New Delhi: The recent additional tariffs of 25 percent that were slapped on India by the US administration will test Indian markets in the near term, however, the domestic economy and market remain a strength for India in an uncertain global environment, said Jim O’Neill, former UK Commerce Secretary and ex-chairman of Chatham House.
The 50 percent imposed tariffs were a major shocker, and they came as a major surprise. Nobody thought this is how things would end up for India, O’Neil said while speaking to ET Now.
Futuristically, O’Neil cautioned that inflation and interest rate risks in developed countries remain a concern for global markets. Indian markets are hopeful, however, there exist some challenges and temporary shocks in the short term. The challenge for India is to absorb the temporary tariff pressure while significantly continuing to boost its economy through domestic consumption and sustained demand.
He said that global markets are influenced by the AI boom, especially the kind of growth that we witnessed in NVIDIA, which has made markets too relaxed and lax despite the existence of immediate major risks from tariffs and global inflation.
US Stocks to underperform
While commenting on the US stock market performance, O’Neill said US equities may underperform than the rest of the world throughout this decade as Trump policies are harming the country’s growth prospects and its equity market.
Trump is letting the American dollar weaken and is causing the erosion of institutional dominance of the US economy through his tariff tirades. Therefore, this is forcing countries like India to rethink alliances and rely more on their domestic and regional growth, he said further
Positive Outlook for Indian stock market
On the Indian front, O’Neil said the correction that came in Indian markets this year is much required and is healthy because the Indian market was showing signs of excess, especially with the surge in equity derivatives. The much-needed underperformance in stocks makes the valuation more reasonable.
He further added that India’s economy offers much-needed hope as it is inward-looking and making itself Atamnirbhar, especially when the ideals of globalization are now being discarded. “India has the natural advantage of being driven largely by domestic demand. If Prime Minister Modi’s outreach to Beijing produces even small positive shifts, it could add a new dimension to India’s long-term story,” O’Neill said during the interview with ET Now.