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The prospect of a US manufacturing revival has strengthened the US dollar, adding to depreciation pressure on the Indian rupee. A weak rupee against the dollar will have a far-reaching impact on India. Imported heavy industries such as oil, electronics and pharmaceuticals face rising costs, increasing inflationary risks to the economy. This currency fluctuation also reduces India’s global purchasing power, widening its trade deficit and affecting its economic resilience.
Heavy FII selling, coupled with currency devaluation and inflationary pressures, could further destabilize Indian markets. This bearish sentiment risks dragging down stock indices, undermining investor confidence and slowing the economic recovery after the pandemic.
Trump’s second term is set to deepen global polarization, demanding adaptability from leaders, businesses, and institutions alike. As alliances face strain and markets become more unpredictable, India has a unique opportunity to establish itself as a stable power. The rupee’s marginal decline of only 3 per cent against the strengthening dollar – highlighted in the SBI report – puts India in a favorable position compared to other countries. By stabilizing currency fluctuations and promoting economic growth, the Indian government can secure its role as a leading alternative manufacturing hub, working with ASEAN to take advantage of shifts in global supply chains .
For businesses, strategic regional diversification will be important. With growing trade disruptions and protectionist measures likely to continue, companies should look to regional partnerships and emerging markets such as India and Southeast Asia. Meanwhile, global institutions such as the WTO and IMF will also push to promote the rules-based international order, which now appears even more broken, as unilateral, ad-hoc protectionist policies test the limits of global economic cooperation.
(Deepanshu Mohan) Professor of Economics, Dean, IDEAS, Office of Inter-Disciplinary Studies and Director of the Center for New Economics Studies (CNES) of OP Jindal Global University. He is Visiting Professor at the London School of Economics, and Fall 2024 Academic Visitor to the Faculty of Asian and Middle Eastern Studies, University of Oxford. Sarthak Ojha And Ankur SinghResearch Assistant at the Center for New Economics Studies (CNES) and member of the Infosphere team. This is an opinion piece and the views expressed above are the author’s own. The Quint Neither endorses nor is responsible for them.)
