Donald Trump’s second term in the White House

Donald Trump’s potential second term in the White House could bring both opportunities and challenges for the Indian economy, affecting sectors like trade, technology, and immigration. While there could be some friction on trade policies, there are also expectations for an intensified Indo-US strategic alliance in areas like defense and technology, especially considering the shared objective of countering China’s influence in the region.

Trade and Tariffs??

Trump's well-known “America First” approach implies a more protectionist stance, which might create hurdles for Indian exports, particularly in manufacturing and technology. During his previous tenure, he labeled India as a "tariff king," accusing it of unfair trade practices, and suspended India’s preferential market access under the Generalized System of Preferences (GSP). A similar stance in his second term could strain bilateral trade relations, possibly leading to higher tariffs on Indian goods. Nevertheless, India's shift toward self-reliance and a domestic demand-driven growth model may mitigate some of these impacts. Furthermore, supply chain diversification due to global trade reconfigurations could make India an attractive destination for American companies seeking alternatives to China.

Technology and Investment??

India's tech sector, a critical driver of its economic growth, could see mixed outcomes. Trump's stricter H-1B visa policies previously restricted the movement of skilled Indian professionals to the US. If similar immigration policies are reinstated, Indian IT and tech companies may face challenges in sending employees to the US, potentially affecting service delivery and client relations. However, increased investment and collaboration in technology and defense are anticipated, as Trump has historically been supportive of US-India defense deals and technology partnerships, which may foster innovation and investment in India's tech ecosystem.

Strategic and Economic Partnership??

On a positive note, Trump’s strong anti-China stance could reinforce the US-India strategic partnership, particularly in defense and counter-terrorism. India’s inclusion in key US-led initiatives, such as the Quad alliance (with Japan and Australia), would likely strengthen in a second Trump term, contributing to regional security and stability in the Indo-Pacific. This alignment in defense and security interests may also open doors for US investments in India’s defense manufacturing sector.

Rupee and Inflationary Pressures??

Economically, Trump's policies could lead to a stronger dollar, putting downward pressure on the Indian rupee. This could make imports costlier, potentially heightening inflation. However, lower commodity prices due to the US’s independent energy stance may benefit India’s import bill, especially in crude oil.

In summary, while Trump’s policies may create trade and immigration challenges for India, the reinforcement of strategic ties and potential supply chain shifts offer opportunities. India’s relatively resilient economy, underpinned by a strong domestic market, may help absorb some of the shocks from possible trade frictions, while its alignment with the US on regional security can enhance its strategic significance globally. This balancing act will require India to navigate both diplomatic and economic channels carefully to maximize the benefits while minimizing the drawbacks of a Trump presidency.