48 according to a study by economists at rabobank

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48 According to a study by economists at Rabobank International, India s economy would be hit hard by a combination of a global tariff war and the US Federal Reserve s monetary tightening cycle. A tariff war would reduce exports and lead to imported inflation, which would hurt Indian purchasing power and investments. That could mean as much as 2.3 percent of missed GDP growth for India by 2022. India could fall victim to adverse trade policies of the US or China or both. This goes against the argument that India is relatively insulated 48. “ India Says Will Not Take Sides in US - China Trade Spat ”, The Indian Express, April 15, 2018 available at : - says - will - not - take - sides - in - us - china - trade - spat - 5138441/
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US - CHINA Trade War: Analyses of Deeper Nuances and Wider Implications 41 from a trade war, given its low share of total world exports of just 1.7 percent. Besides a possible trade war, a faster than expected tightening of US monetary policy would lead to capital outflows. In such an event, the Rabobank model sees the rupee depreciating sharply and the missed capital flows would amount to $32 billion by 2022. 49 It is stated that If India uses its foreign reserves in such a case, interest rates could rise sharply as liquidity decreases. Even though India s re- serves are substantial, markets might still become concerned about the prospects of further declines. These developments will create major speed bumps on India s road to economic prosperity. In an article published in The Mint 50 this issue has been explained. India should not remain complacent that Washington would not threaten New Delhi for enhanced market access in agricultural and dairy products and medical equipment. Although India s trade surplus with the US is little over $25 billion with the US, Washington reckons India as a big market for its dairy and agricultural products and medical equipment. The statements of President Trump on a trivial issue like tariffs on Harley Davidson motorcycle were not a good omen. In the dairy sector, India made significant strides for becoming self - sufficient thanks to Operation Flood and White Revolution launched by Verghese Kurien in 1970. The US re- mains determined to export its heavily subsidised dairy products to India that could wipe out the livelihood of millions of poor people engaged in the domestic dairy sector. On May 9, 2018 the US filed a counter - notification for the first time since the establishment of the WTO against India, alleging that India s market price support (MPS) programmes for wheat and rice breached New Delhi s allowable levels of trade distorting domestic support. The US, which has a range of trade distorting support programmes for rice and other items, is targeting India after blocking the permanent solution for public stockholding programmes for food se- curity. The US also launched a trade dispute against India on duty drawback and other programmes for Indian exporters. The US also wants to deny the generalised
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