Tariff war has many moving parts, India can benefit if it plays its cards well: Enam's Sridhar Sivaram

Many Indian manufacturers can compete globally without the need for protectionist policies, in Sivaram’s view. "I don't really know why we should have such high tariffs for some of these products. And even if the tariffs were made zero, it's very difficult for US companies to actually compete with the Indian products," said Sivaram.

Explaining this, Enam Holding’s Director cited the example of a tire company that sounded confident of competing with US imports even if the tariffs were reduced to zero. "I was talking to a tire company and they were explaining that India has almost 15% tariff on tire imports and US has some 2% tariff. So even if you make it zero on either side, rubber is produced in India. So, we have inherent advantage of raw material," he said.

While India may lose out in some pockets, but in general, we stand to benefit with lesser tariff in most products, said Sivaram. "…if we were to do that and more US orders were to come to India, over the next three to five years, I think we could benefit a lot."

Finding A Balance

From a valuation standpoint, Sivaram said not every sector may benefit, as we are not very competitive in some sectors.

“For example, in pharmaceuticals, India is competitive in generics, but when it comes to liquor, India is not as competitive as US, where wines may be cheaper. Similarly, in solar panels, India is not competitive,” said the veteran investor.

One needs to figure out a balance, said Sivaram. "One of the textile manufacturing company mentioned that we have a free trade agreement with China, with Bangladesh. And if we don't control that, you could get dumping coming from China into Bangladesh and to India. So, I think it's a very fine balance. With the tariffs that the US has put on China, those goods will surely find its place in some form or the other, in some market or the other, which could be deflationary, which could have an impact on many of our companies," said Sridhar Sivaram.

Difficult to Pinpoint Impact

The money manager said ‘new learnings’ are emerging constantly, hence it may be prudent to stay cautious right now. "(I) never thought that the free trade agreement with Bangladesh can have impact, because the initial feel was textiles could be a beneficiary. That may not be so if we get dumping coming from China. So, I think it's very nuanced, " Sivaram added.

At present, Sridhar Sivaram believes some auto names look safe, but one cannot say how trde negotiations play out. Similarly, pharmaceuticals and defense manufacturing could be fine even if we reduce the tariff barriers.

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