- Date : 17/02/2023
- Read: 3 mins
As China is one of India's largest trading partners, a slowdown in China's GDP growth could potentially affect India's exports and overall economic growth. Understand the potential ramifications of China’s economic struggle on India.
China is the world's second-largest economy after the United States, which has a nominal GDP of $23.00 trillion and a GDP growth rate of 5.7%. China has a nominal GDP of $17.73 trillion and a GDP growth rate of 8.1% as of 2023. However, the COVID-19 pandemic has severely impacted China and its economic growth. China's GDP growth was only 2.9% in the October-December 2022 quarter. This has been the lowest since the 1970s. India and China have been at loggerheads for decades. But the slow fiscal growth of India's immediate neighbour can have consequences for the country. Find out what these are.
Also Read: How Does Change In GDP Affect Your Investment Portfolio?
Direct bearing on the Indian economy
China's declining GDP growth can impact the global demand for steel. The country is the world's largest producer and consumer of steel. The slow growth will lower the demand for the metal, leading to lower global prices. This can have direct ramifications on the profits of the Indian steel industry and affect the government's CapEx.
Global slowdown due to low manufacturing
Several industries in India are likely to be affected due to the low GDP growth in China. The Indian automobile sector acquires its raw materials from China. As China continues to struggle with the pandemic and experience low growth, the Indian automobile sector is expected to witness high prices for raw materials. This can lead to low profits for companies and impact the Indian economy.
The electronics market in India also sources most of its smartphone components from China. The slowdown in China will lead to a lull in the electronics sector in India, which can directly impact demand and supply chains as well as employment.
In addition to this, India is also dependent on China for Active Pharmaceutical Ingredients (APIs). The Indian pharmaceuticals sector is a major source of export revenue for the country. India's pharmaceutical production will likely take a hit due to China's slow economic growth.
Also Read: 5 Things To Be Avoided During An Economic Recession
Impact of China's declining GDP growth on India
A slowdown in China's economy could lead to decreased demand for commodities, which could negatively impact India's commodity-dependent industries. However, while China's GDP may be of concern to India, the latter does have some strong components backing it. China's population is now shrinking due to its one-child policy, at a time when India has become the most populous country in the world as of 2023. Moreover, India's population comprises youth primarily, giving it an edge over its neighbour. China is also experiencing international isolation and friction from the western countries, primarily the U.S., which happens to be an ally of India. This gives India the opportunity to become a manufacturing hub of the world. Having said that, India is the fifth largest economy in the world as of 2023, with a nominal GDP of $3.17 trillion and a GDP growth rate of 8.9%. It also has the lowest per capita income because of its high population. Hence, it may be a while before it upsurges China.
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China is the world's second-largest economy after the United States, which has a nominal GDP of $23.00 trillion and a GDP growth rate of 5.7%. China has a nominal GDP of $17.73 trillion and a GDP growth rate of 8.1% as of 2023. However, the COVID-19 pandemic has severely impacted China and its economic growth. China's GDP growth was only 2.9% in the October-December 2022 quarter. This has been the lowest since the 1970s. India and China have been at loggerheads for decades. But the slow fiscal growth of India's immediate neighbour can have consequences for the country. Find out what these are.
Also Read: How Does Change In GDP Affect Your Investment Portfolio?
Direct bearing on the Indian economy
China's declining GDP growth can impact the global demand for steel. The country is the world's largest producer and consumer of steel. The slow growth will lower the demand for the metal, leading to lower global prices. This can have direct ramifications on the profits of the Indian steel industry and affect the government's CapEx.
Global slowdown due to low manufacturing
Several industries in India are likely to be affected due to the low GDP growth in China. The Indian automobile sector acquires its raw materials from China. As China continues to struggle with the pandemic and experience low growth, the Indian automobile sector is expected to witness high prices for raw materials. This can lead to low profits for companies and impact the Indian economy.
The electronics market in India also sources most of its smartphone components from China. The slowdown in China will lead to a lull in the electronics sector in India, which can directly impact demand and supply chains as well as employment.
In addition to this, India is also dependent on China for Active Pharmaceutical Ingredients (APIs). The Indian pharmaceuticals sector is a major source of export revenue for the country. India's pharmaceutical production will likely take a hit due to China's slow economic growth.
Also Read: 5 Things To Be Avoided During An Economic Recession
Impact of China's declining GDP growth on India
A slowdown in China's economy could lead to decreased demand for commodities, which could negatively impact India's commodity-dependent industries. However, while China's GDP may be of concern to India, the latter does have some strong components backing it. China's population is now shrinking due to its one-child policy, at a time when India has become the most populous country in the world as of 2023. Moreover, India's population comprises youth primarily, giving it an edge over its neighbour. China is also experiencing international isolation and friction from the western countries, primarily the U.S., which happens to be an ally of India. This gives India the opportunity to become a manufacturing hub of the world. Having said that, India is the fifth largest economy in the world as of 2023, with a nominal GDP of $3.17 trillion and a GDP growth rate of 8.9%. It also has the lowest per capita income because of its high population. Hence, it may be a while before it upsurges China.
Sources:
