The Impact of India's Slowdown on the Commonwealth - Harsha Vardhana Singh and Veena Jha

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ISSN 2413-3175


The Impact of India’s Slowdown on the

Harsha Vardhana Singh and Veena Jha
International Trade Working Paper 2020/12
ISSN 2413-3175
© Commonwealth Secretariat 2020
By Harsha Vardhana Singh, Veena Jha and team.
This paper was written by a team of economists. These include Dr Harsha Vardhana Singh
and Dr Veena Jha. The GTAP modelling exercise was carried out by Dr Badrinarayan
Gopalakrishnan and research assistance was provided by Mr Vipin Kumar.
Please cite this paper as: Singh, H V and V Jha (2020), ‘The Impact of India’s Slowdown on
the Commonwealth’, International Trade Working Paper 2020/12, Commonwealth Secretariat,

   The International Trade Working Paper series promptly documents and disseminates
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   the Commonwealth Secretariat.
   For more information contact the Series Editor: Dr Brendan Vickers,

India has 55 per cent of the Commonwealth’s population and accounts for 26 per cent of intra-
Commonwealth trade. The impact of India’s slowdown will be felt differently by Commonwealth
countries based on their economic links with India. The Commonwealth least developed countries
(LDCs) and Commonwealth members in sub-Saharan Africa (SSA) are most dependent on India
in terms of the share of their global imports of goods, services and investment, while India is more
dependent on developed and certain developing countries. India exports more labour-intensive
goods to the developed Commonwealth, and capital- and skill-intensive products to SSAs and
LDCs. Minerals and metals are the most important imports from all groups of Commonwealth
   This study uses GTAP analysis to assess the impact of India’s GDP slowdown on Commonwealth
countries in 2020. It also compares a hypothetical situation of no slowdown of India’s GDP for
2019–2020 to 2021–2022 with the projected slowdown. A range of forecasts exist for 2020, and
four GDP growth scenarios are considered: 4.2 per cent (the past year’s growth), 2 per cent (opti-
mistic), −1.5 per cent and −5 per cent. The uniformly negative effects of India’s slowdown on
Commonwealth trade and investment are strongest for India’s exports to LDCs and SSA, and
India’s imports from developed Commonwealth countries. In addition to GTAP, a qualitative
assessment indicates the products and Commonwealth countries most likely to be affected by
India’s slowdown.

JEL Classifications: F17, F44, F60
Keywords: India, GDP slowdown, intra-Commonwealth trade, imports, exports
International Trade Working Paper 2020/12                                            3


Executive summary                                                                    5
1. Introduction                                                                      7
2. The possible impact of India’s slowdown on Commonwealth groups: An analysis
   based on a review of the literature and a comparison with the 2008–2009 crisis   10
3. Trade flows between India and the Commonwealth                                   16
4. Impact of Indian slowdown on Commonwealth countries                              24
5. The counterfactual                                                               31
6. Conclusions                                                                      34

Notes                                                                               35
References                                                                          36
Annex 1: Post-COVID-19 GDP growth indicators in India                               39
Annex 2: Post-COVID-19 growth in merchandise trade and services                     42
Annex 3: India’s trade with Commonwealth countries in 2019                          49
Annex 4: India’s trade with Commonwealth countries over the past 5 years            50
Annex 5: GTAP sector mapping                                                        53
Annex 6: Detailed product profile of India’s trade with the Commonwealth
          at the sectoral level                                                    56
Annex 7: Investment inflows and outflows between India and the Commonwealth         58
Annex 8: Services trade between India and the Commonwealth                          62
Annex 9: Global value chains                                                        71
Annex 10: Decrease in exports and imports in April 2020                             73
Annex 11: Description of GTAP model and results                                     77
Annex 12: Description of GTAP dynamic model                                         84
4                                        The Impact of India’s Slowdown on the Commonwealth

                  Abbreviations and Acronyms

CW       Commonwealth
CWEIC    Commonwealth Enterprise & Investment Council
FDI      foreign direct investment
GDP      gross domestic product
GFCE     government final consumption expenditure
GFCF     gross fixed capital formation
GTAP     Global Trade Analysis Project
GVC      global value chains
IMF      International Monetary Fund
IO       Input-output
LDCs     least developed countries
LICs     low income countries
NBFCs    non-banking financial companies
n.d.     not dated
n.i.e.   not included elsewhere
NPAs     non-performing assets
PMI      purchasing managers indices
PFCE     private final consumption expenditure
SSA      sub-Saharan Africa
UNWTO    World Tourism Organization
WTO      World Trade Organization
International Trade Working Paper 2020/12                                                          5

                                  Executive summary

This study examines the effects on                  both external and internal factors as well as the
Commonwealth members when there is a                complications due to the danger of infection
slowdown of the Indian economy. As there            with close contact.
have been a range of estimates and these were          The Commonwealth as a whole and almost
repeatedly revised downwards, it was difficult      all Commonwealth groups considered in this
to work with a single number. The study uses        study are very important markets for India,
a general equilibrium model from the Global         accounting for 20 per cent of its total value
Trade Analysis Project (GTAP). It also uses         of exports. Within this group the share of
the database from this project for performing       Commonwealth members in sub-Saharan
the scenario analysis. Two kinds of GTAP, i.e.      Africa (SSA) is the highest. The product pro-
comparative static and dynamic models have          file of India’s exports shows that it exports
been used. In addition, a qualitative assessment    largely labour-intensive goods to the developed
was made of the likely effect of the slowdown in    Commonwealth, and capital-and skill-intensive
India on Commonwealth countries, using, inter       products to SSAs and least developed countries
alia, data on India’s trade developments up to      (LDCs). In terms of India’s imports, miner-
May 2020.                                           als and metals are the most important imports
    The comparative static GTAP analysis exam-      from all groups of Commonwealth countries.
ines the impact of India’s slowdown in 2020 on      Among the Commonwealth groups SSA and
Commonwealth countries. The range of esti-          LDCs are most reliant on India, as around 15
mates of India’s GDP growth in 2020 used in         per cent or more of their imports come from
this report are 2 per cent (optimistic), −1.5 per   India in five of the seven GTAP product sec-
cent (mildly pessimistic in June 2020) and −5       tors studied here. Developing LDCs rely sig-
per cent (most broad assessment of the worst        nificantly on India for about four of the seven
case scenario in June 2020). There is in addi-      GTAP sectors. Developed Commonwealth
tion a best case scenario based on the situation    countries are not reliant on India, as for most
continuing as if the 2020 slowdown had not          products imports from India are insignificant.
occurred. For this, the study relies on India’s        As far as investment is concerned, for-
GDP growth estimate for 2019–20, i.e. 4.2           eign direct investment (FDI) inflows from
per cent as assessed by both the IMF and the        the Commonwealth into India far exceed FDI
World Bank. The dynamic GTAP assessment             outflows from India. However, India provides
is conducted by establishing a counterfactual       about 40 per cent of the global FDI inflow into
to assess the trade loss compared to the situa-     the Commonwealth, while the share of the
tion if there had been no slowdown in 2019 or       Commonwealth in India’s FDI inflows is around
2020. For this purpose it uses the GDP growth       20 per cent. India’s largest share (50%) of out-
projections of the World Bank before and after      ward FDI goes to developed Commonwealth
the slowdown, i.e. forecast made in January         members and 60 per cent of FDI inflows come
2019 and the current forecasts of India’s GDP       from developed Commonwealth members.
growth. These comparisons are made for the          The same trend can be observed in services
period 2019–2020 to 2021–2022.                      as for outward FDI. The largest exports to all
    Past experience of 2008 and 2009 provides       Commonwealth groups are for financial, insur-
little guidance on what is to be expected in        ance and business services. The other impor-
the COVID-19 scenario. India bounced back           tant categories of services exports from India
quickly from the financial shock of 2008–2009,      are transport and information and communi-
and belied the IMF and World Bank expecta-          cations. Unlike goods, India’s import of services
tions of a slow recovery. The 2020 lockdown has     from Commonwealth members is far lower
been very severe in India and the adverse effects   than its exports. Surprisingly, unlike exports
on the industry and the core sectors have been      from India of tourism services, this sector is
dramatic, to say the least. While the key reason    an important sector for import of services into
for the economic collapse in 2008–2009 was          India across all country groups, especially for
external to India, the COVID crisis combines        SSA Commonwealth members.
6                                                  The Impact of India’s Slowdown on the Commonwealth

   The impact of India’s slowdown will be felt     and demand bottlenecks will be encountered
differently by various Commonwealth groups.        in all the Commonwealth members which will
The trade and investment effects of the differ-    change the outcomes considerably. However,
ence in the best and the worst case scenarios      modelling these changes is beyond the scope
are uniformly negative on all groups but are       of this study, which is focused on assess-
strongest for India’s exports to LDCs and SSA,     ing the effects of India’s slowdown on the
and for India’s imports from the developed         Commonwealth groups. There is, however, a
Commonwealth. With the large base of India’s       qualitative discussion in this study of the prod-
exports to developed countries and the small       uct categories and Commonwealth countries
base to SSA countries, the decline of exports to   most likely to be adversely affected due to a
the developed Commonwealth would hit the           decline in India’s growth rate. This qualita-
Indian economy more. Post-COVID recovery           tive discussion considers India’s imports and
will be the slowest in exports to SSA and LDCs     exports up to May 2020 and the kind of trade
and quickest in the case of exports to developed   relationships Commonwealth countries have
countries. India’s imports from the developed      with India, thus providing a broad basis for a
Commonwealth would decrease the most and           wider consideration of the changes taking place
those from LDCs the least.                         at present.
   Even if the Indian economy sees a small posi-      To alleviate the trade and investment declines
tive GDP growth of 2 per cent in the COVID         especially for Commonwealth LDCs and SSA,
period (2020), muted expectations will dampen      transparency of trade restrictive measures
trade and investment recovery. Interestingly,      should be requested for all Commonwealth
outward investment falls when India’s growth       countries. In addition export credit should be
rate rises, and inward investment rises by one     eased and transport restrictions lifted, with
and a half times the growth rate. The opposite     proper precautions. Policies to encourage high
happens when the growth rate declines, i.e.        value, low volume tourism should be encour-
there is an increase in outward FDI from India,    aged. The rules of business have changed struc-
and a decrease in inward FDI.                      turally and the Commonwealth has to adapt to
   Asymmetric responses are expected in the        this changed environment.
positive and negative growth scenarios. When
the positive growth rate of 4.2 per cent is con-   Note: At the time of writing, −5% GDP decline
sidered, then the impact on trade is relatively    for India during the financial year 2020-21 was
smaller than the decline in trade with a nega-     a reasonable estimate of the worst-case sce-
tive growth rate of −3.2 per cent, for example.    nario. Now, this rate of decline is forecast at
It cannot be emphasised enough that all these      about −10%. Though the quantitative estimates
changes estimated through a GTAP model             will change with a revised figure, the analysis of
relate only to an Indian slowdown. While India     the paper suggests that the qualitative insights
is slowing down so are the others. Hence supply    will remain relevant and unchanged.
International Trade Working Paper 2020/12                                                          7

                                      1. Introduction

India has 55 per cent of the Commonwealth’s         on trade and investment with Commonwealth
2.3 billion population and accounts for 26 per      countries. This impact will depend on the extent
cent of intra-Commonwealth trade (Economic          of decline in India’s growth and economic link-
Times, 2017). India exports some US$50.15 bil-      ages between India and the Commonwealth
lion worth of goods, or more than 19 per cent       countries. Section 1 of this paper examines the
of its exports, to Commonwealth nations. It         range of India’s recent economic growth fore-
also imports some US$54.66 billion worth of         casts (national and international estimates).
goods, or 15.32 per cent of its global imports,     Section 2 surveys the relevant literature on the
from Commonwealth nations (Indian Express,          effects of India’s slowdown on Commonwealth
2020). Nigeria, Malaysia, Australia, Singapore      countries as a group and on selected groups of
and the UK are among the top exporters to India     Commonwealth countries such as least devel-
from the Commonwealth, while India’s top five       oped countries (LDCs) and countries in sub-
export destinations within the Commonwealth         Saharan Africa (SSA). Section 3 maps trade
are the UK, Singapore, Bangladesh, Malaysia         and investment flows to and from India with
and Singapore (New Indian Express, 2020).           the Commonwealth groups, and the product
According to estimates by the Commonwealth          profile of India’s trade with Commonwealth
Enterprise & Investment Council (CWEIC),            countries (including a specific focus on LDCs
the Commonwealth’s combined GDP was pre-            and SSA). It also identifies the countries and
dicted to reach US$14 trillion by 2020, and         products with the largest linkages to the value
intra-Commonwealth trade was projected to           chains in Commonwealth groups and those
surpass US$1 trillion by 2020, up from US$525       that would be least impacted by a slowdown
billion in 2015 (Economic Times, 2018).             in India. Section 4 conducts a GTAP analysis
   The Indian economy was already slowing           to assess the trade and investment impact of
down before the pandemic disease COVID-19           India’s growth slowdown on Commonwealth
first hit. Its GDP growth rate at the end of the    countries in 2020. Section 5 shows the GTAP
second quarter of the financial year 2019–2020      analysis for the counterfactual situation based
was the lowest that it had been in the previous     on a comparison with a situation without a
26 quarters.                                        slowdown in India’s growth. Section 6 sum-
   There are multiple indicators of the country’s   marises the results.
slowdown ranging from a 4.3 per cent contrac-
tion of industrial output for September 2019, to
                                                    1.1 Impact of COVID-19 on India’s
a decline of merchandise exports in the succes-
                                                    economic growth in 2020
sive months of August (−6%) and September
(−6.6%). Consumer confidence dropped to a           The estimates for India’s decline in growth vary.
six-year low in September 2019. The main rea-       There are two different parts of India’s eco-
sons ascribed to the slowdown by experts were       nomic slowdown: first is the slowdown of the
declining manufacturing activity, weakened          Indian economy that occurred in 2019. The
investments, and lower consumption demand,          second is the impact of COVID-19 (hereinafter
both globally and in India (Bloomberg, 2020).       ‘COVID’) (Table 1).
Several reasons have been advanced for this            To begin with, the impact is evaluated for
slowdown: cyclical, global, structural, policy-     2020 based on three rates of growth for India,
induced difficulties and uncertainties, all of      namely business as usual, and the optimistic
them only partially explaining the major slow-      and pessimistic rates of growth likely for 2020.
down that has led to a ‘four-balance sheets’        The forecasts for growth rates are being revised
problem, i.e. major adverse financial situation     downwards and, taking this into account, a
for banks, non-banking financial companies          ‘worst case scenario’ is also considered. The
(NBFCs), infrastructure and the real estate         respective estimates until June 2020 for these
sector.1                                            situations were 4.2 per cent (business as usual),
   Against this background, it is important to      2 per cent (optimistic), −1.5 per cent (pessimis-
assess the impact of India’s recent slowdown        tic), and −5 per cent (worst case scenario).
8                                                       The Impact of India’s Slowdown on the Commonwealth

Table 1. NCAER Business Confidence Index, January–March 2020 (percentage rise/fall)

 Consumer durables       Consumer non-durables         Intermediate goods     Capital goods     Services
 −32.9%                  −31.6%                        −35%                   −27.5%            −30%

Source: NCAER (2020).

   In addition to the impact during 2020, a            per cent for advanced economies (Center
longer-term assessment will be carried out for         for Global Development, 2020, p. 9). Thus,
the impact of the slowdown up to 2025. This            despite these policy announcements, the
comparison will consider a counterfactual              slowdown of GDP in 2020 will continue to
situation if the slowdown had not occurred             be substantial (see also the excerpt from the
in 2019. The pre-slowdown growth rate fore-            statement by the Governor, Reserve Bank of
casts (i.e. January 2019) by the World Bank            India in Annex 1).
for India were 5.8 per cent, 6.1 per cent and
6.2 per cent respectively for the financial years      1.3 The range of GDP forecasts and
2019–20, 2020–21 and 2021–2022. The most               their revisions over time
recent World Bank forecasts after the COVID
crisis for India are 4.2 per cent (2019–2020),         The 2020 forecasts for India’s growth rates
−3.2 per cent (2020–2021) and 3.1 per cent             have changed very significantly in the last
(2021–2022) (World Bank, 2019). The GTAP               six months, as the situation with COVID
model forecasts changes from one general               has evolved (Table 2).
equilibrium to another. Normally the total                The sharp decrease in forecasts over six months
or complete effect of any change takes about           is explained as follows: ‘the economic costs now
three years, taking the impact of trade fore-          beginning to show up in the hard numbers are
casts to 2025.                                         far worse than our initial expectations. The pur-
                                                       chasing managers indices (PMIs; released by IHS
1.2 Key growth rate forecasts of India’s               Markit) for the manufacturing and services sec-
                                                       tors were at 27.4 and 5.4, respectively, in April,
                                                       implying extraordinary contraction. That com-
 The Indian economy was weakening even                 pares with 51.8 and 49.3, respectively, in March.
 before the COVID pandemic. After COVID,               Exports contracted 60.3% in April, core sector
 India’s lockdown has been quite severe in com-        output contracted 38%, there were no sales in
 parison to most advanced economies, reflected         the auto segment and new telecom subscribers
 for example by the Google mobility indica-            declined 35%, while railway freight movement
 tors.2 The estimates for these mobility indica-       plunged 35% on-year’ (CRISIL, 2020, p. 3).
 tors ranged from 1 to 5 in mid-February 2020             Growth estimates for 2020: Four growth
 to between −45 and −87 for most of the period         rates are selected based on the forecasts in
 during late March to mid-May 2020. The larg-          Table 2.
 est decline has been for mobility linked to retail,
 with the index falling from 1 in mid-February to      a. Best case scenario: The GDP growth in
 −70 by end-May.3 Further, the National Council           2019–2020 was lower than expected. Both
for Applied Economic Research Business                    the World Bank and IMF have estimated it
Confidence Index has decreased sharply (Table             as 4.2 per cent (IMF, 2020c, Chapter 1 Table
1). The severe effects of COVID have been felt            1.1), compared to the estimate of 5.8 per
in all sectors of the economy but especially in           cent made by both bodies in January 2020
trade (Table 4, Section 2).                               (World Bank Group, 2020; IMF, 2020a).
    The Indian Government has implemented              b. Optimistic growth rate: The optimis-
a number of fiscal and monetary initiatives to            tic growth rate would be applicable if
support economic activity and jobs and cre-               the COVID situation is addressed in the
ate social safety nets. However, India’s direct           near future and the economic policies of the
fiscal response, according to estimates, is               government have a significant impact on
­relatively low at 1.1 per cent to 2.7 per cent           the second half of the year estimates at 1.9
 of GDP, in comparison to an average 7.8                  per cent by both the World Bank and IMF
International Trade Working Paper 2020/12                                                               9

Table 2. Forecasts for India’s GDP growth 2020–21 during December 2019 to June 2020

                               December 2019/   March 2020     April 2020   May/June 2020
                               January 2020
 World Bank                    5.8%             1.5% to 2%                  −3.2%
 IMF                           5.8%                            1.9%         −4.5%
 ADB                           6.5%                            4%           −3% to −6%; −4% (revised)
 Reserve Bank of India (RBI)   5.9% (6 Feb)                                 −1.5%
 State Bank of India (SBI)     Below 6%                        1.1%         −6.8%
 Moody                         6.6%             2.5%           0.2%         0%; −4% (Revised)
 CRISIL                        6% (2nd Feb)     3.5%           1.8%         −5%
 ICRA                          6.3%             2% (Revised)   −1%          −1% to −2%; −5% (revised)
 Goldman Sachs                 6.4%                            1.6%         −5%
 Nomura                        5.5%             −0.5%                       −5%
 HSBC                                                                       −3%

Sources: Please see Annex 1.

c. Mildly pessimistic growth rate: This esti-      up to financial year 2021, will be used for this
   mate of −1.5 per cent was used by the           exercise. For comparing the trade effects on
   Reserve Bank of India in considering its        the Commonwealth, pre-slowdown and post-
   monetary policy.                                slowdown estimates have been used. The rates
d. Worst case situation growth rate: Table 2       post-slowdown are 4.2 per cent (2019–2020),
   shows a broad concurrence around −5 per         −3.2 per cent (2020–2021), and 3.1 per cent
   cent as the worst case scenario for GDP in      (2021–2022), while those for pre-slowdown
   2020–2021.                                      from January 2019 are 5.8 per cent (2019–20),
                                                   6.1 per cent (2020–2021), and 6.2 per cent
  Growth estimates for assessment of impact        (2021–2022). Based on experience from GTAP
up to 2024–2025 – the counterfactual: The          the effects of the slowdown will be felt until
World Bank estimated growth rates, which rise      2024–2025.
10                                                   The Impact of India’s Slowdown on the Commonwealth

        2. The possible impact of India’s slowdown
     on Commonwealth groups: An analysis based on a
     review of the literature and a comparison with the
                       2008–2009 crisis

2.1 Comparison with the 2008–2009                    Thus, India’s GDP growth took time to decline
crisis                                               during the 2008–2009 crisis, and even then the
                                                     growth rate was high compared to several other
The last crisis which was somewhat similar to        large economies. This maintained some robust-
the COVID crisis was the financial crisis of         ness in the tax receipts for the government.
2008/2009. Studying its impact on India and             With the roll-out of the fiscal stimulus, pri-
the consequent impact on Commonwealth                marily in the shape of implementation of the
states could provide a narrative for much of the     Sixth Pay Commission recommendations in
likely effects of the slowdown and of COVID.         Q3, as well as the second round of fiscal expan-
However, there are also significant differences      sion announced in Q4, the growth in govern-
due, among other factors, to the lockdown and        ment final consumption expenditure shot up
‘social distancing’ which prevent economic           by nearly 36 per cent, partly making up for the
operations and modes of trade in both goods          shortfall in other components of the domestic
and services.                                        aggregate demand. The overall GDP growth for
   In 2008–2009, the expectation was that the        the fiscal 2008–2009 at 6.7 per cent surpassed
Indian economy would collapse to around 4            all estimates and forecasts by international
per cent growth during the subsequent four to        agencies and analysts (India Budget, 2008–9),
six quarters and thereafter go back to around        which mostly ranged from 5.5 per cent to 6.5
5 to 5.5 per cent growth over the medium             per cent.
term (World Bank Group, 2020; IMF, 2020a).              As expected, the outcome of the reces-
Instead, the first half (H1) of 2008–2009 saw the    sion in countries to which India exported its
Indian economy recording a GDP growth of 7.8         goods was a sharp fall in growth of Indian
per cent, despite the high level of uncertainty      organised manufacturing, and in its exports
in the international commodity and finan-            and imports. A downward trend in India’s
cial markets. Among India’s domestic growth          manufacturing sector started in the second
drivers, gross fixed capital formation (GFCF)        quarter of the calendar year 2007 with a
retained some of its momentum from the pre-          slowing of the US economy and its imports
ceding years with a growth of nearly 11 per cent     of several products from India. The trend
(World Bank Group, 2020; IMF, 2020a). Both           was merely accelerated after the meltdown of
private and government consumption, how-             the US markets and the onset of the global
ever, declined significantly. The growth in pri-     recession. Services sector growth of India
vate final consumption expenditure (PFCE) in         was not expected to slow sharply because of
the first half 2008–2009 was 3.3 per cent, less      its insensitivity to demand cycles and rela-
than half of the corresponding period in 2007–       tively small contribution of service exports to
2008. Similarly, government final consumption        GDP. In fact, there was a sharp increase in the
expenditure (GFCE) in the first half of 2008–        growth of community, social and personal
2009 grew at less than 1 per cent or just one        services, which includes GDP from govern-
third of the growth in first half of 2007–2008. In   ment administration. It is also important to
the second half (H2) of 2008–2009, India’s GDP       note that in 2009–2010 the Indian economy
growth declined to 5.8 per cent, with a further      recovered faster and GDP growth rates in
fall in private consumption growth to 2.5 per        2009–2010 and 2010–2011 were, respectively,
cent and a significant moderation in growth          8.6 per cent and 9.3 per cent. This showed
rate of GFCF to about 6 per cent over the corre-     the resilience of the Indian economy against
sponding period of 2007–2008 (Joseph, 2009).         external shocks.
International Trade Working Paper 2020/12                                                                         11

Table 3. Forecasts of India’s GDP, world output and world trade growth for 2009 and 2020,
and actual growth in 2009

                        Forecast     Forecast in    Forecast      Forecast      Forecast in   Forecast    Actual
                        in January   April 2009     in July       in January    April 2020    in June     growth
                        2009                        2009          2020                        2020        2009
 India – GDP             5.1%           4.5%           5.4%       5.8%             1.9%        −4.5%           6.8%
 World output            0.5%          −1.3%          −1.4%       3.3%           −3%           −4.9%       −0.7%
 World trade volume     −2.8%        −11%           −12.2%        2.9%          −11%          −11.9%      −10.7%

Sources: IMF, 2009a, 2009b, 2019.
Note: World trade includes goods and services.

   Table 3 shows the forecasts made in 2009                 transport, travel and tourism, hotels, sports
about India’s GDP growth, with comparable                   and entertainment as well as the financial ser-
forecasts for 2020. The growth in forecast trade            vices sector. There are some sectors which are
and actual trade is also shown. The actual per-             benefiting due to social distancing and lock-
formance in the year was better than antici-                down. Internet, cloud services and e-com-
pated. For world output and trade, the actual               merce have seen double-digit growth rates
performance in 2009 was a decline, but a lower              during this period (Economic Times, 2020b).
decline than anticipated by the worst case sce-             On the supply side, disruptions are also com-
nario predicted by forecasts. Consider now the              ing through supply chain breakdowns in coun-
actual experiences for merchandise trade in the             tries such as China, South Korea, Italy, Spain,
same months of 2009 and 2020.                               France, Germany, the UK and the USA. India
   The decline in trade for both exports and                has substantive trade relations through exports
imports in 2019–2020 has been larger than that              and imports with all these countries (Srivasta,
for 2009–2010 (Table 4). Likewise, comparing                2020). A recent study has shown, for example,
the months of March to May in 2009 and 2020,                that a decrease in trade in intermediate prod-
the decline is much larger in 2020. It is note-             ucts from China could have a wide-ranging
worthy that the impact of COVID on the Indian               adverse effect on India’s supply chains in mul-
economy is very different from the 2009 global              tiple sectors.4
economic crisis. The adverse effects are much                  The consequent production slowdown
higher on account of domestic factors such as               occurs also because sales are sharply reduced.
a fall in domestic demand, non-availability of              This in turn would have a knock-on effect
labour, supply-side shortages and a drastic fall            in terms of a rise in non-performing assets
in exports and imports. Hence in the COVID                  (NPAs) in banks. If the shutdown on travel and
situation, to a substantial extent India itself is          malls continues for a month or more in sev-
generating its slowdown – which will impact                 eral parts of India, the economic prospects will
the Commonwealth countries.                                 be strongly hit, affecting the ability to service
   Thus, in 2020 the Indian economy has both                loans. Foreign investors withdrew over US$16
supply- and demand-side disruptions. On the                 billion from India in the first quarter of 2020,
demand side, the brunt of the adverse impact                showing the impact of COVID (Congressional
of COVID would be on sectors such as trade,                 Research Services, 2020). Trade and links with

Table 4. Year-on-year percentage decline in merchandise exports and imports of India

                        Exports 2009               Exports 2020            Imports 2009             Imports 2020
 Financial year           −3.5%                     −5.2%                      −5.0%                   −7.8%
 March                  −25.1%                     −34.6%                  −10.6%                   −23.7%
 April                  −32.4%                     −60.3%                  −20.2%                   −58.6%
 May                    −34.1%                     −36.5%                  −21.6                    −51.0%

Source: Department of Commerce, Government of India.
Note: Financial years: exports/imports 2009 are for 2009–10; exports/imports 2020 are for 2019–20.
12                                                    The Impact of India’s Slowdown on the Commonwealth

the Commonwealth will thus be affected both           countries for which India provides a substan-
due to a fall in income abroad and a major            tive share of their imports. India has a small
downturn of the economy at home.                      share in the imports of Commonwealth devel-
                                                      oped countries, but a significant share in the
2.2 India’s exports slowdown and the                  imports of Commonwealth developing coun-
Commonwealth                                          tries, SSA and LDCs (see Table 6 in Section
                                                      3). Commonwealth LDCs import a significant
India’s exports would decline due to both a fall      part of their imports in a number of product
in demand abroad as well as supply-side con-          categories from India. India’s share in total
straints that arise due to COVID. Forecasts for       imports by Commonwealth LDCs is 20 per
various Commonwealth economies, developed             cent for transport and motor vehicles sectors;
as well as developing ones (including in sub-         17 per cent each for chemicals and pharmaceu-
Saharan Africa), show major declines in GDP.5         ticals, textiles, garments and leather products,
This would impact demand for India’s exports.         and ‘other manufacturing’; and 12 per cent for
In addition, during the COVID crisis domestic         petroleum and minerals and metals. For SSAs,
factors are also responsible for a reduction in       the most important sectors are chemicals and
export supply. An indication of the impact of         pharmaceuticals, transport and motor vehicles,
lower international demand would be provided          and textiles, garments and leather products.
by the income elasticity of India’s exports.             Table 2 of Annex 10 shows the large decrease
   India’s export elasticity: Estimates of India’s    in India’s exports during April and May 2020.
income elasticity of exports calculated some time     Other than drugs and pharmaceuticals (which
ago suggest that with a fall in incomes abroad,       saw an increase), and exports of chemicals
the largest impact (income elasticity of exports      which fell by 27 per cent, all other categories
between 4.11 and 5.4), would be on India’s            registered a fall of 40 per cent or more dur-
exports of petroleum, ores and mineral, and gems      ing April and May 2020. This suggests a major
and jewellery. The next level of impact (elasticity   impact on Commonwealth LDCs and sub-
between 2.28 and 2.55) would be on chemicals          Saharan African member countries, and also
and chemical products and engineering and elec-       on the group of Commonwealth developing
tronic products. Products whose export would          countries.
likely decrease but less than those mentioned            The large decline in exports largely arose
above include marine products, leather and            because of the lockdown, transport and travel
leather products, and textiles and textiles prod-     restrictions, and fear of infection through con-
ucts (UNCTAD, 2013). The overall impact on            tact. Some export restrictions on food and
India’s exports, however, would depend on both        medicines in the initial phase of COVID have
the income elasticity and the domestic supply-        also been responsible for an export decline
side constraints arising due to lockdown.             from India. Subsequently some restrictions on
   Experience in 2008–2009: There are very few        export of medicines, diagnostic kits, gloves and
studies of the impact of 2008–2009 on India           masks were relaxed in May 2020 (WTO, 2020).
and the link with Commonwealth countries.             However, supply constraints rather than export
Therefore, the implications of the Indian trade       restrictions have been the major reason for the
decline in 2008–9 would need to be assessed           large decline in exports to the Commonwealth,
based on the sectors which declined in the pre-       especially to LDCs and sub-Saharan Africa.
vious crisis. In 2009, a Government of India          This is because the first round of impact on
labour survey had found that the maximum              account of inter-state travel restrictions has
employment decline for exporting units was in         been on food exports from India. At the best
the gems and jewellery sector (Government of          of times trade logistics are a major handicap to
India Ministry of Labour & Employment, 2009).         Indian exports. This has multiplied many times
Other sectors with a significant fall in employ-      with COVID.
ment among exporting units included metals,
textiles and automobiles. The current experi-
                                                      2.3 India’s imports slowdown and the
ence also shows a large decline in these prod-
ucts, among others (see Table 2 in Annex 10).
   A decline in India’s exports could have a          Experience in 2008–2009 for low income
significant impact on those Commonwealth              economies in Africa: ‘The merchandise
International Trade Working Paper 2020/12                                                           13

exports of LICs began falling in October 2008,         Particularly strong adverse effects would
while exports of services (mainly tourism)          be felt by those countries for which India is a
also declined; overall the exports of goods         prominent export market for both agricultural
and services are estimated to have declined by      and non-agricultural products. These are the
16% in 2009. … For 15 LICs in Africa [includ-       countries given in bold in the list above. This
ing Ghana, Kenya, Malawi, Mozambique,               list contains Commonwealth countries from
Rwanda, Tanzania, Uganda and Zambia], the           developed, developing, SSA and LDC catego-
exports of goods and services as a percentage       ries. Table 4 in Annex 2 shows the main prod-
of GDP fell from 24.8% in 2007 to 24.2% in          ucts imported by India from the individual
2008 and to an estimated 21.8% in 2009. …           Commonwealth countries, and the shares of
Among the worst affected are Mozambique             India’s imports from these individual countries
(whose exports fell from 37.8% of GDP to            in India’s total imports. A comparison with the
27.9% of GDP between 2007 and 2009) and             decline in India’s imports of important prod-
Zambia (from 41.9 to 31.9% of GDP in the            uct categories (Annex 10) will show the likely
same years). For sub-Saharan Africa as a            reduction in the product categories exported by
whole, the export fall was from 41% of GDP          individual Commonwealth countries to India.
in 2008 to 31.2% of GDP in 2009’ (South                At present, product-level detail for indi-
Centre, 2010, p. 29).                               vidual countries is available for March 2020,
   India’s imports from the Commonwealth:           the first month showing the major effects of
The Commonwealth countries are impor-               COVID. Based on this, more specific infor-
tant exporters of several products to India,        mation on countries for which India is among
especially the developed Commonwealth               the top five export markets for agriculture and
countries. However, a small number of com-          non-agriculture products is provided by Table
panies account for a large share of India’s         5. Though very partial, it shows the effects of
imports from the Commonwealth. Among the            India’s major slowdown on its imports and thus
Commonwealth, the top ten sources of India’s        on the exports to India.
merchandise imports6 in 2019 accounted                 In general, there was a major decrease in
for 92 per cent of India’s total imports from       India’s imports from most countries. There were
Commonwealth. The next top ten sources              a few exceptions, i.e. cases where India’s imports
(WTO, 2019)7 accounted for another 7.3              from the country have increased. These were
per cent. Thus 20 Commonwealth countries            Australia,8 Bangladesh9 and Tanzania10 for agri-
accounted for 99.3 per cent of India’s mer-         cultural products, and Brunei Darussalam,11
chandise imports from the Commonwealth in           South Africa12 and Zambia13 for non-agricul-
2019.                                               tural products. Thus, most Commonwealth
   India’s slowdown will impact Commonwealth        countries are facing a shrinking import demand
countries strongly if it is a prominent export      for products for which India is a significant des-
market for them. These countries would be           tination of their exports.
adversely affected due to a large and widespread       Interaction between exports and imports
merchandise import decline from India. The          during the COVID crisis: Exports from
WTO provides summary information on the             Commonwealth countries have been adversely
top five export markets for individual countries,   affected as they rely on external demand.
in terms of two product categories, agricultural    Manufacturing, in particular of garments, has
products and non-agricultural products (WTO,        been a main development driver for LDCs such
2019). The Commonwealth countries for which         as Bangladesh. COVID-19 has resulted in can-
India is a prominent export market are:             cellation of orders as fashion retail in India col-
                                                    lapsed. At the same time, Bangladesh’s domestic
a. For agricultural products: Bangladesh,           supply was constrained by mandatory factory
   Cameroon,      Malaysia,    Mozambique,          closures: ‘By the end of March 2020, a quarter
   Nigeria, Sri Lanka and Tanzania.                 of the 4 million mostly female Bangladeshi gar-
b. For non-agricultural products: Australia,        ment workers had been fired or furloughed’
   Botswana, Brunei Darussalam, Cameroon,           (United Nations Department of Economic and
   Gambia, Ghana, Lesotho, Mozambique,              Social Affairs, 2020). Garments exports from
   Nigeria, Pakistan, Solomon Islands, South        Bangladesh declined by more than 80 per cent
   Africa, Sri Lanka, Tanzania and Zambia.          on a year-to-year basis in April 2020. This in
14                                                         The Impact of India’s Slowdown on the Commonwealth

Table 5. Growth of India’s imports in March 2020 (year-on-year, %)

                              Growth rate of India’s       Growth rate of India’s           Growth rate of India’s
                              agricultural imports         non-agricultural imports         merchandise imports
 Australia                    232.3%                       −38.7%                           −37.3%
 Bangladesh                    14.9%                        −4.8%                            −2.56%
 Botswana                     See Note 3                   −20.56%                          −20.56%
 Brunei Darussalam            See Note 3                    38.5%                            38.5%
 Cameroon                     See Note 3                   −83.96%                          −83.96%
 Gambia                       See Note 4                   −73%                             −18.59%
 Ghana                        −49.1%                       −89.3%                           −86.53%
 Lesotho                      See Note 3                   See Note 3                       See Note 3
 Malaysia                     −95%                         −39.2%                           −52.08%
 Mozambique                   −20.6%                       −16.1%                           −17.29%
 Nigeria                      −25.6%                       −21.7%                           −21.76%
 Pakistan                     −50%                         −99.2%                           −95.15%
 Solomon Islands              See Note 3                   −77.86%                          −77.86%
 South Africa                  −8.5%                        59%                              58.53%
 Sri Lanka                    −24%                         −80.7%                           −70.68%
 Tanzania                     663.2%                       −43%                              32.83%
 Zambia                       See Note 5                    52.1%                            51.62%

Source: Department of Commerce, Government of India.
Note 1: The highlighted estimates show the product categories for which India is among the top five exports
  markets for specific CW countries in this table.
Note 2: The coverage of products is at GS 2-digit level. Products from HS 1 to 24 are considered as agricultural
  products. Others are taken as non-agricultural products.
Note 3: No imports took place in March 2019 or March 2020.
Note 4: Imports of agricultural products from Gambia increased from zero in March 2019 to US$0.6 million in
  March 2020.
Note 5: No imports took place in March 2020.

turn meant that its appetite for imports from              import demand in these countries. Informal
India, especially for raw materials for its gar-           border trade has also come to a virtual stand-
ments sector, was at an all-time low (Ibid.).              still because of travel and transport restrictions
   Tourism is a major export of many                       by India.
Commonwealth LDCs. India has imposed                          Commodity exporters have been hit by both
strong travel restrictions and advisories. In              reduced demand and resulting price declines.
addition, the destination countries themselves             Oil-exporting countries such as Nigeria have
are limiting tourist inflows to contain COVID              been hit by the fall in demand from India:
(Trade for Development News by EIF, 2020).                 ‘While other commodities have been less
Thus decreasing revenues have resulted in                  affected than oil, prices for most metals and
decreased import demand from India. Reduced                minerals have declined by 20 per cent, slash-
demand for migrant workers and travel bans                 ing export earnings and potentially reducing
imposed by receiving or sending countries                  foreign direct investment (FDI) inflows.’ (Trade
has drastically reduced remittances, which are             for Development News by EIF, 2020). This in
essential in many LDCs.                                    turn has affected their demand for products
   Job losses and the return of migrant work-              from India.
ers who have lost their jobs due to the crisis                Additionally, pressure on exchange rates
abroad can put further stress on limited social            in Commonwealth LDCs and sub-Saharan
protection and health systems. In fact, the large          Africa from an export slump would lead to bal-
influx of migrant workers from neighbouring                ance of payments problems. This would inten-
countries has all but dried up, reducing the               sify their pre-existing debt problems and also
International Trade Working Paper 2020/12                                                          15

reduce their demand for imports from India:          products thereof, fruits and vegetables, non-
‘Already before the Covid-19 crisis, 19 out of       ferrous metals and silver. These products cover
39 LDCs covered by the debt sustainability           exports from most Commonwealth countries.
assessment of the International Monetary Fund           In addition, the lockdown and social distanc-
(IMF) for low income countries were at high          ing implies that service trade through Modes 2,
risk of, or already in, debt distress’ ((Trade for   3 and 4 will decline strongly. To some extent,
Development News by EIF, 2020). The IMF has          the move towards digitalisation of trade would
calculated that COVID is set to wipe out nearly      mitigate this effect but services trade in sec-
ten years of progress in economic development        tors like tourism, transport, construction, and
for sub-Saharan Africa (IMF, 2020e, p. 6).           financial services may decrease.
                                                        An important issue being discussed in the
Impact at the regional level
                                                     literature is that the COVID situation has dis-
The outbreak of the COVID-19 pandemic may            rupted global value chains. It has also adversely
bring new opportunities for regional coop-           impacted several services exports and imports
eration in South Asia with the setting up of an      notably tourism, hospitality, aviation and finan-
emergency fund of US$10 million on India’s           cial and business services.
initiative (Mitra, 2020). Bangladesh supplied
food and medical equipment to the Maldives
                                                     2.4 Global value chains (GVCs) between
and India provided medical assistance to the
                                                     India and the Commonwealth
whole region. A decline in globalisation may
lead to the relative strengthening of regional       India’s GVCs are rapidly changing both in terms
supply chains. India could gain investment           of their product composition and the coun-
from some of the firms moving out of China.          tries targeted. Earlier studies have pointed out
However, India’s limited trade connectivity          that small economies in the Commonwealth
with South Asia has meant that intra-regional        could integrate into GVCs for a limited range
trade in South Asia is among the lowest in the       of products such as agri-food, seafood, textiles
world (at 5 per cent) (Sinha and Sareen, 2020).      and apparel, tourism and IT and business pro-
India’s trade with South Asia has varied from        cess outsourcing (The Commonwealth, 2016a).
1.7 per cent to 3.8 per cent of its global trade,    However, these are not products for which sig-
while China has steadily increased its exports       nificant trade-related GVCs currently exist in
to the region from US$8 billion in 2005 to           India.
US$52 billion in 2018 (Ibid.). As a result, only         India has relatively low GVC participation:
Afghanistan, Nepal, and Bhutan now have a            India is comparatively weakly integrated into
higher trade share with India as compared to         GVCs because of its primary focus on domestic
that with China. However, India continues to         markets. Annex 9 shows some details regarding
be an important market for all its neighbouring      India’s GVC participation. India’s backward and
countries, except Myanmar and Pakistan.              forward participation has been low; at 19 per
   The impact of India’s slowdown is likely          cent and 14 per cent respectively in 2015 (see
to be widespread. Table 4 in Annex 10 shows          Annex 9, Table 1) (OECD, 2013). India’s foreign
that India’s imports of a large range of items       value-added content of gross exports are low-
fell sharply in April and May 2020. The largest      est for primary agriculture (3%) and processed
decline was for gold and pearls, semi-precious       food (6%) and highest for petroleum products
and precious stones. These categories are part       (47%) and basic metals (39%). A notable point
of the main imports of India from a number           is that though India’s rank in GVC participation
of countries (e.g. Botswana, Dominica and            is low, the rate of growth of its GVC participa-
Ghana). Import falls of more than 40 per cent        tion was among the fastest from 2005 to 2015
took place for cotton, textile yarn and made-up      (Annex 9, Table 2).
articles, leather and leather products, ores and         Potential     products/countries     identi-
minerals, petroleum and products, electronic         fied for Commonwealth GVCs: A number
goods, machine tools, electrical and non-elec-       of studies have identified several goods and
trical machinery, and transport equipment. A         service sectors for which potential GVCs
decrease between 20 per cent and 40 per cent         could be established between India and other
was observed for chemicals, vegetable oil, pulp      Commonwealth countries. These studies and
and waste paper, artificial resins, plastics and     a consideration of synergistic possibilities for
16                                                    The Impact of India’s Slowdown on the Commonwealth

India and Commonwealth countries suggest              as potential candidates for GVCs with India
that GVCs connections could be established            for several years but trade with India in these
in several sectors such as fish, cashew nuts,         areas has not progressed much (see Section
food processing, vegetable oils and fats, metals      3). An important point to give momentum to
and minerals, petroleum/coal products, home           GVC links is that they need specific focus and
appliances, dyes, leather articles, footwear,         effort. A significant insight from the experi-
carpets, apparel, textiles furnishing articles,       ence with GVCs is that specific targeted strate-
jewellery, machinery and equipment, motors,           gies have to be developed for them, together
turbines, transformers, tractors, wagons, tour-       with ‘lead firms’, i.e. firms which manage or
ism, the financial sector, and ICT products           co-ordinate the GVCs. Although Indian lead
(including over-the-top products such as apps)        firms are relatively few, they are substantively
(for example, The Commonwealth, 2016a;                present in many sectors as actual or potential
Ukkusuri et al., 2016).                               lead firms. In addition, some of the foreign
   Commonwealth countries as GVC part-                lead firms in India could also be part of such
ners: A number of Commonwealth countries              an effort. Some examples of these include14
are active participants in GVCs (e.g., Australia,     the automotive sector (e.g., Maruti, Mahindra,
Malaysia, Singapore and South Africa – Table 3        Tata Motors, Ashok Leyland, Hero Motors,
of Annex 9). These countries have a number of         Bajaj Auto), textiles and apparel (e.g., Arvind
products suitable for developing greater GVC          Mills, Raymonds, Welspun, Vardhaman,
links with India. Among the Commonwealth              Shahi Exports, Orient Craft, Eastman Exports
LDCs, those most likely to be integrated              Global, and Arvind Lifestyle Apparel), phar-
into India’s GVCs are Bangladesh, Malawi,             maceuticals (e.g., Biocon Biologics, Natco
Mozambique, Rwanda, Sierra Leone, Tanzania,           Pharma, Lupin Pharmaceuticals, Dr. Reddy
Uganda and Zambia. A number of the above-             Laboratories), engineering goods (L&T,
mentioned countries are Commonwealth sub-             Kirloskar, BHEL, Triveni Engg), chemicals
Saharan African countries. Other countries            (Reliance, Tata Chemicals, Jubilant, UPL,
with potential for GVC with India include             Deepak Fertilizers) , electrical and electronic
Botswana, Cameroon, Ghana and Kenya in                products (e.g., Amar Raja batteries, Bajaj
sectors such as petroleum, mineral fuels and          Electronics, Centum, Deki Electronics, Dixon
oils, gems and jewellery, food processing and         Technologies, Kirloskar Electronics, Lava,
machinery and appliances.                             Flex, Foxconn, Honeywell), gems and jewel-
   Importance of lead firms: A number of the          lery, and plastics (for some discussion, see
sectors mentioned above have been identified          ICRIER, 2020).

 3. Trade flows between India and the Commonwealth

3.1 Trade flows between India and                        Table 6 shows that both for sub-Saharan
Commonwealth country groups                           Africa (SSA) and LDCs, India is an important
                                                      trade partner. India accounted for more than
India and the Commonwealth are important for          13 per cent of the total imports of LDCs and
each other. Table 6 shows that India’s imports        8 per cent of the imports of the sub-Saharan
from the Commonwealth member countries                African Commonwealth countries. Within
exceeded its exports to the Commonwealth              LDCs, Bangladesh, Uganda and Tanzania were
consistently for nearly 20 years. An important        the most important trading partners as India
feature of India’s trade with the Commonwealth        accounted, respectively, for 16 per cent, 14
countries is that while their share in India’s        per cent and 12 per cent of their total imports.
exports is almost one fifth, India’s share in their   The other important trading partners were
imports is very small (about 3% or one thirti-        Malawi, Rwanda, Gambia, Sierra Leone and
eth). Both have grown exponentially by over           Mozambique in descending order of magni-
seven times in the past twenty years.                 tude.15 Bangladesh and Mozambique are among
International Trade Working Paper 2020/12                                                                          17

Table 6. Importance of Indian trade in the Commonwealth

 Country            India’s exports in      India’s imports in       India’s share in         % share in India’s
 groupings          (US$ billion)           2019 (US$ billion)       overall imports (in %)   total exports

                    2000    2010    2019    2000      2010    2019   2000    2010    2019     2000   2010    2019
 All CW Countries   7.6     45.2    64      10        53.2    75     0.79    0.66     2.9     9      20.5    19.8
 Developed          3.4     10.6    16       4.7      20      22     0.61    0.3      1.26    4        4.8    4.85
   Countries CW
 Developing CW      4.2     34.7    48       5.3      33.2    53     1.21    1.17     4.67    5      15.7    14.9
 LDCs CW            1        5.2    14       0.2       0.8     4     4.38    6.9     13       1.2      2.3    4.19
 Sub-Saharan        1.3     11.2    17       2.4      18.2    24     2.06    0.82     7.6     1.5      5      5.21
   Africa CW

Source: ITC trade Maps. Base data given in Annex 1.

the top ten export markets of India among                    with the next two. Its trade deficit with this
Commonwealth countries (Annex 3, Table 1).                   group is entirely accounted for by its deficit
   The picture changes somewhat when the                     with Singapore and Malaysia, as can be inferred
group of SSA countries is analysed. Imports                  from Figure 1.
from sub-Saharan countries exceed exports,                      Both developed and developing Common­
even though SSA accounts for a smaller share                 wealth countries are important trading partners
of Indian exports than its imports from India.               for India, and for SSA and LDC Commonwealth
Indian imports were highest from Nigeria,                    countries India is an important trading partner.
South Africa, Ghana and Mozambique in that                   Thus, with India’s slowdown, the vulnerable
order, whereas Indian exports were highest to                groups of countries (those likely to be more
South Africa, Nigeria, Mozambique, Kenya and                 impacted) would be SSA and LDCs, especially
Tanzania. The product profile analysis in the                Nigeria and Bangladesh. India’s slowdown will
next section will indicate the co-dependency of              affect the export opportunities of developed
India and SSA on each other. This creates a pos-             and developing Commonwealth countries to
sibility of value chain linkages between India               India, particularly for specific groups of coun-
and SSA, explored in the next sub-section.                   tries as shown in Tables 7 and 8.
   As far as developed Commonwealth coun-
tries are concerned, India’s imports from them
                                                             3.2 Trends in trade flows to major
exceed its exports to them. These countries
are more important to India than India is to                 country groups
them for trade, as their share in Indian exports             Trade with the Commonwealth grew in the five
is higher than India’s share in their global                 years from 2015 to 2019. Table 7 shows that
imports. Among the developed countries, the                  while the overall growth of India’s merchandise
UK, Australia and Canada are important trad-                 exports has been a robust 4 per cent since 2015,
ing partners for India, whereas New Zealand,                 trade with LDCs grew fastest at an average
Cyprus and Malta are relatively unimport-                    compound rate of 9 per cent per annum. The
ant trading partners. While the UK is the                    rates of growth of exports to developed coun-
largest developed country market for India’s                 tries and SSA have been lowest at 2 per cent per
exports to the Commonwealth, the largest                     annum. Exports to developing countries have
source for India’s imports from the developed                followed the average trend. Given that nearly 8
Commonwealth is Australia.                                   per cent of SSA’s imports come from India this
   For the developing Commonwealth group,                    is a disappointing trend, but the rate of GDP
India’s share in their total imports is far                  growth of SSA was at an all-time low of around
lower than their share in India’s total exports.             2.5 per cent between 2015 and 2019 (Statistia
Excluding LDCs and SSA, the largest trading                  International, 2020b). The developed countries
partners for India are Singapore, Malaysia, Sri              showed an average annual growth of 2 per cent
Lanka and Pakistan. India has a trade deficit                over the five years in question, which is con-
with the first two countries and a trade surplus             sistent with average growth of the economies
18                                                                 The Impact of India’s Slowdown on the Commonwealth

Figure 1. India’s top 5 exporters and importers of goods and services in 2019
Top 5 Export destinations of goods Top 5 Exporters of goods to India

         Sri Lanka                  4279
                                                                   United Kingdom                   6954
         Malaysia                          6140                            Malaysia                          10528

                                                                            Nigeria                          10548
       Bangladesh                                 8272
                                                                           Australia                         10553

 United Kingdom                                    8821                   Singapore                                  15028
                                                                                       0   5000      10000      15000    20000
        Singapore                                         10728

                     0   2000 4000 6000 8000 1000012000

           Nigeria       662.2                                             Malaysia        393.3

         Australia         1404.5                                          Australia       401.7

          Canada                 2552.5                                     Canada               940.6

        Singapore                     4296.8                              Singapore                             2650.6

  United Kingdom                                          8855.9    United Kingdom                                   3109.6

                     0    2000 4000 6000 8000 10000                                    0    1000     2000       3000     4000

         India's services exports in 2019 (USDmn)                         India's services imports in 2019 (USDmn)

Source: ITC trade maps and GTAP database.

(World Bank (n.d) GDP Growth). Developing                          Uganda, which have grown at over 6 per cent
countries have grown at average annual rate of                     per annum over this period (Ibid.).
around 4 per cent and export growth has been                          India’s imports from the Commonwealth
consistent with it (Ibid.). However, it is India’s                 have grown faster than its exports. Its imports
exports to LDCs which have outstripped their                       from developed countries, developing countries
GDP growth rate (Ibid.). This is explained by                      and LDCs have grown at 6 per cent or higher,
the fact that over 40 per cent of India’s exports                  with the highest growth from LDCs (Statistia
to LDCs went to Bangladesh, Tanzania and                           International, 2020a). A robust rate of growth

Table 7. Trends in India’s merchandise exports to the CW

 Countries/Groupings                       India’s merchandise exports (US$ billion)                     Compound rate of
                                                                                                         growth of exports
                                           2015          2016      2017        2018         2019         per annum
 All Commonwealth countries                57            50        61           66          64           4
 Developed                                 15            14        16           17          16           2
 Developing                                42            36        45           49          48           4
 LDCs                                      10            10        11           13          14           9
 SSA                                       16            13        14           15          17           2
 India’s GDP growth (annual %)*             8             8.3       7            6.1         5           6.88

Source: ITC trade maps.
Note: * World Bank (n.d.) Development indicators: India
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