India’s long-term prospects intact, says CEA, brushing aside equity volatility

Within hours of the worst post-Covid crash in the Indian equity markets today led by retaliatory tariff fears, Chief Economic Advisor V. Anantha Nageswaran said that the country’s long-term prospects are intact and that the impact of the likely US tariff measures are speculative at the moment. Nageswaran also pointed out that the tariff impact talks on India are “speculative”, and lower crude prices may offset the trade-related impact on New Delhi.

The tariff fears triggered a massive sell-off in Indian equities, resulting in the benchmark indices wilting by close to 2%. “We talk about uncertainties. But looking at the long-term prospects of the Indian economy, compared with the other places, and looking at the historical track record of the Indian markets, one should not over-interpret the near-term volatility,” said Nageswaran during a media briefing on the third quarter GDP numbers.

That said, he also pointed out that the Indian markets had gone “parabolic” for a certain period. “The India stock market went almost parabolic between July 2024 and October 2024, and those parabolic gains are now currently being unwound in the marketplace. As we speak today, we notice that the US stock market is significantly down, and the Indian market today has reflected that as well,” said CEA Nageswaran.

“Reciprocal tariff impact is speculative at the moment, as far as India is concerned. Since Hon’ble PM has visited the US, both the countries have agreed to negotiate a trade agreement. On specific safeguards, I am not in a position to comment. I am sure that the commerce ministry and the other relevant ministries are working on it,” Nageswaran said.

He also pointed out that any positive development on the Russia Ukraine front may ease oil prices, which may help offset the trade impact on account of higher tariffs. “It is not enough to focus on the fact that the trade tariff measures are dominating headlines. Correspondingly, we are also seeing that the crude oil prices are behaving well from the Indian perspective. A possible end of the war going on in Ukraine and more crude supply coming in to the market, I think the lower energy prices will offset the trade-related impact that may be there, which is at the moment speculative in nature,” Nageswaran added.