'India should trade more with neighbours amid rising protectionism'

In an environment of rising protectionism in the US, Indian firms should focus "more on their backyard" and increase the share of trade with neighbouring economies, says an HSBC report.

According to HSBC's global survey, that covered 6,000 companies in 26 markets, nine in ten businesses in India feel governments are turning increasingly protectionist, more than the global average.

"Raising the share of trade with neighbouring economies has been high on India's agenda for some time, and has become even more important given the rising risk of protectionism in the West," the report said.

The rise in protectionism leads to an increase in the cost of doing international business, altering trade routes and raising hurdles to obtaining trade finance.

 

In such a scenario, trade initiatives that are likely to lower trade barriers, are viewed positively.

Moreover, companies also adopt strategies like increasing regional trade, establishing joint ventures or local subsidiaries in more markets and capitalising on trends in consumer demands and digital technologies.

Globally, majority of firms are looking at regional partners to develop trade opportunities, with almost 74 per cent of overseas trade in Europe and Asia-Pacific being conducted within their 'home' region, the survey noted.

"Despite SAFTA, South Asia remains one of the least integrated regions so far. In an environment of rising protectionism in the US, Indian firms should focus more on their backyard, finding mutual grounds to tackle issues such as high transaction costs," the report added.

The survey further noted that firms are most united in the positive impact of ASEAN 2025 and SAFTA on their businesses. And surprisingly, even with the negative press around H1B visas, most firms (63 per cent) believe that US policies and regulatory environment will be beneficial for their businesses.

The firms are however less optimistic about China's Belt and Road initiative, with 22 per cent respondents indicating a negative impact on their businesses.