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Last Updated : Sep 10, 2019 08:13 AM IST | Source: Moneycontrol.com

US-China trade war: India will not be a top beneficiary, says Paul Krugman

The direct impact of the ongoing trade war has been on capital expenditure of businesses, feels Krugman.

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With India battling slowdown, noted economist Paul Krugman feels that the country won't benefit from the US-China trade war.

"It looks like uncertainty about trade policy is having a pretty serious drag on the capital expenditure. Trade war seems to be intensifying between US- China and there are no visible signs of any real negotiation. India is not at the top of the list because it is not a major manufacturing hub for exports. The much more obvious countries could be Vietnam or even Bangladesh," Krugman said in an interview with CNBC-Tv18.

The direct impact of the ongoing trade war has been on capital expenditure of businesses, feels Krugman.

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"Businesses don’t know which way to go,” he said.

Global markets celebrated on September 6 after reports suggested that the United States and China have agreed to return to the negotiating table in Washington to discuss trade.

Earlier this week, UBS in a note slashed its forecasts for world growth to 2.5 percent in the coming quarter compared to an annualized 3.2 percent previously and cut its US 10-year Treasury yields forecasts by 25 basis points to 1 percent for 2019 and 1.25 percent for 2020, as per a Reuters report.

Talking about tax cuts, Krugman said that tax cuts are oversold as a way of promoting growth.

"I think the idea that tax cuts are going to be a stimulative thing is misguided," he said, "India does have some obvious shortfalls in infrastructure and so it would make more sense to go that way."

Talking on the topic of independence of central banks, Krugman said it is a relatively recent development.

"The US Federal Reserve was not really an independent policy-making institution. Maybe there are few people worse positioned to make the case against independence than Donald Trump," he said.

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First Published on Sep 6, 2019 06:03 pm
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