NEW DELHI: A recent report from the State Bank of India (SBI) suggests that if Donald Trump returns to the US presidency, his administration’s policies – potentially echoing those of his first term – could influence India’s foreign direct investment (FDI) landscape.
During “Trump 1.0,” his administration implemented regulatory changes aimed at encouraging investments to return to the US, which impacted global FDI flows, including those to India.
If similar policies are reintroduced under a potential second term, they could pose challenges for emerging markets like India, which rely on FDI for economic growth.
FDI sources diverse
However, SBI’s report also points out that India’s FDI sources have become more diverse in recent years, reducing dependency on traditional sectors. Sectors such as renewable energy, sea transport, medical devices, and surgical equipment have attracted significant investment interest.
With up to 12 emerging industries showing strong FDI potential, India may be able to offset any impact from a shift in global investment trends under “Trump 2.0.”
In the short term, heightened US tariffs, stricter H-1B visa policies, and a stronger dollar might introduce some volatility into India’s trade and investment environment.
Trade surplus
Yet, these challenges could also prompt India to increase its domestic manufacturing, expand export markets, and enhance economic self-reliance in the longer term.
The report also notes that India’s merchandise trade surplus with the US remained strong even with the tariffs imposed during Trump’s first term, reflecting resilient export performance and room for further trade growth in emerging sectors.
Looking ahead, India is likely to monitor US policy developments closely, balancing the opportunities and challenges they may bring to the country’s economic and investment framework.
