India Inc is hoping for better relationship with the US under the newly-elected President Donald Trump.
“As the largest Indian investor in the US, we congratulate President-Elect Trump on his historic victory. We are confident that the long-standing strong relationship between India and the United States will only continue to strengthen in the years ahead. The US economy is incredibly dynamic, and our continued investments will support the revitalization of the growing American manufacturing sector while demonstrating our commitment to our customers and our communities. We have invested over $15 billion in the US to date and look forward to finding new opportunities for the Aditya Birla Group to continue to invest in the country moving forward,” said Kumar Mangalam Birla, Chairman, Aditya Birla Group. Birla has interests in the metal space with presence in the US through aluminium producer Novelis.
Guatam Adani, Chairman of Adani Group, said “If there is one person on Earth who stands as the embodiment of unbreakable tenacity, unshakeable grit, relentless determination and the courage to stay true to his beliefs, it is Donald Trump. Fascinating to see America’s democracy empower its people and uphold the nation’s founding principles. Congratulations to the 47th POTUS-elect.”
Key hub
The US accounts for ~18 per cent of India’s merchandise exports, and the biggest export items include electronics, pearls & precious stones, pharmaceuticals, nuclear reactors, petroleum products, and to a lesser extent, iron & steel, autos and textiles. India is also one of the world’s top services exporters, particularly of IT and professional services (global capability centers involved in the outsourcing of value-added services), and the US is an important customer of India’s services sector.
However, one cannot rule out Trump imposing tariffs on India either because of geopolitical reasons or for running a trade surplus with US or for having a perceivably managed currency – all of which have historical context, said a note from Angel One Wealth.
Areas to watch
Nuvama Research said two areas of policymaking need close monitoring—trade policy and fiscal policy. On the trade front, Trump may decide to go multilateral in the tariff war (so far, the focus was on China). This is because despite various tariff hikes on China since 2018, there is hardly any improvement in US manufacturing or US trade deficit. Hence, Trump may get more aggressive on trade front by going multilateral. Meanwhile, on the domestic front, he may go for tax cuts or even spending boost to support the economy, pushing fiscal deficit higher, something that happened in his first term too. This shall create its own challenges as US sovereign debt is much higher today than in 2018, Nomura said.
If Trump lifts tariffs across the board, other countries may retaliate with countervailing duties and this global trade war could significantly dent the global and Indian economy.
“First, it could hit global trade (already weak), which in turn shall hurt India’s exports, not to mention the risk of tariffs on India as well. Second, it may heighten the risk of inflation, eat into HH purchasing power and cloud the outlook on Fed’s rate cuts,” Nomura said.
