Ahead of the keenly awaited US Presidential elections on November 5, investors worldwide, including those in India, are weighing out the pros and cons of the eventual impact on the Indian economy. Of particular interest is how Asia's third largest economy will be impacted if there is a change in leadership in the US.
According to a research note by PhillipCapital, while a win by Republican nominee Donald Trump may negatively impact India's IT companies, sectors such as energy, defence and commodities along with textiles, auto components and consumer electric may end up benefitting.
For Indian IT companies, a victory by Trump may lead to stricter work visa policies due to his strong stance on immigration, the report noted. However, "prima facie, impact seems harsher if Trump wins, given his anti-immigration stance. However, Indian IT companies have tried to de-risk this challenge by hiring more locals in onsite markets, relying on subcontractors, and opening more near-shore delivery centres," it added.
In automobiles, demand for electric vehicle (EV) components from Indian suppliers may see a short-term fall because of potential reduction in EV incentives under Trump, the report noted. However, this could also lead to a shift towards hybrid vehicles, stabilizing demand in the medium term. Also, Trump's infrastructure and manufacturing spending plans, including boosting Class 8 trucks, would likely benefit Indian auto component manufacturers.
Trump's penchant for fossil fuels over renewable energy may lead to increased production of US crude oil and natural gas, leading to fall in global energy prices. This will likely aid Indian refiners and consumers, while higher natural gas output may give long-term contracting opportunities for Indian utilities.
When it comes to the defence sector, Trump's tough stance on China would match India's strategic interests in countering the Asian superpower, potentially speeding up defence partnerships, PhillipCapital noted.
In the commodities and metals sector, his infrastructure spending plans are expected to boost demand for metals that will bode well for Indian metal companies. Trump's interest in fossil fuels may drive higher capex in oil and gas, which will likely benefit Indian metals and pipe manufacturing firms.
Despite his criticism of India's trade practices, Trump has often showered praises on Indian Prime Minister Narendra Modi, calling him his "friend" who is "fantastic" and the "nicest human being".
During his presidency, Donald Trump visited India in 2020, where PM Modi hosted a massive event at the world’s largest cricket stadium, attended by over 100,000 people. The two leaders shared a close relationship, with Modi organizing the "Namaste Trump" rally during Trump's visit, where attendees wore hats bearing the event's name. In 2019, Trump and PM Modi also took the stage together at the "Howdy, Modi!" rally in Texas, where they exchanged praise in front of a crowd of over 50,000 people.
Meanwhile, Donald Trump's likely push for increased tariffs on Chinese goods may lead to opportunities for Indian textiles, consumer electronics, and auto components companies, boosting their competitiveness in the US market. This shift may also attract FDI inflows towards India as the country showcase itself as an alternative to China for manufacturing and investment, according to the report.
(With ANI inputs)
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