It would be “naive” for India to “tilt” towards the US in the “trade war” between Beijing and Washington under Donald Trump’s administration, a state-run Chinese daily warned today amid concerns that expansion of manufacturing sector in India could dent Chinese exports.
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“It would be naive for India to assume that its economy will boom if it draws closer to the upcoming Trump administration amid a pending trade war between Beijing and Washington,” an article in Global Times said.
“Overestimating US-India economic ties may mislead India and send it down the wrong path for economic development. New Delhi needs to be realistic in terms of growth,” it said.
“Instead of tilting toward the US, it should focus on developing its manufacturing industry and integrating itself into the global supply chain to expand exports to narrow its trade deficits with major trading partners and create jobs to generate growth,” it said.
The article hit out at the weekend Assocham India report stating that India is likely to be harmed by a trade war between China and the US and New Delhi must be proactive to ensure that it is “on the right side of the upcoming US administration; or else the impact could be on the Indian services exports to the American firms”.
“Assocham’s message that cautions being dragged into a US-China trade war seems to suggest that New Delhi should lean toward Washington to avoid being implicated and be ready to reap economic gains from a growing alliance with the US.
“While this observation appears to be pragmatic, it is also near sighted and may risk distracting India from a better path for economic growth,” it said.
“The weight of economic ties between China and the US is heavier than those between India and the US. Bilateral trade between China and the US reached USD 558 billion in 2015 while trade between India and US was about USD 109 billion.
“It would be self-deceptive to believe that the US needs India more than it does China,” it said.
The article argued that the problem with the Indian economy is that its manufacturing industry is less competitive than China’s, which means India imports more than it exports.
“China’s exports to India reached USD 58.24 billion in 2015 while imports from India hit USD 13.38 billion, resulting is a trade deficit with China of USD 44.86 billion,” it said.
India officially put its trade deficit with China in 2015 at USD 51 billion.
This year it was expected to grow as Indian exports have reportedly fallen further.
“Further, India runs trade deficits with most of its top trade partners. To bridge these trade deficits, India needs to develop its manufacturing industry and produce more manufactured goods,” it said.
“Only by integrating itself into the global supply chain can India boost exports and drive growth. To achieve that, the best way is to work with a manufacturing powerhouse like China and develop its manufacturing capacity to become an integral part of the Asian supply chain. This would allow India to attract more foreign investment and open further to the outside world,” it said.
“With a large working-age population, many of whom are employed in unorganised sectors, India has a greater need to develop its manufacturing industry to tap the potential of its demographic dividend and lift a vast number of people out of poverty just as China did and still is doing,” it said.
“India needs to realise that there is no short cut when it comes to economic development. Failing to realise this, India risks setting its economy on a dead-end route,” the article warned.