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India’s growth expected to overtake China in next 2 years according to OECD

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).

China’s 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. 

What 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.

Dry Bulk

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.

As 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.

To 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.

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