Trump’s trade policies to have minimal impact on India: Nomura

The Dollar Business Bureau 

Nomura, the Japanese financial holding company has played down the impact of US President Donald Trump’s protectionist trade policies as it projects the Indian economy to see only 10 bps hit on GDP at 6.8% in 2017.

The Nomura Group, however, was quick to add that Trumpnomics is likely to impact the domestic software exports, as 86% of H1B visas have been taken up by Indians.

"We expect this hit on growth to be only transitory, as remonetisation, wealth re-distribution and lower lending rates should result in growth returning to above 7% from the second half of 2017," Nomura said in a report.

Nomura had earlier projected the country’s GDP growth to decline to 6.9% in 2017 from 7.1% in 2016 due to the government’s demonetisation scheme.

“We currently project the GDP growth to slow to 6.9%  in 2017 from 7.1% in 2016, largely reflecting a weak first quarter owing to demonetisation, followed by a sharp V-shaped recovery in second half of 2017," Nomura said.

Nomura expects GDP growth to fall marginally to 6.8%, mainly because of weaker trade volumes and tighter financial conditions, emanated by Trump’s foreign trade policies and supplemented by global inflation, US’ tighter immigration policies and noted escalation in global tensions.

Among other risks, across-the-board tariffs, targeted tariffs on specific imports, border taxes, incentives to US firms, deportation of illegal immigrants and reducing the inflow of new ones would also hinder the global growth.

Trump plans to increase H-1B minimum salaries, give job preference to Americans, limit the issuance of green cards and do away with H-1B extensions.

"The US accounts for about 15% of the country's goods exports, which is a paltry 2% of US imports. A border tax or an across-the-board tariff increase could hurt the country's major exports to the US such as pharma, textiles, gem & jewellery and auto products,” the financial major said, referring to future India-US trade outlook.

Nomura noted that geopolitically, Trump would most likely favour India as it sees that a nuclear India is a real check to Pakistan.