Indian Economy is all set to overtake that of
China in terms of growth due to ongoing trade war between United States and
China and a slow-down in the Chinese economy according to a recent report by
the Organization of Economic Cooperation and Development (OECD).
GDP in 2019 at 6.2% while India’s 7.2%
According to the report China’s GDP growth
estimated for the year 2019 is expected to be 6.2 percent and six per cent for
2020 whereas for India, growth is predicated to continue to increase from 7.2
per cent in 2019 and 7.4 per cent next year.
does the future hold for world’s largest democracy in terms of trade
The spotlight has been on India in recent weeks
as the country’s elections have drawn to a close with Prime Minister Narendra
Modi securing another term after winning a landslide general election victory.
With an estimated 900 million people eligible to vote, more than the combined
population of the US and the EU, this has the been the world’s largest
electoral exercise but what does the future hold for the world’s largest
democracy in terms of trade.
India is predicted to overtake China this year
having increased imports by 14 per cent for Q1 2019 to over 56 million tons in
order to meet power demand. India’s surging demand has spurred growth in the
sector and India is sourcing the bulk of its coal from South East Asia but is
increasing amounts are coming from East Coast of Australia.
of now, India, second largest importer of coal next to China
This could be good news for larger vessels but in
reality, Indian Port restrictions dictate that the majority of coal is imported
in Pana Max and Supra Max vessels. The East Coast ports like Tuticorin Chennai
Viskapatnam port are the closest to Australia the prime source of coal. But
these ports have poor infrastructure like draft and inadequate length of
berths. Hence smaller vessels are pressed into service for ferrying coal. This
means higher freight cost. As of now India is the second largest importer of
coal just behind China
Oil: India still highly dependent on oil; crude
imports continue to increase
Four years ago Prime Minister Modi outlined
targets decrease the country’s dependence on imported oil by 10 per cent by
2022 and instead focus on increasing domestic production and promoting the use
of bio-fuels, energy conservation and sustainable alternatives. However with
oil consumption continuing to grow and domestic production limited to meet the
growing demand, government data suggest that India is still highly dependent on
oil that crude imports have continued to increase. In fact oil market
predictions show that by 2024 India will surpass China in terms of demand for
oil and will account for about 30 per cent of total global oil demand growth.
As the world’s third largest oil-consumer, India
meets more than 80 per cent of its oil needs through imports. However, US
sanctions on Iran and Venezuela have forced India to seek alternative sources
of crude to make up for lost volumes. In 20108, Iran was the third largest
supplier of crude to India, accounting for 11 per cent and Venezuelan imports
ranked fourth at around 8 per cent. Put together both the countries were
meeting nearly 20 per cent of Indian requirement of oil.
meet the challenge of US sanctions, domestic refiners step up production
With US sanctions in place against Iran and
Venezuela, Indian government announced that it will step up imports from other
sources in the Middle East countries like UAE and Saudi Arabia and also from
Mexico which would reinforce the demand for long-haul crude shipments. Domestic
refineries have stepped up production in order to meet national demand. In
April 2019, India’s crude oil refinery output increased by 4.3per cent to 20.63
million tons compared to the same period in April 2018.
As Trade wars continue to escalate and fears that
a global slowdown could be on the cards, affecting China’s economy India’s
growing demand for raw materials could provide welcome support for vessel
demand both in the dry bulk and crude sectors.