Donald Trump’s Presidency of the United States will open new opportunities for India though certain sectors, especially pharma and IT, may face the heat if the incoming president decides to impose restrictions on imports and H1B visa regulations.
Prime Minister Narendra Modi’s friendly relationship with Trump will have a positive bearing on Indo-US relations but India may have to adapt its strategies to maintain cooperation in areas of mutual interest.
Prime Minister Narendra Modi on Wednesday spoke to his “friend” Donald Trump on his “historic” presidential polls victory. “Had a great conversation with my friend, President @realDonaldTrump, congratulating him on his spectacular victory. Looking forward to working closely together once again to further strengthen India-US relations across technology, defence, energy, space and several other sectors,” PM Modi wrote.
Former Niti Aayog Vice Chairman Rajiv Kumar said: “Trump’s presidency can be a new opportunity for India. Trump will impose tariffs and import restrictions on countries that he thinks are not friendly to the US, like China and even some European countries, and this can open markets for Indian exports”.
Barclays, in a research report on Wednesday, said trade policy is where Trump is likely to be “most consequential” for emerging Asia, which includes India and China. “We estimate Trump’s tariff proposals would subtract 2 per cent from China’s GDP – and greater pain on the more open economies in the rest of the region,” Barclays said. The more domestically oriented economies, including India, Indonesia and the Philippines, would be less vulnerable to higher tariffs, it added.
However, some experts feel that his trade protectionist views could have some negative impact on India’s exports and might exert some pressure on the rupee in the short term. Since Trump’s protectionist philosophy of economics is well known, the process of globalisation may become more strategic and less fair to emerging economies, including India, NIPFP visiting Professor Pinaki Chakraborty said.
The Trump administration is likely to bring renewed trade tensions, with potential adverse effects on India’s key export sectors and capital inflows, said Client Associates director (investment, research and advisory) Nitin Aggarwal.
The economic outlook for India will depend on how quickly the US economy adjusts to the policy changes coming after the Trump administration takes charge. “For India, the consequences of such a policy shift could be two-fold. First, certain sectors like pharmaceuticals and IT may experience challenges. Indian generic drug manufacturers could face increased tariffs on their exports to the US…”
Meanwhile, India’s IT sector might also see a slowdown in demand, as a trade war and its economic impact could reduce discretionary spending in the US,” Aggarwal said.