Geopolitical tension between India and China important for the market sentiment

Chinese President Xi Jinping, left, and Indian Prime Minister Narendra Modi attend the group photo session at 2017 BRICS Summit in Xiamen, Fujian province in China, Monday, Sept. 4, 2017. (Kenzaburo Fukuhara/Pool Photo via AP)

On Monday Moody’s Investors Service predicted that the Indian economy will shrink 3.1 per cent in 2020 and further said that the India-China tension on the border will increase the geopolitical risks in the Asian region where countries are particularly exposed to changes in geopolitical dynamics.
Also, very high volatility in the share market can be seen during the trading sessions due to the cross border tensions.
The US and China are the two largest trading partners of India. The exports of Indian products to the US are more than the imports made from the country, however, the same is not true with China. And hence, the repercussions of the ongoing tension between the two will be severe in China’s business.
For the time period between April 2019 and February 2020, India’s total imports from China accounted for 11.8 per cent. while India’s total exports to the country stood only at 3 per cent. Indicating, Indians buy more from China than they sell. This trade deficit between India and China is the major contributor to India’s overall trade deficit, and also one of the world’s largest trade deficits between the two countries.


In February the India-China trade deficit stood at $3.3 billion, a 13 per cent increase from the year-ago during the same period. India’s overall trade deficit remained flat from a year ago at $9.8 billion.
However, trades from both sides have decreased drastically over the past two months due to the ongoing coronavirus pandemic tension and the border dispute between the two countries.
On Tuesday, the Confederation of All India Traders (CAIT) released the list of 500 categories of goods that are imported from China could be exchanged with the goods made in India. CAIT wants to cut down the imports made from China from $70 billion in 2018-19 to $13 billion by the end of December 2021, by substituting a list of products imported from China with indigenous goods.


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