by Elton Gomes
Amidst an escalating trade war between Beijing and Washington, China has agreed to give swift regulatory approvals to drugs manufactured in India, the head of an Indian export promotion group told Reuters news agency. The development comes as Beijing searches for new commercial partners in the backdrop of a full scale war with the US.
Trade officials in New Delhi said that firms in India are looking to fulfill Chinese demand for generic drugs, software, sugar, and some varieties of rice. We do feel that China is receptive at this time and its all about making prices competitive, a government official privy to the matter told Reuters. The report further mentioned that, as per officials from India and China, no concrete deals have been signed but India seems confident of positive dpharmaceutical sales.
As the trade war heats up with the US, China is looking towards other primary partners to boost trade. Towards the end of June, Beijing had announced a reduction on tariffs on 8,549 types of goods from India and four other Asian countries. New Delhi had been pressing Beijing to allow pharma products from India to address her $51 billion trade deficit.
India exported drugs worth $17.3 billion in the fiscal year 2017-18 to the US and the European Union. However, as per industry data, only one percent of India’s exports go to China, the worlds second-largest market for pharmaceuticals.
Dinesh Dua, chairman of the Pharmaceuticals Export Promotion Council (Pharmexcil), which comes under Indias trade ministry, told Reuters in an interview that Indian drug firms can expect to export to China within six months. We understand internally that Chinese authorities have issued instructions that EU-approved Indian suppliers should be granted the industrial drug licence in an expeditious manner so they can enter the Chinese market within six months, Dua said.
China looks towards India to boost trade
In May 2018, the Financial Express reported that China had exempted 28 drugs, including all cancer medicines, from import tariffs starting May 1, and it had decided to open up further to foreign businesses. China was of the opinion that the move would benefit the Indian pharmaceutical industry.
Luo Zhaohui, the Chinese ambassador in New Delhi, said in a tweet that the move is good news for Indias pharmaceutical industry and medicine export to China. He believed that the move would help reduce trade imbalance between China and India in future.
Another media report hinted at the growing proximity between India and China, as both nations sought to boost trade relations. In a joint economic group meeting, India’s commerce minister Suresh Prabhu met his Chinese counterpart Zhong Shan in New Delhi, and the meeting addressed the trade imbalance between the two countries.
The year 2017 was a difficult one for Indo-China relations, and tensions were rife between the two nations due to Doklam. However, under a looming trade war with the US, China seems to be looking towards India to boost trade ties.
In March 2018, India and China agreed to develop a roadmap with clear timelines to boost bilateral trade. The move came just a day after China promised to look into Indias trade deficit concerns. Additionally, the move could be an indicator that India and China are looking at better relations to counter the protectionist stance put forth by the US under Donald Trump’s presidency.
India could face trade war implications
Although the trade war might have a positive impact on India, experts opine that it could be detrimental as well. According to a report in Business Standard, the trade war could affect exports from India. The dispute could lead to a decrease in demand and an increase in costs, thereby pushing prices up.
A report released by Indian credit rating agency, CARE Ratings, stated that “such tariff wars come at a time when the world economy is just about getting out of a slow growth phase. If global trade volume shrinks on account of this trade war, our exports are bound to be buffeted. The expected double-digit growth in export in FY19 might not happen.”
Experts further opine that the trade war could lead to currency volatility. Devendra Pant, chief economist at India Ratings and Research, said, Exports depend more on global demand than the currency rate and India’s exports are broadly expected to remain stable and rise over the next financial year. But, significant global developments such as this (the trade war) might negatively affect the process, Business Standard reported.
A study conducted by economists at Rabobank International estimates that the Indian economy will be affected significantly by the trade war and the US Federal Reserves monetary tightening cycle. The study estimates that a tariff war could reduce exports and lead to imported inflation, which will hurt Indian purchasing power and investments.
Elton Gomes is a staff writer at Qrius