Impact of Donald Trump’s 2024 Election Victory on the Indian Economy

Ms. Parika Sharma
Assistant Professor
Faculty of Commerce & Management
Kalinga University
parika.sharma@kalingauniversity.ac.in

Donald Trump’s victory in the 2024 U.S. presidential election brings both opportunities and challenges for the Indian economy. As the two nations are among the world’s largest democracies, the United States’ policies under Trump’s administration will inevitably affect India’s trade, investment flows, and economic strategy. Here’s a look at how his re-election could shape the Indian economy.
1. Trade and Bilateral Relations
India and the United States share a strong trade relationship, with the U.S. being one of India’s largest trading partners. Under Trump’s administration, however, the “America First” policy could lead to more protectionist stances. If Trump pushes for renegotiated trade terms or increases tariffs on certain Indian goods, it might lead to reduced exports to the U.S., impacting industries like textiles, pharmaceuticals, and IT services.
However, Trump has historically expressed interest in balancing U.S. trade deficits with countries like China, which might open new doors for India. As Trump’s administration seeks alternatives to Chinese goods and services, India could strengthen its trade position by offering competitive alternatives in sectors such as manufacturing, technology, and agriculture.
2. Impact on the IT and Services Sector
India’s IT and services sector, a significant contributor to the country’s economy, relies heavily on exports to the United States. Policies aimed at tightening immigration and reforming work visas, such as H-1B, could affect the Indian workforce in the U.S. Indian IT firms may face challenges in sending skilled workers to the U.S., leading to increased costs as they try to hire local talent abroad.
However, this could also encourage Indian IT firms to innovate and shift more operations to India, creating local jobs and potentially boosting domestic technology infrastructure. Trump’s emphasis on self-reliance and onshoring might, paradoxically, encourage India to further develop its technological capacities domestically.
3. Foreign Direct Investment (FDI) in India
A Trump-led administration may continue to encourage American companies to bring their investments back to the U.S., which could reduce FDI flows into India. This might particularly affect sectors like manufacturing, retail, and automotive industries. However, as the U.S. continues to reduce its reliance on Chinese manufacturing, India could serve as an alternative, attracting investments from American companies seeking a stable base in Asia.
India’s favorable trade policies, such as the Production-Linked Incentive (PLI) scheme, and a skilled workforce could make it an appealing destination for American investors. If India can effectively present itself as a viable manufacturing hub, it may benefit from redirected investments initially meant for China.
4. Energy and Defense Cooperation
India and the U.S. have built strong ties in energy and defense. Trump’s support for traditional energy sources like oil and gas might strengthen India-U.S. energy relations. India’s growing energy demand could find an ally in Trump’s policies, which encourage energy exports. This could benefit India’s energy security by allowing it to import oil and gas from the U.S. at potentially favorable rates.
On defense, the strategic partnership between the two nations could grow, especially amid shared concerns about China’s regional influence. India could see increased defense exports and collaboration with the U.S., which would enhance India’s defense capabilities and foster domestic manufacturing within this sector.
5. The Rupee and Financial Markets
Trump’s re-election could impact the U.S. dollar’s strength, especially if his policies focus on reducing trade deficits and increasing interest rates. A strong dollar typically puts pressure on emerging markets like India, making imports more expensive and impacting the Indian rupee. Additionally, U.S. monetary policies could influence foreign portfolio investments (FPIs) in Indian markets, with potential capital outflows if U.S. interest rates rise.
However, India’s status as a growing economy could continue to attract investors seeking growth opportunities, partially offsetting these impacts. If India maintains a favorable investment climate, it may cushion the effect of a strong dollar on its economy.
6. Geopolitical Shifts and India’s Strategic Position
Trump’s foreign policy generally takes a hard stance on China, which could work in India’s favor, given the two countries’ strained relations. A U.S.-India alignment on key issues may enable India to strengthen its position on the global stage. This could be advantageous for India in its economic diplomacy and in negotiating trade and defense deals that support its economic growth.
Conclusion
Donald Trump’s victory in the 2024 U.S. election could bring both challenges and opportunities for the Indian economy. While tighter immigration laws and potential trade restrictions might pose initial hurdles, the opportunity to deepen defense and energy ties, attract alternative investments, and collaborate on technological advancements could offset these risks. The Indian economy’s resilience and adaptability will be crucial as it navigates these evolving dynamics with the Trump administration.