 
The horizon for the 2024 U.S. Presidential election is now drawing near, and as the political landscape takes shape, many await the return of Donald Trump to the White House. While his first term in office was quite dramatic with respect to a massive change in U.S. foreign policy, changes in trade relations, and economic decisions, the question remains: how would a second Trump presidency affect the Indian economy? Moody’s recent report has shed light on the subject and given some key insights into what may be possible with respect to the Indian economy. This blog will outline the possible economic implications of a Donald Trump presidency for India, based on Moody’s analysis, and consider other important factors.
The Trump Legacy: A Quick Review
First, we take a general glance at the impact of Donald Trump on economies of the world, in this case, India during his first term. As President, Trump followed an “America First” agenda and did enact protectionist policies at several instances. This, in fact, led to imposition of tariffs on China and India, among others. Though Trump’s policies had instilled some friction, these very policies began opening avenues for Indian exports to the US market mostly in the form of technology and pharmaceutical products.
While there has been growth in some areas under Trump’s tenure in India, trade wars and uncertainties around the stability of global supply chains could have kept the environment volatile.
Trade Relations: Will Tensions Continue or Improve?
One more pressing issue with a second Trump presidency seems to be U.S.-India trade relations. He criticized India during the whole course of his first term for its trade practices-especially on agriculture, steel, and the tech sector-because it branded India as the world’s “most protectionist” nation. This just added fuel to the already fraught relations caused by the tariffs.
However, Moody’s believes that although Trump may go on to force India to open up its markets, there is also good news on the way.
For instance, as the U.S. seeks alternatives in Chinese manufacturing, there would be further expansion of India’s role in the global supply chain. The U.S.’s drive for diversification is only going to add more sheen to Indian business. One might envision that if Trump continues with his policies on path, policies which reduce dependence on China, then investment and trade flows may increase into India. There are strategic commonalities in the areas of cybersecurity, 5G technology, and the country’s current muscle in data security. Any trade practices tensions may break out, but India’s strong standing may be able to achieve deeper cooperation with the U.S.
Foreign Direct Investment (FDI) and Economic Growth
During the first term of President Trump, India has witnessed steady growth of FDI originating in the United States and particularly to emerging sectors of technology and manufacturing industries. Continuing this trend is possible under a second term of President Trump, especially assuming that the Indian government would continue with the Indian economic policies favorable to foreign investors.
Trump’s policies, primarily on tax cuts and deregulation, eased the investment of U.S. companies abroad. This could invite more U.S. investments into infrastructure, energy, and manufacturing sectors in India. An attractive business environment in India, which the government is promoting through initiatives such as “Make in India” and “Atmanirbhar Bharat” or self-reliant India, might just serve the need to deepen bilateral trade ties and reduce dependency on China.
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This may in turn depend on India’s capacity to restrain the protectionist forces. While Trump continues with policies biased toward the interests of US companies, India needs to balance trade liberalization with domestic protection to avoid further tensions.
Geopolitical Dynamics: Strategic Partnerships or Rivalries?
Under Trump, the relationship between the U.S. and India has strengthened a bit due to a framework of defense and security cooperation. Notably, the two countries started gaining a closer cooperation on military trade cooperation, in the sphere of intelligence, as well as in regional security in the Indo-Pacific region. These strategic ties appear in Trump’s larger strategy of containment of China, and India seems to be an important partner for the goal.
Even if Trump returns to power, these geopolitical dynamics might continue to change.
On the one hand, of course, India will benefit from continued security partnerships with the U.S., which may result in more favorable conditions for Indian businesses, especially in defense and technology sectors. But on the other hand, India will have to balance its delicate relationship with other global powers such as Russia, Iran, and the European Union who might not go all out with Trump’s policies. An alliance with the US on geopolitical matters may, according to Moody’s, result in an Indian economy that is steadier and more predictable, even amidst gale-force storms in the trade front.
Immigration Policies and Talent Flow
As such, India had to struggle with sending its tech professionals into the United States and accessing the talent pool for companies across the globe.
Moody’s notes that, while Trump may continue to demand even tougher immigration policies, the rapidly high tech of India and the protracted digital economy may actually have workarounds.
Once US immigration policies are tightened further, India would have a great opportunity to be promoted as an alternative talent hub for multi-national companies. This is because India focuses on digital transformation and innovation due to the constant rise in worldwide demands for technological services.
Conclusion: A Complex, Yet Opportunity-Filled Future.
A second term by Donald Trump would thus usher in a mix of challenges and opportunities for India. Trade relations might remain complex, with investments deepening strategic ties with the U.S. ahead. Much of India’s future under Trump is thus to be found in its ability to navigate protectionist pressures while continuing to innovate and attract foreign investments.
Moody’s rating implies that despite issues in the trade relationships between U.S. and India, a new path to prosperity may be created due to continuous developments in India’s high-tech industries, geopolitical influence, and investor-friendliness of its climate. It is quite possible that Trump’s presidency may serve as another obstacle, however also as an opportunity for more economic cooperation and growth.
