A Trump presidency could benefit India through increased foreign investments, enhanced trade opportunities, and lower energy costs. However, challenges include immigration restrictions, currency fluctuations, and geopolitical instability.

With Donald Trump set to defeat Democratic candidate Kamala Harris in the 2024 US presidential race, Indian equity markets have shown a positive response to his potential return to the White House. However, the long-term impact of a Trump presidency on Indian stock markets remains a subject of interest. Meanwhile, Chinese markets are expected to experience heightened volatility and uncertainty under Trump’s administration. This presents India with an opportunity to benefit, as foreign portfolio investment (FPI) flows may shift in India’s favor, positioning the country to attract more global capital. Here’s a breakdown of the potential advantages and disadvantages of a Trump presidency for Indian stock markets.

Pros of a Trump Victory for India

Increased Foreign Investments (FIIs)
Trump’s trade war and sanctions on China could lead foreign institutional investors (FIIs) to shift their focus from China to other emerging markets like India. With growing trade tensions and regulatory uncertainty in China, many FIIs may reconsider their investments in the Chinese market. India, with its stable political environment, strong economic growth, and strategic ties with the US and Western nations, becomes an attractive alternative. This shift could result in increased foreign capital inflows into Indian equities, bonds, and infrastructure, boosting market confidence and supporting India’s economic growth amid global uncertainties.

Enhanced Trade Opportunities in the Wake of US-China Tensions
Trump’s ongoing trade war with China presents an opportunity for India to increase its exports to the US. With tariffs on Chinese goods, Indian manufacturers in sectors like textiles, auto parts, solar equipment, and chemicals may find greater demand for their products in the US, providing a boost to India’s export sector.

Boost for Indian Manufacturing
Trump’s policies to bring manufacturing jobs back to the US and reduce dependency on China could open up new markets for Indian manufacturers, especially in sectors such as electronics, chemicals, and machinery. India could become a key supplier of goods to the US, benefiting from trade diversion away from China.

Economic and Trade Opportunities
A major advantage of a Trump presidency for India is the potential to increase its exports to the US. Trump’s aggressive trade policies, particularly his tariff war with China, created opportunities for countries like India to fill the gaps left by Chinese suppliers. In sectors such as auto parts, textiles, solar equipment, and chemicals, Indian manufacturers could see a rise in demand as US businesses seek alternatives to Chinese imports. India’s economic growth would be bolstered as American companies diversify their supply chains, with India benefiting from its competitive edge in cost-effective manufacturing.

Lower Energy Costs
Trump’s pro-fossil fuel stance and emphasis on energy independence for the US could lead to more favorable conditions for Indian companies in the energy sector. Increased US oil production and policies that focus on reducing global energy costs might result in cheaper oil prices. For India, which is heavily dependent on energy imports, lower oil prices could help reduce the cost of oil imports, easing inflationary pressures and benefiting Indian oil companies like HPCL, BPCL, and IOC. This could also translate into reduced energy costs for Indian consumers and industries alike.

Cons of a Trump Victory for India

Immigration Restrictions and Impact on Indian IT
Trump’s anti-immigration stance remains one of the most controversial aspects of his policies, and it could continue to hurt Indian professionals seeking employment in the US. Indian IT companies are heavily dependent on the H-1B visa program to send skilled workers to the US. Restrictions on this visa category during Trump’s first term led to higher rejection rates and increased costs. If similar policies are reinstated, it could strain India’s tech industry and limit opportunities for Indian professionals in the US.

Currency Fluctuations and Inflation
Trump’s economic policies, particularly his fiscal deficit spending and tax cuts, could put upward pressure on global interest rates and lead to a stronger US dollar. A stronger dollar would make Indian exports more expensive, potentially hurting India’s competitiveness in global markets. Additionally, a stronger dollar would increase the cost of oil imports, leading to higher domestic inflation in India, which would impact both businesses and consumers.

Geopolitical Uncertainty and Global Instability
Trump’s “America First” approach to foreign policy often involves unpredictable and unilateral actions. His administration’s withdrawal from international agreements and disregard for multilateral frameworks could create global instability. For India, this could mean navigating a more uncertain international order, where the US may not always align with India’s strategic interests. India’s foreign policy, particularly regarding climate change, trade, and multilateral organizations, could face challenges if Trump’s isolationist policies continue.