Can Musk make it worse for India?

This report comes from this week’s CNBC “Inside India” newsletter, which brings you timely, insightful news and market commentary on the up-and-coming powerhouse and the big companies behind its meteoric rise. Like what you see? You can subscribe here.

Recent rumblings from Washington indicate that the tariffs are unlikely to be broad. Scott Bessent, the hedge fund billionaire and Trump’s pick for Treasury secretary, is expected to outline his vision for US trade policy today during his term Senate confirmation hearing which reinforces the idea of ​​targeted duties.

Yet another billionaire – Elon Musk – is likely to have a huge influence on US trade policy with China, which could be detrimental to India’s economic growth.

Musk, as a leader Teslait has huge economic exposure to China through carmakers and will want trade policy between the two superpowers resolved as soon as possible rather than allow tensions to rise.

There is also the possibility that the Chinese government sees Musk as an operator who could help ease tensions between Beijing and Washington. China is now reportedly considering a plan to have one Musk, who also owns social media platform X, is taking over TikTok’s US operations so that the application is not effectively banned. TikTok has denied the reports and said it will not sell its US business.

While Musk is not the only one with business interests in China, he is among the incoming president’s inner circle of close advisers and could potentially play a key role in a US-China trade deal.

“It would undoubtedly be a negative outcome for India if the US brokers a deal with China,” said Gaurav Narain, portfolio manager at the London Stock Exchange. Capital Growth Fund of India. “Companies are clearly exploring alternatives to China, which represents a significant opportunity for India.”

“However, if a deal is brokered, the urgency to find an alternative would disappear as China remains more cost competitive and boasts a full supply chain,” Narain added.

The Tesla boss has also previously spoken publicly about his problems with India’s “by far the highest tariffs in the world” on car imports. Far from supporting India, Musk, who now has Trump’s ear, could reignite trade tensions between India and the US over Indian import tariffs.

In an attempt to woo Musk and partially distract from its own tariff policy, the Indian government has temporarily lowered import duties on electric vehicles to 15% in 2024, after keeping them at 100% for more than a decade.

However, economists suggest that Trump has surrounded himself with enough China hawks that even when a trade deal is struck, it will only cause companies to delay their transition out of China, rather than stopping it altogether.

“I think it’s possible that the flow of that investment (into India) is slowing because companies are looking at it and thinking, ‘Oh, we’ve got four more years,'” said Michael Langham, India economist at asset manager abrdn. . “I don’t see companies thinking so short-term that they don’t plan ahead for what is a longer-term trend, which is the diversification of supply chains.”

Others have also suggested that, in addition to the trade tariffs imposed by Trump during his first administration, the Covid-19 pandemic has also contributed to the corporate strategy of moving away from China.

“I think the reasons why companies are moving their supply chains are much deeper and therefore likely to continue,” Sonal Varma, chief India economist for Nomura, said in an interview with CNBC in late December. “The trade imbalance between the US and China, I think is a small part, is actually the bigger problem,” Verma added.

There’s also evidence that Musk hasn’t always gotten along with Trump either.

The Tesla boss endorsed Howard Lutnick, CEO of investment bank Cantor Fitzgerald, as his choice for Treasury Secretary. Yet Trump instead chose billionaire hedge fund manager Bessent to head the US government’s Treasury Department.

Slowing Inflation in India. Inflation in India in December amounted to 5.22% on an annual basisstates the Ministry of Statistics and Program Implementation. The reading was lower than the 5.30% forecast in a Reuters poll of analysts, with inflation slowing for the second straight month. Softer inflation readings open room for RBI to cut rates, amid slowing growth in the country.

China may be delaying exports to India. Shri S. Krishnan, Secretary of State, Ministry of Electronics and Information Technology said on Tuesday that the government has received feedback from industrial companies, such as Foxconn, that capital equipment was retained in Chinese ports several months. China has not announced any official restrictions, but the move could be made informally by Beijing, Krishnan said.

The Indian government sees no problems with the supply of currency or oil. The Indian rupee has depreciated against the US dollar this week, but the government has enough foreign reserves to prevent any excessive currency changesgovernment sources said. The government is also confident that India will not experience shortages or spikes in oil prices after the US imposed it new sanctions on Russian oilof which India is one of the largest customers.

Using options to get returns from India. The Indian economy is currently experiencing a slowdown. However, its growth prospects, according to United Nations forecasts, are still strong compared to other global markets. One of the best ways to play in the Indian market can be with optionsaccording to the chief strategist of an investment company. (For subscribers only)

Indian stocks seem to be recovering from a terrible start to the year. The A great 50 the index is down 0.5% so far this week, but has been on an uptrend over the past few days. The index fell by 1.41% this year.

The benchmark 10-year Indian government bond yield briefly rose 10 basis points over the past week but fell to 6.75% on Thursday.

On CNBC TV this week, Neelkanth Mishra, chief economist at Axis Bank, said the Indian rupee was facing a problem of “excessive stability”. In the past two years, rupee volatility was more limited than in other world currencies, Mishra said. That’s because the Reserve Bank of India has had a policy of stabilizing the currency — and could keep that stance “much longer than perhaps necessary,” according to Mishra.

Meanwhile, Sumeet Jain, senior research analyst at CLSA, told CNBC that valuations of Indian IT sector names “have been under attack for the past two years despite declining earnings.” Nevertheless, Jain is “cautiously optimistic” about the sector as India’s macroeconomic conditions are on the upswing.