With Donald Trump potentially set for a second term as the 47th President of the United States, the world is already speculating how his policies could reshape global economies—and India is no exception. For India, this leadership shift represents a complex mix of opportunities and challenges, influencing various sectors from defence to IT. Here’s a closer look at how “Trump 2.0” could impact India’s economy, industries, and broader relationship with the US.
Strengthening India-US Relations Amidst Economic Policy Shifts
A Trump-led administration would likely reinforce strategic ties with India, particularly through defence collaborations in the Indo-Pacific region, which is crucial for India’s security. This strengthened partnership is expected to support increased defence investments and cooperation, positively impacting India’s defence sector. However, the economic landscape may experience strain due to proposed policies favouring American manufacturing and heightened tariffs, potentially affecting Indian exports.
Impact of Tariffs on Indian Goods: Potential Challenges
Trump’s “Make in America” push includes higher tariffs on imports, including items from India. If tariffs rise on goods like textiles, automotive components, and steel products, India’s exports to the US could face challenges, impacting the trade balance and potentially straining India’s manufacturing sector. Despite these hurdles, India may benefit from Trump’s strong stance on China, as some Indian exports could serve as alternatives in the US market, especially if anti-China tariffs remain or increase.
US Corporate Tax Cuts and Potential Boost to Indian IT & Pharma
One of Trump’s campaign promises is to cut corporate tax rates for domestic manufacturers from 21% to 15%, a move that could increase IT spending among US companies. This bodes well for India’s IT sector, as more US businesses may outsource services and software solutions. Additionally, Indian pharma companies could benefit from increased demand for generic drugs in the US, though regulatory risks around drug pricing could pose constraints if Trump revives measures on price controls.
Also Read: Global Stock Market Crash: The Real Cause and Its Impact on the Indian Market
A Hawkish Federal Reserve and Its Ripple Effect on USD-INR
Analysts expect the Federal Reserve to adopt a more hawkish stance, especially given Trump’s expansionary fiscal policies, which could lead to inflation risks. This approach may strengthen the USD, driving the USD-INR exchange rate higher, with projections placing it at 84.5. For Indian businesses relying on imports, a firmer USD could increase costs, impacting profit margins. However, export-oriented sectors, like IT and pharmaceuticals, could see a favourable impact due to gains from a weaker INR.
Anti-China Policies: Opportunities and Risks for India
Trump’s return to the White House could intensify anti-China trade policies, indirectly benefiting India by positioning it as an alternative manufacturing hub for US imports. India could see higher demand for exports in sectors like electronics, semiconductors, and textile manufacturing. However, these policies also pose risks: if China faces increased tariffs, its excess products might flood the Indian market, exerting downward pressure on prices in Indian manufacturing sectors.
Positive Outlook for Indian Equities and Select Sectors
The Trump administration’s fiscal policies, including corporate tax cuts, are expected to stimulate US equities and create a risk-on environment globally. This positive market sentiment could benefit Indian equities, particularly in the IT, pharma, electronics manufacturing services (EMS), and defence sectors. Investment in high-tech industries, including artificial intelligence and semiconductor manufacturing, is also likely to increase, aided by partnerships like the NVIDIA-Reliance collaboration, which aims to strengthen India’s tech ecosystem.
Oil and Energy Implications for India
Trump’s focus on expanding US oil and gas production through policies favouring fracking and lifting certain regulatory restrictions could maintain stable global oil prices. For India, a major oil importer, steady or lower oil prices would ease inflationary pressures and benefit companies across the oil and gas value chain. This would also support the overall economy by reducing the import bill and helping manage India’s trade deficit.
Trade and Immigration Policies: Visa Restrictions on Indian Talent
The US President’s immigration policies are expected to prioritise American workers, potentially leading to tighter visa restrictions for skilled labour. This could challenge India’s IT sector, which relies heavily on sending skilled workers to the US. Companies might need to explore alternative workforce strategies, including remote work, to mitigate these effects.
Navigating Trump 2.0’s Impact on India
India stands at a unique juncture, with opportunities for deeper ties with the US, especially in defence, technology, and pharmaceuticals, under Trump’s potential second term. However, challenges like higher tariffs, currency volatility, and stricter immigration policies mean that India’s economic and policy responses will be crucial. By strategically positioning itself as a reliable trade and defence partner while navigating challenges in trade and immigration, India could turn the uncertainties of “Trump 2.0” into avenues for growth and partnership.
For Indian businesses and policymakers, adapting to this dynamic scenario will be key to maximising gains and minimising risks as this new chapter in US-India relations unfolds.
FAQs
Ans: Trump’s policies are a mix for India. While stronger defence ties and opportunities for Indian IT and pharma are positives, higher tariffs and potential visa restrictions could pose challenges for Indian exports and workers.
Ans: If Trump becomes president, sectors like IT, pharma, and defence could benefit, potentially boosting the Indian stock market. However, trade tariffs and currency fluctuations could bring mixed results, impacting market stability.
Ans: Trump’s anti-China stance could position India as a preferred trade partner, benefiting Indian exports. His focus on defence and high-tech collaboration may further enhance India’s defence, IT, and manufacturing sectors.
