If India can exploit its competitive advantage in the machinery, chemical and textile sectors, the country has great opportunities in the export market.

This will help the country explore the opportunities generated by the ongoing trade standoff between the US and China and narrow its trade deficit. This is especially true of products related to minerals, machinery, mechanical appliances and their parts, electrical machinery and equipment, chemicals, synthetic fibers and textiles.

Escalation in global trade tensions is a recent factor and India has been attracting better investments in manufacturing over the past four years. For instance FDI from China in Indian metallurgical industries rose around five times in fiscal ’19 and three times in the renewable energy and services sector. Similarly, FDI from the US in the Indian software and hardware industry rose more than three times in fiscal ’19. Metallurgical industries, education and power sectors also saw a spike in FDI from the US.

However the extent to which India can increase exports depend on market access, cost competitiveness of the product in comparison to the alternative in different markets and the generation of an adequate export surplus. For instance, exports of India’s major export commodity, steel, to the US have fallen by 35 per cent due to the imposition of the additional tariff of 25 per cent on steel imports by the US.