Trump's 2024 win: What it means for Indian IT, real estate, pharma, trade

India IT Services players are more insulated now from such anti-immigration policies than they were in 2016. All players have ramped-up local hiring in US.

 Following a decisive victory in the 2024 US Presidential Election, Donald Trump and the Republican Party have gained control of both the White House and the US Senate, with the potential to secure the House of Representatives as well. This Republican "clean sweep" means that Trump's policy agenda is likely to advance with greater momentum. For India, Trump's win could have significant implications across various sectors, ranging from corporate taxes and trade tariffs to energy policy and immigration laws. 

 

Here is what Trump's victory means for various sectors in India:

 

1. Lower Corporate Taxes & Higher US Manufacturing Investment

 

One of the cornerstones of Trump's agenda is his promise to reduce corporate tax rates in the US, particularly for manufacturers operating within the country. Trump's proposed tax cut would reduce corporate tax rates from 21% to 15%, which could stimulate investment and job creation within the US. For India, this means:

 

Positive Impact on US Businesses: Indian companies with a significant US presence, especially in IT services and manufacturing, could benefit from the growth in US corporate investments and capital expenditure (capex). This could create new opportunities for Indian firms offering manufacturing services or supply chain solutions.

 

2. Indian IT:

 

"Trump, in his previous stint, tried to curb the H-1B visa programme. His policies led to increased H-1B rejection rates, higher H-1B/L-1 visa processing charges and wage inflation for H-1B resources. That said, India IT Services players are more insulated now from such anti-immigration policies as all players have ramped-up local hiring in US. Majority of their US employees are now not dependent on visa (local/green card holders)," said Venkatesh Balasubramaniam of JM Financial Research. 

 

3. Negative Impact on Indian Banks & NBFCs: While lower taxes may be a boon for US businesses, higher interest rates in the US as a result of Trump’s fiscal policies could constrain India’s borrowing costs, particularly affecting NBFCs (Non-Banking Financial Companies) and banks. With the US Federal Reserve likely maintaining or increasing rates to combat inflationary pressures from Trump's expansionary policies, India's borrowing rates may stay elevated, posing a challenge for financial institutions that rely on lower rates for growth.

 

"Given interest rates in India are unlikely to come down in a hurry, the expectation of NBFCs outperforming banks may not hold. PSU banks could be a relative beneficiary," said Shalin Choksy of JM Financial Research. 

 

4. Higher Tariffs and Trade Frictions

Trump’s protectionist trade stance is expected to lead to higher tariffs on imports from China (around 60%) and other countries (10-20%). This could have a ripple effect on global trade, including India. The potential consequences for India include:

 

China+1 Strategy Accelerates: India's exporters in sectors like chemicals, electronics manufacturing services (EMS), auto ancillaries, and solar panels could benefit from the growing trend of China+1 as companies look to diversify away from China. Increased tariffs on Chinese goods could open up opportunities for Indian manufacturers to step in and fill the supply gap in the US market.

 

Trump's tariffs on Chinese imports are likely to accelerate the China+1 strategy—the idea that companies should de-risk their supply chains by reducing reliance on China and sourcing from other countries, including India. 

Indian exporters in various sectors such as chemicals, electronics manufacturing services (EMS), auto ancillaries, wires and cables, tiles, and solar cells could see a boost as global companies seek alternatives to Chinese suppliers. This could help Indian companies gain market share in these industries, especially for exports to the US.

 

5. Geopolitical Shifts and Crude Oil Prices

Trump's foreign policy stance focuses on reducing US involvement in geopolitical conflicts, particularly in regions like the Middle East and Europe. His support for oil & gas production in the US is likely to bring down global crude oil prices. For India, this could have a mixed impact:

 

Lower Oil Prices: A decrease in oil prices would be a positive for India, which is a net importer of crude oil. Lower fuel costs could reduce inflationary pressures and help improve India's current account deficit.

 

Reduced US Involvement in Global Conflicts: While this could lead to a more stable geopolitical environment, it might also shift the global power balance. India could face new challenges in navigating a potentially more isolated US on the global stage, especially in areas like defense and trade agreements.

 

"Trump's pro oil & gas policies could be a bit bearish for global oil price as it could incentivise investment in US shale assets. Trump's promise to end Russia-Ukraine war and Middle East tension could eliminate geopolitical risk premium from oil price. Trump's likely approval for new US LNG export plant could lead to normalisation of spot LNG prices from current high levels," said Balasubramaniam.

 

6. Pharma - Local Manufacturing and Innovation Projects:

 

Trump’s administration has strongly supported bringing manufacturing jobs back to the US, including in sectors like pharmaceuticals. He aims to reduce reliance on foreign countries (especially China) for manufacturing drugs and medical supplies. The push for local manufacturing could lead to the reshoring of some pharmaceutical production to the US.

 

Reduction of reliance on China: In particular, Trump has advocated for reducing US dependence on China for pharmaceuticals and medical equipment. India, as a major supplier of generic drugs and active pharmaceutical ingredients (APIs), could benefit from this push to diversify the supply chain.

 

Shifting of innovation projects:

 

While some pharmaceutical innovation-related projects might move back to the US, or to other countries like South Korea, Indian contract development and manufacturing organizations (CDMOs) stand to gain because of their lower cost base.

These Indian companies are poised to expand their business by handling the outsourced production of drugs that would previously have been done in China, benefiting from both the China+1 strategy (a diversification away from Chinese suppliers) and the global cost advantages they offer.

 

"Promotion of local manufacturing is on Trump's agenda but so is lowering cost of drugs. The read through here is that dependence on China could be reduced. While some innovation-related projects may shift to USA or other countries like Korea. Indian CDMOs stand to gain on a low base. Trump is unlikely to repeal the Affordability Care Act. At present, this is neutral for pharmaceutical sector China + 1 players: A Trump win an increased tariff on China imports would mean China+1 de-risking can accelerate and may benefit Indian chemicals, EMS, auto ancillary, wires & cables, tiles, solar cells and module exporters," said Hitesh Suvarna of JM Financial Research. 

 

Affordability Care Act: Trump is unlikely to repeal the Affordable Care Act (ACA), which provides a framework for healthcare coverage and regulation in the US. This is relevant to the pharmaceutical industry because it ensures that a significant number of Americans have access to healthcare and, by extension, medicines. Indian pharmaceutical companies that export to the US benefit from this stability.

 

7. Textile – Stronger US Economy and Retail Sentiment:

Stronger US economy under Trump:

Trump's pro-business stance, including his tax cuts and deregulation policies, could lead to a stronger US economy, which may help improve consumer retail sentiment. This could result in higher demand for imported goods, including apparel. India, being a major exporter of textiles and apparel to the US, could see a rise in demand for its products. This could especially benefit textile companies in India if there is an increase in US consumer spending, as per the JM Financial Report. 

 

8 Real Estate – Impact of Delayed Rate Cuts in India:

India's real estate market could be impacted by delays in interest rate cuts by the Reserve Bank of India (RBI). If the US raises interest rates due to Trump’s policies and India follows suit to prevent capital outflows, borrowing costs in India could stay high. This could reduce demand in the affordable housing segment, where interest rates are a significant factor in consumer purchasing decisions. Real estate in India may see weaker demand in the short term, especially for lower-end housing that is sensitive to interest rates.

 

"Trump’s "America First" and anti-immigrant policy could impact IT/ITes (did not play out in his first term). India is the biggest market for offshoring and has the highest number of GCCs globally. Both sectors (IT/GCCs) are big employers and the largest occupiers of offices in India. Hence, an inward-looking policy by Trump can impact the fortunes of the office landlords (REITs/DLF etc.) and the co-working/ flex operators," said Suvarna. 

 

9. Commodities – Tariffs and Regionalism:

During Trump’s first term, he imposed steep tariffs on metals like steel and aluminum as part of his America First policies. These tariffs disrupted global price discovery and led to higher metal prices in the US. Under a second Trump term, similar tariff policies could continue, potentially increasing prices for metals and other raw materials in global markets.

 

Regionalism in commodities:

As global trade becomes more regionalized, with countries creating trade blocs and economic zones, there is a growing trend of ring-fencing in commodity markets. This means that commodities like metals may see price increases due to localized supply and demand imbalances.

 

"Commodities witnessed steep tariffs in Trump's previous tenure, effectively disrupting efficient price discovery. With regionalism and ring-fencing in commodities picking pace, metal prices could inch up under a Trump regime," said Suvarna. 

 

10 Chemicals

 Higher tariffs on Chinese imports under Trump could result in higher competitiveness of Indian chemicals exporters. Hence, despite the imposition of 10-20% tariffs on Indian imports, chemical exports from India could see a meaningful jump. 

Inflationary Pressures and Interest Rate Dynamics

Trump’s expansionary fiscal policies — including tax cuts and increased spending — are likely to keep interest rates elevated in the US. Although Trump may exert pressure on the Federal Reserve to lower rates, his inflationary policies may leave little room for the Fed to accommodate such requests. For India, this could result in:

 

Stronger US Dollar: A robust US dollar, driven by higher interest rates, would negatively impact Indian exporters by making their products more expensive in dollar-denominated markets. It could also increase the cost of dollar-denominated debt for Indian companies.

 

Key points: 

• IT Services: Indian IT firms are less affected by Trump's visa policies now, thanks to increased local hiring in the US.
• Pharma: Indian CDMOs could benefit from reduced competition from China and increased US outsourcing, while local manufacturing in the US may slightly affect innovation-related projects.
• China+1: India could benefit as companies shift supply chains away from China to diversify risk.
• Textile: The stronger US economy under Trump could lead to higher demand for Indian apparel exports.
• Real Estate: Delays in rate cuts could reduce demand in India's real estate market, especially for affordable housing.
• Commodities: Higher tariffs on metals and regionalization may raise commodity prices, benefiting Indian exporters but increasing input costs for manufacturers.