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US Tariffs Shift Indian Businesses Globally
13 Feb
Summary
- US tariffs on India caused rupee weakness and higher outbound investment.
- Businesses relocated to Vietnam, Mexico, and the US to access the US market.
- India's rupee is a strong performer since the millennium despite recent dips.
India's Chief Economic Advisor, V. Anantha Nageswaran, has confirmed that a significant 50% tariff imposed by the United States on India led to a weakening of the Indian rupee. This trade measure also spurred increased outbound investment from Indian businesses.
Nageswaran explained that these high tariffs compelled companies to seek lower-tariff jurisdictions. Consequently, businesses began relocating production and operations to countries such as Vietnam and Mexico, which offer proximity to the US market. Some firms even shifted operations directly to the United States.
This strategic shift has led to discussions about an "India Plus One" approach for manufacturers, mirroring the "China Plus One" strategy aimed at diversifying supply chains. The CEA noted that such a tariff escalation posed an "idiosyncratic risk" to India's economy. He also highlighted that the Indian rupee, despite recent weakness, has been a strong performer among emerging market currencies since the millennium and has remained stable post-COVID.
