The article discusses India’s resilience in the face of US tariffs and its need to negotiate market volatility. According to a recent interview with Neelkanth Mishra, an economist at Axis Bank, India has shown significant resilience against the impact of tariffs imposed by the United States.
Mishra mentions that India’s economy has witnessed some stress due to the US trade tensions, but the country has navigated this challenge well in the short term. He notes that the benefits from the trade balance have more than offset the negative impact of tariffs, indicating that India’s economic fundamentals remain strong.
However, Mishra also emphasizes the need for India to negotiate market volatility in the short term. He suggests that the high market volatility is largely driven by the US-China trade tensions, which have caused a flight of funds from emerging markets, including India.
Despite the economic indicators being positive, the country is facing some challenges. Large economies are expected to slow down, which may impact India’s exports. Additionally, lower oil prices which have been a windfall for India may not continue.
Mishra recommends that the government implement measures to reduce the subsidy burden on oil companies so that the benefits of lower oil prices can be passed on to consumers. He also suggests that the government prioritize farmer welfare, provide social security to vulnerable sections, and pump-prime infrastructure to prevent a slowdown.
Mishra also mentions that high fiscal deficit is a concern for investors and adds to the market volatility witnessed. This volatility is exacerbated by the government’s borrowing costs rising 25- 37 basis points after the recent bond auction.
The overall message from Mishra is that India is resilient due to its strong economic fundamentals, but it still needs to negotiate the market volatility which is increasing due to a slowdown in global growth and uncertainty over the trade tensions between the US and China.