Why India can be a big winner of Donald Trump 2.0 era if it plays its cards right

India is in a sweet spot - it’s the world’s fastest growing major economy - and at a time when the global economy is reeling from US President Donald Trump’s tariff uncertainties, India is being looked at to seal a favourable trade deal soon. This confidence is reflecting in global funds pouring money back into India.Even though the IMF has revised its GDP growth forecast downwards for India to 6.2%, it has taken note of the relative stability of the economy in an era of global turbulence."For India, the growth outlook is relatively more stable at 6.2 percent in 2025, supported by private consumption, particularly in rural areas, but this rate is 0.3 percentage point lower than that in the January 2025 WEO Update on account of higher levels of trade tensions and global uncertainty," IMF said in April. Despite the added uncertainty on account of tariff war unleashed by Trump globally, India is set to become the fourth largest economy in the world this year, overtaking Japan.This week the NSE Nifty 50 index reached its 7-month peak, driven by positive sentiment following Donald Trump's remarks about a potential US-India trade deal. Trump mentioned that India has "offered us a deal where basically they are willing to literally charge us no tariff" on US goods. He did not elaborate on the specifics of this purported offer.Commerce Minister Piyush Goyal will travel to Washington from May 17 to engage in discussions with US officials about the proposed bilateral trade agreement. The Commerce and Industry minister's four-day visit includes planned meetings with US Trade Representative Jamieson Greer and commerce secretary Howard Lutnick to explore avenues for progressing the agreement.Indian Markets Bounce BackWhy is India ‘hot trade’ again?"India can be a big winner of Trump 2.0 if it plays its cards right," Trinh Nguyen, senior economist at Natixis in Hong Kong has said. "India does offer both high yield in bonds and decent return on capital for equity investors,” Nguyen told Bloomberg.Also Read | Donald Trump warns Apple about ‘Make in India’, will Tim Cook-led iPhone maker listen?India's appeal to investors stems from its position as a relatively stable option during global trade uncertainty, attributed to its domestically focused economy. Additionally, India's lower exposure to US tariffs compared to Chinese imports makes it an attractive alternative for companies such as Apple Inc.International investors are directing huge capital into India, facilitating major corporate funding arrangements, as investors anticipate India's potential success amidst Trump's tariff tantrums.Indian businesses are capitalising on this momentum, with Shapoorji Pallonji Group securing a $3.4 billion private credit arrangement and Reliance Industries Ltd. obtaining a $2.98 billion-equivalent loan. This highlights global investors' growing interest in Indian corporate debt.This renewed interest stems from several positive economic factors. The government aims to capitalise on a unique opportunity to strengthen India's position in global supply networks. Additionally, the Reserve Bank of India's accommodative policy stance is bolstering market confidence, with bond yields at their lowest in over three years. RBI has already cut repo rate by 50 basis points in this calendar year, with experts expecting more cuts this year.Also Read | The real reason India’s getting tough on Donald Trump’s trade termsThe sentiment transformation has been swift among worldwide fund managers, including those from Franklin Templeton and Federated Hermes. According to a recent BofA Securities survey, domestic equities have become the top choice for Asian fund managers investing across the region."Amid global trade uncertainties, India's large domestic market, ascending middle class, and prospects of a trade deal with the US will help spur global investors' interest in Indian credit," said Wei Liang Chang, macro strategist at DBS Group Holdings Ltd.Despite positive indicators, certain challenges persist. The recent escalation in tensions with Pakistan highlighted the geopolitical vulnerabilities that could affect Prime Minister Narendra Modi's infrastructure development plans, which require substantial foreign investment across various sectors including solar energy and transportation.Nevertheless, at present, the investment community maintains its attention on India's positive economic trajectory.Also Read | Big achievement! India to become 4th largest economy in 2025 overtaking Japan; will be 3rd largest by 2028