India's FDI Resilience Amid Possible Shift Under Trump 2.0, Says SBI Report

New Delhi: As the prospect of a second term for Donald Trump looms, foreign direct investment (FDI) strategies worldwide could undergo major shifts, with potential impacts on emerging economies, including India. According to a recent report by the State Bank of India (SBI), although Trump’s "America First" policies may prompt some FDIs to favor the U.S., India’s inflow of foreign investments is expected to remain resilient due to recent diversification into new sectors. 

FDI Shifts Likely But Impact on India May Be Limited 

The SBI report notes that during Trump’s first term, his administration implemented significant regulatory changes designed to attract global investments back to the U.S. These moves, referred to as "Trump 1.0 policies," caused global shifts in FDI, with some emerging markets experiencing reduced inflows as investments concentrated in the U.S. However, the report argues that India’s economy has adapted in ways that may insulate it from similar impacts if Trump returns for a second term, referred to as "Trump 2.0." 
The report suggests that if Trump’s second term leads to policies aimed at redirecting investments back to the U.S., India’s increasingly varied FDI sources and expanding range of sectors could serve as a cushion against significant disruptions. 

Diverse Sectors Cushion Against Traditional FDI Dependency 

One of the key strengths highlighted is India’s shift away from dependence on a limited range of FDI sources and sectors. Unlike a decade ago, when a few industries, such as IT and telecommunications, attracted the bulk of FDI, India now sees increasing investments in renewable energy, transportation, healthcare, medical devices, and digital infrastructure. According to the SBI report, nearly a dozen emerging sectors are attracting significant FDI interest, which could help balance any potential drop in traditional industries if U.S. policies shift. 
The report highlights that India's broad mix of FDI-attracting sectors equips the country to handle potential slowdowns in specific industries and to take advantage of changing global investment flows. 

Opportunities for India Amid Potential Policy Changes 

While Trump 2.0 could present fresh challenges, the SBI report also suggests that such challenges could spur India’s domestic growth and self-reliance. The report hints that any restrictive trade policies, such as increased U.S. tariffs or stricter H-1B visa regulations, could encourage India to boost its manufacturing capabilities and diversify its trade relationships. This aligns with India’s ‘Atmanirbhar Bharat’ initiative, aimed at building a self-sustaining economy. 
The report emphasizes that although heightened tariffs or tighter H-1B visa restrictions could create immediate challenges, these shifts could also serve as catalysts for India. 

Resilient Trade Relationship with the U.S. Offers Support 

Despite prior tariffs under Trump’s first term, India has managed to maintain a merchandise trade surplus with the U.S., signaling that Indian exports remain competitive and adaptable. SBI’s report underscores this resilience, suggesting that India could strengthen this trade relationship further by targeting emerging sectors and moving beyond its dependence on established industries. 
With India’s trade and FDI outlook remaining positive, the report concludes that monitoring U.S. policy developments closely and fostering resilient economic strategies will be essential for India to navigate any potential volatility. 
In summary, while Trump’s possible return to office might prompt certain FDI shifts globally, India’s diversified FDI sources and expanding sectoral landscape are expected to provide stability and resilience.