While many may have breathed a sigh of relief following the withholding of tariff imposition by the US and found respite from fears of an impending recession in global markets, Keki Mistry, veteran banker who sits on the boards of several leading institutions, including the HDFC Bank, points to factors that run in favour of India when discussing trade tariffs. “In my opinion, the Indian markets are very strong and I do not think we need to worry. Personally, if I was looking at investing, I would think this is a good time to invest for the long-term” even as there is short-term volatility.
To him, the net impact of trade tariffs on India would not be huge because India was still not a large exporter and that the India story was largely a story of “domestic economy. So long as we are able to continue creating jobs for the young people fresh out of college campuses each year, our economy will keep on growing,” he said.
On the markets and their reaction, he said, “the markets are overreacting but then they always overreact when there is uncertainty.”
Seeing good reasons why “we need to look at ourselves not in isolation but on a relative basis,” he felt, the discussion on tariffs “has been overblown.” While the tariffs have been held back at the moment, to Mistry, a quick back-of-the-envelope calculations show that “the reality of the matter is that the exports are not a very large part of India’s Gross Domestic Product (GDP). Given that they are 21 per cent of the GDP and within this, the exports to the US at only 17 per cent of the total exports meant that the direct impact to India’s GDP would be 40 to 50 bps (basis points).” But then, he sees room to take comfort in the fact that “this will be offset by the fact that oil prices have come down. In addition, the Reserve Bank of India (RBI) has also now infused liquidity into the system. Adding it all up, his reading of the numbers and their implications suggest: “The slipping oil prices would help by 10 bps and the liquidity infusion adding another 10 bps to the GDP. So, to him, “the net impact to the GDP will not be more than 25 to 30 bps.”