There is a sense that the recent decline in oil prices has been beneficial for Indian markets, says KotechaET Now|May 08, 2019, 10.20 AM ISTAlthough India and China do not compete in too many export fields, there could be some advantages to India if companies shift production to India, said Mitul Kotecha, Senior Emerging Market Strategist, TD Securities, in an interview with ETNOW.Edited excerpts:
Trade war jitters seem to have spooked the global markets. While many analysts are expecting a deal, there are concerns that Donald Trump could unleash higher tariffs by the end of the week and aggravate the tensions with China. How big a big worry is that?
The sentiment across asset markets has been extremely negative and this was extended yesterday with the US and European markets. We are seeing pressure on risk assets in general and safe havens such as Japanese Yen doing much better but clearly markets are expecting the worst outcome, that we will see the tariffs raised to 25% on $200 billion worth of Chinese exports with US plus risks of another $325 billion of tariffs as well. That could derail some of the global growth stabilisation that we have been seeing and have much more ramifications across the globe. That is the reaction markets are fearing at the moment.
Each time there is a spark between US and China, the same question is raised, on manufacturing front, is it advantage India? But near term, will India also bear the brunt because even our markets have fallen about 350 odd points from the top?
India is definitely in a better position than most economies. Firstly, the economy is more closed, less trade-driven and more domestically driven. There is a sense that the recent decline in oil prices has been beneficial for India’s markets as well and if tariffs are put on Chinese exports, although India and China do not compete in too many export fields, there could be some advantages to India if companies shift production to India or if India is able to capitalise on some of the construction in exports that China has in the US.
Clearly, the India manufacturing sector could benefit on that front but manufacturing is a different level and a lot of the goods are quite different. So, it is not obvious that India is going to be key beneficiary but on balance, India will gain from any tariffs against China.
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