A slowdown in the Eurozone points to doom for India's ailing exports

• Mario Draghi, the president of the European Central Bank, said that the EU's growth in 2019 would be lower than expected.
  
• Hence, the EU’s demand for imports will decline - something that will be exacerbated by the global trend towards protectionism.
• This will have negative implications for India, since the EU is its largest trading partner.
  

Yesterday, Mario Draghi, the president of the European Central Bank, reaffirmed doubts about the ongoing slowdown in the European Union (EU), adding that growth in 2019 would be lower than expected, due in part to the impending exit of Britain from the EU as well as a sluggish economic growth in China.

Given the downward projections for demand and growth in the Eurozone, there will be negative implications for the the bloc’s trading partners. The EU’s demand for imports will decline - something that will be exacerbated by the global trend towards protectionism.

India, which counts a number of European countries like Germany, Belgium and Italy among its top trading partners, is likely to suffer a decline in exports as a result of the slowdown in the EU. Taken together, Eurozone countries account for the largest share of Indian trade volumes (13.1%), ahead of China and the US, according to the European Commission.

The country’s exports to the EU have been steadily increasing in the last few years, despite stalled progress on a trade treaty.



Since 2007, plans for an India-EU free trade agreement have been in the works but have been repeatedly delayed owing to disagreements over duty cuts on India’s imports of automobiles and dairy products as well as intellectual property rights.

India’s top merchandise exports to the EU in 2017 were textiles, machinery and chemicals. Hence, given the risk of oversupply, domestic exporters of these goods will have to crimp production volumes.



India’s services exports, a bulk of which constitutes IT services, are also set to take a hit. Total services exports came in at €15.3 billion (₹1.2 trillion) in 2016, making it the fourth largest services exporter to the EU.

India is counting on export growth to help achieve its economic growth and job creation targets for the coming year. Both the IMF and World Bank have predicted that India’s economy will grow by 7.5% in the coming fiscal year. A reduction in export volumes to the EU will endanger this.


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