NEW DELHI, July 12: Economic troubles for China will not be a great news for India which cannot be in sweet spot as there would be more negatives than positives from the ripples of a Dragon dragging the shaky world economy, according to a study.
While it is true that fall in commodity prices, linked to China’s slow demand, is a positive for India at a macro level, the development is negative for a host of metal and iron ore producers like SAIL, Tata Steel, NMDC and upstream oil producers.
A sharp fall in iron ore, steel and copper prices has equally hit the Indian manufacturers as any other company in the world, the ASSOCHAM paper said.
After a runaway ride , the Chinese stock market has crashed since June 12 with investors losing a whopping 3.5 trillion dollar , creating a challenging situation for the world’s second largest economy. Besides, if a bubble like situation erupts from China, the impact will be seen all around the world to which the Indian economy is too well entrenched into.
China is number one merchandise trader in the world with over 4.16 trillion dollar worth of trade, followed by the US with 3.9 trillion dollar, it said.
If there is a shakeout, a slew of sectors in the global markets , which get their sizeable chunk of revenue from China-tourism, hotels, education, health, etc will feel the immediate impact. Then, the kind of cost competitiveness which the Chinese companies provide to several manufacturing, semi-process industries like electronics, electrical, telecom equipment, will go missing from the global supply chain, the paper pointed out.
It said the so-called de-coupling for India had proved to be an illusion. We as an economy are not at all de-coupled with close to one trillion dollar of our global engagement in goods, services and investments, it said.
In none of these industries, the space vacated possibly by the Chinese companies can be occupied by India which has not so far invested seriously in these sectors and several other manufacturing verticals.
Even if the Chinese get temporary jerks, they are not going to disappear from the scene. Their capability to impair is good enough to stage a comeback. The Indian enterprise, as of today, has its own problems of large debts, aggravated by high interest rates, slow demand, inability to pass on the costs and a big pressure on profit margins, it added. (UNI)
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