The escalation of global trade protectionist measures into a "full-scale global trade war" will damage the Indian economy as well, industry body Assocham has said.
According to Assocham, a "full-scale" global trade war will impact the country's exports and enlarge its current account deficit (CAD).
"Tensions in the market look quite justified, as Trump's move to levy tariff on trading partners could lead to a further retaliation against the US," the industry body was quoted in a statement.
"Though India may not get much of a direct impact, the collateral damage could be in the form of adverse impact on the overall sentiment."
As per the statement, a further erosion in "market confidence" can also lead to an outflow of portfolio investment thereby "taking a toll on the dollar rates".
Besides, as the US dollar is used as a safe haven in the midst of global uncertainties, its increased demand would put pressure on the Indian currency along with those of the other currencies of the emerging markets, Assocham added.
The industry body's Secretary General D.S. Rawat said: "We must have a backup plan which should include opening bilateral trade with key trading partners, (while) taking precautions that we remain WTO compliant."
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