SBI report: India may experience changes in FDI inflow during Trump 2.0

SBI report: According to research conducted by the State Bank of India, India's foreign direct investment sector would undergo a change with US President-elect Donald Trump returning back to power for the second time.

The report further said that the significant regulatory changes introduced by Trump in his first term to woo investment back into the country affected Indian FDI inflows. Furthermore, such policies would pose immense challenges to emerging markets like India tracing their economic growth from FDI if reinstated during his second term.

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"India may see shifts in foreign direct investments (FDIs) during Trump 2.0. Trump 1.0 administration saw significant regulatory changes aimed at attracting investments back to the US" the report said.

Meanwhile, India has been gradually diversifying its sources of FDI in order to reduce any eventual decline.

As per the report, India is no longer dependent on the traditional sources of FDI inflows because it has been introduced in the new sectors. Unlike a decade back, today, the country has managed to attract investments in practically all the kinds of industries such as renewable energy, sea transport, medical devices and surgical appliances.

Moreover, nearly 12 emerging sectors are promising to revive any slips in investment in the old sectors if trends of global investments change under another administration of Trump.

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The report said that Trump 2.0 will present mixed challenges and opportunities for the nation as well as the world at large.

There is certainly some short-term seesaw movement in India's trade and investment landscape in the face of factors like a heightened likelihood of the US imposing higher tariffs, tight H-1B visa policies, and a strong dollar.

However, these would become critical for giving a boost to India's long-term growth through a large expansion in its manufacturing base, a much more diversified export market, and increased economic self-reliance.

Despite the tariffs of Trump's first term, India has managed to sustain a merchandise trade surplus with the US and constitutes strong exports that can further be leveraged and strengthened by capitalizing on emerging sectors and reducing dependency on traditional industries. Going forward, India will keenly observe the developmental policy of the US.

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