The rupee could decline by 8-10% against the U.S. dollar during Trump’s second term, according to an SBI research report, with the Indian currency recently hitting a historic low on November 11, 2024. Titled U.S. Presidential Election 2024: How Trump 2.0 Impacts India’s and Global Economy, the report suggests the rupee may experience a temporary depreciation before stabilizing.
Trump’s return to office is seen as a catalyst for select markets, but attention is shifting to broader economic effects and potential realignments in supply chains. According to the report, Trump’s administration presents both challenges and opportunities for India. While short-term risks like increased tariffs, a strong dollar, and potential restrictions on H-1B visas could create market volatility, there are long-term benefits for India, such as expanding its manufacturing sector, diversifying export markets, and enhancing economic independence.
The report notes that while the rupee could weaken, this may be beneficial for export sectors like textiles, manufacturing, and agriculture. However, depreciation could also increase import costs, especially for commodities like oil, with minimal inflation impact projected.
In addition, the report anticipates that foreign direct investment (FDI) patterns may shift, as India is now receiving FDI in diverse sectors such as renewable energy, maritime transport, and medical equipment. The Trump administration’s potential for H-1B visa restrictions could also impact Indian IT firms, potentially raising costs as companies may need to hire locally in the U.S.
SBI’s analysis concludes that while the rupee may experience fluctuations, it is unlikely to face extreme depreciation, and India’s broader economic base may provide resilience amidst the evolving U.S.-India economic relationship.
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