Exports to feel the pinch of American rates, Domestic plays a safer bet: Rajeev Agrawal

Since the deadline of 27 August starts for American rates on Indian goods, investors and exporters are braced for the road that lies in front of us. Although the Trump government had previously provided assistance to the European Union and others, India was omitted. Trade discussions planned before 25 August were postponed without a new date, making little room for last-minute negotiations.

“This situation is somewhat different from what we saw with other countries,” Rajeev Agrawal from Doorarshi India Fund told ET. “After a certain point there was really not much dialogue between India and the US. What was decided weeks ago just happened, and markets have already seized this. I don’t expect a big knee shock reaction tomorrow.”

Which sectors could the heat feel?

The rates are expected to become the most difficult the export-heavy industry. “Textiles, automatic components, metal components, agri products and the export of shrimp will probably be influenced,” said Agrawal. “Finding new markets is possible, but it takes time. Although part of it is priced, because figures start reflecting deterioration, the markets can respond further.” In contrast to domestic targeted sectors, it can prove to be more resilient. “Infrastructure, banking and capital markets must continue to do well. The government will try to stimulate the domestic economy to dampen the tariff bladder. Stock opportunities are more in domestic plays,” he added.

Is an auxiliary window possible?

According to the chance that a 90-day assistance from Washington, Agrawal was less hopeful. “Where the US has offered such windows, it was bound by strategic leverage, for example China and rare earths. At this stage it is not clear what India could offer in exchange for this. Without a high level, I will not see much room for such a window.”

Can reforms soften the blow?

The tariff role coincides with expectations about the reforms of GST 2.0 in India. “GST 2 reforms must be rolled out by Diwali, but the real question is how much of what is expected will actually be delivered,” said Agrawal. “In addition to GST 2.0, the government has suggested additional reforms. If they occur, India’s domestic GDP can get a strong push. In that case, the long -term tariff effect may not be so harmful.”

For now, exporters will be the victim, but wider markets can find balance in a domestic growth batum conducted by reforms.