX1F9a
1 day ago