QUES . Is the ongoing trade war between China and the United States an opportunity for India to replace China as a major exporter of manufactured goods? Discuss. UPSC IES/ISS EXAM 2020 General Studies. 200 Words. 5 Marks.
HINTS:
In the ongoing trade war between China and the United States, if tariffs and restrictions make Chinese goods less welcome in American ports, surely India, the world’s largest democracy—with its low labour costs and burgeoning industrial base—can fill the gap. But is it so easy?
China’s Export to US
The scale of China’s export is staggering. In 2024, it shipped US$439 billion worth of goods directly to the US. Add indirect exports—those routed via Vietnam, Malaysia, Cambodia, and Mexico—and the figure climbs even higher. Replacing this volume is no small feat. India and its peers simply do not have the industrial depth, logistical capability, or policy clarity to substitute Chinese supply at scale.
Idea of a long standoff is unrealistic
Trade between Washington and Beijing has collapsed. But the idea of a long, grinding standoff is unrealistic. Within weeks, many American store shelves would begin to empty. China-based sellers constitute more than half of Amazon’s top-performing vendors.
Should imports of electronics, toys, apparel and household goods remain stalled, prices would rise sharply, fuelling higher inflation expectations in a self-reinforcing cycle and ultimately shaking confidence in US financial assets. Pressure for a resolution—any resolution—will mount quickly. Any surge in Indian exports, therefore, is likely to be short-lived.
But US and China have been in a trade war for more than a decade; it is not just a Trump thing. So, even if a deal is reached, it may merely codify higher tariffs on Chinese goods. That, would leave Indian goods relatively more competitive. But the real question- Is India ready to grab the opportunity?
Is India Capable of Benefitting from Trade War Between China and the United States?
While USA’s trade war may work in New Delhi’s favour, doubts remain over India’s capacity to become a manufacturing hub. Challenges such as a shortage of skilled workers, inadequate infrastructure, tangled supply chains, and bureaucratic delays still hamper its progress.
India’s manufacturing sector remains fragmented, largely low-tech, and ill-equipped to plug even a modest gap left by China.
Quality issues
One of the chief obstacles is quality. Indian products often struggle to meet international standards.
Traditional exports have not scaled with demand
India’s traditional exports—textiles, garments and jewellery—have not scaled with global demand. Only in the pharmaceutical sector does India boast true heft: it supplies nearly half of America’s generic medicines. Here, additional gains are plausible but Americans are wary of replacing China with India in pharmaceuticals also.
Impediments for exporters
Exporters face a complex of direct impediments. Regulatory compliance is difficult. According to HDFC Bank, India’s exporters must navigate a formidable list of one-time and recurring documentation.
Transport infrastructure is no less daunting. Congested and inefficient roads, railways, seaports, and airports impose delays and increased costs, directly impacting exporters’ ability to meet delivery terms.
Exporters in land-locked states are hamstrung by a lack of connectivity to gateway ports. It takes three to four days to move a shipment from a warehouse in Delhi to a port, three times longer than in other countries. This particularly affects agricultural produce.
The Indian Railways, one of the world’s five largest, moves over three million tonnes of cargo across the country. Yet the system is hobbled by ageing equipment, the lack of a modern signalling system, and an acute shortage of rakes, leading to higher costs and delays.
India itself dependent on imports from China
In 2023–24, nearly 63% of India’s solar equipment imports came from its northern neighbour. China controls 97% of global polysilicon production and 80% of solar module output. Indian manufacturers of smartphones, laptops, and appliances are similarly reliant on Chinese components.
Roughly 70% of active pharmaceutical ingredients (APIs) used in Indian drug manufacturing originate in China.
Chinese auto parts, too, remain essential to Indian assembly lines. Meanwhile, the metal sector is grappling with falling prices, declining exports, and rising imports—many of them Chinese.
What is needed to become a globally competitive player?
Building global competitiveness requires patient hard work, done diligently over a long time. That means investing in science and technical education, scaling up vocational training, easing conditions for doing business, lowering indirect taxes, fostering fierce competition, supporting budding export champions, and creating conditions for sustained foreign direct investment with meaningful technology transfer.
Even though steps have been taken on the above mentioned aspects, they have not performed up to the mark. Thus, the result is, even if the US-China rivalry creates openings, India lacks the capacity to exploit them.
Ultimately, the key question is not whether the world will offer India a chance—it is whether India will do the hard work needed to seize it. We can still do the hard things now!!
