Government shutdown may affect Indian exports

India’s shipments to the US account for more than 16% of total exports by the country.

The federal government shutdown, now on its third day, is likely to affect India, if it continues.

India, a major trade partner of the US, has taken note of the situations after the Senate failed to pass an order enabling the government to spend money.

“The shutdown of the U.S. federal government is certainly a bad news for the Indian exporters since the American economy is among the largest destinations for (India’s) exports,” Ravi P Sehgal, chairman, EEPC India — the apex body for Indian engineering exporters, told The Hindu.

India’s shipments to the US account for more than 16% of total exports by the country. If the shutdown continues for long, it will adversely affect Indian economy.

“For the (India’s) engineering sector, the U.S. is the number one export destination, giving a robust growth in the current financial year,” Sehgal added. “Between April-December period of the current fiscal, (India’s) engineering exports to the U.S. grew by over 50% to $7.5 billion,”

While the financial market in India is unaffected by the crisis, experts are of the view that prolonged shutdown may affect the market.

Independent market expert Ambareesh Baliga told The Economic Times, that if the crisis ends quickly, Indian markets wouldn’t be affected. But, if it continues beyond Tuesday, it will affect global markets including India, he said.

Flight operations between the two countries have not been affected by the shutdown. According to industry players, the crisis would have an impact if it continues for long.

“The U.S. government shutdown will have no impact on those traveling from India. Airlines are functioning as per their schedules, the air traffic control, immigration and customs services which are deemed as essential services, are not covered by the shutdown,” Karan Anand, head of Relationships at Cox & Kings, told news agency Indo Asian News Service.

However, some experts remained optimistic about reaching a solution to the crisis. “It’s nothing but a showdown between the two parties in the US, where one side will compromise very soon. Since the government cannot be run like this, the standoff won’t last long. One of the parties will compromise and everything will come back to normal,” said G Chokkalingam, Founder & MD of Equinomics Research & Advisory.

The crisis started last Friday when the Senate failed to arrive at a consensus on allowing funds for the government’s functioning. The Democrats demanded the inclusion of a provision for the protection of young undocumented immigrants, known as “Dreamers,” in the legislation. But the Republicans were not willing to negotiate on immigration.

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