Indian companies likely to gain due to US-China tariff war

Question: Will India benefit from the US-China tariff war which is taking place at present?  What is going to be the likely impact?

ANSWER: President Trump has signed an order imposing stiff tariffs on imports from China. Likewise, China has imposed a 15 per cent tariff on export of US coal and liquefied natural gas and 10 per cent on its oil and agricultural equipment. These tariffs would push prices of goods sold in the American market, making them less competitive. India is likely to gain on account of this trade war between the two major economies and Indian exporters of electrical machinery and components, auto components, mobile phones, pharmaceutical products, chemicals, and fabrics are expected to be the beneficiaries. In the recent budget, the Indian Government has reduced customs duties on motorcycles, Ethernet switches and ground installation products for satellites which will benefit American exporters and boost the Indo-US trade. During the first term of President Trump, India was the fourth largest beneficiary when US imposed higher duties on Chinese goods. During April to December of the current financial year ending on 31st March, 2025, India’s goods exports to the US are estimated to be around $ 60 billion and imports are of $33.4 billion.

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Question: In your earlier columns you have mentioned about global capability centres being set up in India by multinational companies. Do they actually contribute to the revenues of these companies or do they merely provide back office services?

ANSWER: Global capability centres do not provide back office services.  These centres are set up for research, development and innovation. They provide digital capabilities and devise strategic initiatives. Therefore, they contribute to the top line growth as well as profitability of their parent company.  According to a recent report, there are 24 GCCs in India, each of which has generated export revenue surpassing US $ 1 billion in the financial year 2023-24. These 24 GCCs collectively generated revenues of US $ 43.6 billion. India is expected to have 2,100 GCCs by 2028 with the market size touching $900 billion. By the end of this financial year, the country will have 1,900 GCCs with estimated revenue of $60 billion. The revenue model is based on services rendered to their parent companies and global affiliates with a predefined markup regulated by transfer pricing norms as per the provisions of the Income-tax Act. While most GCCs adopt the cost plus method of transfer pricing, their financial success is determined by their ability to make value addition. Unlike IT service providers that maintain a bench workforce, GCCs function as specialised entities with dedicated service lines for their global parent organisations. This has greatly benefited young engineers in India who get the opportunity to work closer with global enterprises and have a career option which is far more attractive than they had ever before. 

Question: My family firm in which I am a dormant partner has not been receiving dues from a couple of large companies to which my firm supplies components.  Is it possible for my firm to take legal action under the Bankruptcy Law of India?

ANSWER: If the amount due to your firm exceeds Rs10 million, you are legally entitled to file an application as an operational creditor before the National Company Law Tribunal against the defaulting company. After the Court admits your application, the process can take several months especially if other creditors, including financial creditors like banks, file their own applications. However, the advantage of an operational creditor like your firm filing an application would be that the debtor would most likely come forward to settle the dues of your firm as the debtor would not like to expose himself to the risk of being held as a defaulter and liquidation proceedings being initiated against him.  In the past, many operational creditors like your firm have been reasonably successful in realizing a substantial part of their dues even before the NCLT commences the formal proceedings.  This would ensure that your firm and the debtor would come to a speedy settlement and legal costs would be minimal.

The writer is a practising lawyer, specialising in corporate and fiscal laws of India