India resilient to US tariffs but needs to negotiate market volatility, says Axis Bank's Neelkanth Mishra

The Axis Bank Chief Economist sounded confident that India remains relatively insulated from tariff fallouts, especially with the Reserve Bank of India’s proactively stepping in to improve liquidity and supporting domestic demand, thereby minimizing any widespread impact.

The Indian economy and businesses may be relatively insulated from Trump’s latest tariffs, however, the financial and currency markets may need to navigate volatility in days ahead, Neelkanth Mishra, Chief Economist at Axis Bank said on April 3.

“The market should get used to heightened uncertainty,” Neelkanth Mishra said during a conversation with CNBC TV18 on April 3, reacting to the reciprocal tariffs. Mishra warned that any potential retaliation could trigger currency swings and market stress, given that bilateral trade talks between India and America have been underway.

The Axis Bank Chief Economist sounded confident that India remains relatively insulated from tariff fallouts, especially with the Reserve Bank of India’s proactively stepping in to improve liquidity and supporting domestic demand, thereby minimizing any widespread impact.

Mishra added that he sees opportunities in apparel and footwear sector, where higher tariffs on Vietnam could make India a more competitive sourcing hub from the US. A tariff gap of around 20 percent may enhance India’s edge, as production shifts from China but is unlikely to move to the US, he added.

The financial markets may bear the brunt of some more uncertainty, according to Neelkanth, with foreign portfolio investors reducing exposure to emerging markets in favour of safer assets. The latest tariff measures could further strain global financial conditions, leading to increased capital outflows from EMs, Mishra added.

Neelkanth Mishra added the Reserve Bank of India is expected to focus on domestic factors like inflation, monsoon impact, and growth, which will be supportive for the equity market.

Mishra also sees India’s electronics sector as a key beneficiary of Trump’s tariffs on China and Vietnam, making the sector a more attractive sourcing and manufacturing hub for global companies.

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