Anand Mahindra, chairman of Mahindra & Mahindra Ltd., poses for a photograph at the World Economic Forum (WEF) in Davos, Switzerland (Photographer: Simon Dawson/Bloomberg)  

Anand Mahindra Says India Can Stand Tall In A Trade War

India need not worry about a potential trade war as its large domestic economy can easily weather such shocks, said Anand Mahindra.

“Not sure why Indian markets seem so perturbed by the threat of global tariff wars,” Mahindra, chairman of the Mahindra Group, tweeted. “Small, export-focused countries stand to lose. Countries with large domestic economies can easily withstand tariff threats. The world needs access to the fastest-growing large economy.”

India’s benchmark indices have been volatile this month, tracking global peers, with U.S. President Donald Trump set to impose tariffs on imported steel and aluminium. The European Union has threatened to impose a 25 percent retaliatory tariff on everything from jeans to whiskey and even the iconic Harley Davidson bikes. Even China, which Trump branded as a “strategic competitor” has warned of a “justified and necessary response”.

The head of the $19-billion automobiles-to-software group said India is a free market economy with the ability to access capital and technology from around the globe to fuel its own startups. Even multi-national firms want in on India's growth prospects and for that they will manufacture locally, he added.

Data available from the U.S. government shows that India ranks ninth on the list of trading partners which run a surplus. That means India exports more to the U.S. than it imports. The top items shipped to the U.S. from India include diamonds, pharmaceuticals, apparel and fish.

When it comes to the steel and aluminum, the direct impact on India is minor. Less than one percent of the steel manufactured in India is exported to the U.S., according to a recent Morgan Stanley report. Any rerouting of steel exports from other countries to India is unlikely and the strong steel demand in India can absorb any amount of extra supply, it added.

The risk for India comes from counter measures that other countries may undertake, impacting metal prices outside the U.S., Morgan Stanley said. “However, with safeguard duty still in place and domestic steel prices at a discount to global steel prices, a potential increase in steel imports into India is unlikely.”

Even for aluminum, India only ships 2 percent of its total exports to the U.S. That's not “meaningful to significantly weaken the outlook” on aluminium, according to a Kotak Institutional Equities report.