April 27, 2025

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DONALD DUCKS

VANIJYA BHAWAN, LOCATED RIGHT NEXT TO INDIA GATE AMIDST LUSH GREEN TREES AND A PANORAMIC VIEW OF LUTYENS' DELHI, HOUSES THE UNION MINISTRY OF COMMERCE AND INDUSTRY. IN RECENT DAYS, IT HAS SEEN A FLURRY OF ACTIVITY AS OFFICIALS NEGOTIATE TRADE DEALS WITH OVER 10 COUNTRIES, INCLUDING THE US. THIS COMES AMID US PRESIDENT DONALD TRUMP'S SALVO OF "RECIPROCAL" TARIFFS FOR MOST COUNTRIES. THOUGH PAUSED FOR NOW, IT WARRANTS CLOSER SCRUTINY OF INDIA'S FOREIGN TRADE SITUATION AND A CALIBRATED POLICY RESPONSE. exports were one of the four key engines for the Indian economy outlined by Finance | Minister Nirmala Sitharaman in Budget 2025-26, but trade dynamics have since become the topmost priority for New Delhi in light of an increasingly uncertain global environment and new dynamics that bring in fresh volatility into the mix almost every other dayThe tariffs, announced by Trump on April 2 and put on hold for 90 days on April 9, could trigger a recession in the US if and when they kick in, devastate global trade and economic growth prospects, and cast a shadow even on economies like India that have strong domestic driversFor India, trade and exports have become an increasingly important part of its economy. The country has set a target of reaching $2 trillion in exports by 2030--with $1 trillion each of merchandise and services exports-- as it aspires to become a global manufacturing hub. The share of goods exports is just 12% of the GDP as of now, compared with 20% for ChinaIn recent months, India's commerce ministry, led by Minister Piyush Goyal, has been engaged in a slew of negotiations for free trade agreements (FTAs) with several countries. Negotiations with the UK and New Zealand have also been re-launched with great gusto this year, even as the minister hopes to conclude at least a pact with the European Union this year. At present, India has FTAs with 13 countries, including the UAE, and an interim pact with AustraliaThe sense of urgency was necessitated after Trump returned to the White House on a plank of protectionism that talked of Making America Great Again. Since Trump assumed office as the 47th President of the US in January, he has announced a series of tariff hikes on several items and countries, before finally unveiling his muchtalked-about reciprocal tariffs on

WILL FY26 BEA WASHOUT YEAR?

Bulls had a great run post Covid. Now, it is time for the bears to get a piece of the action as FY26 brings more uncertainty. Though the bulls started losing steam in September 2024, the tariff war started by US President Donald Trump, slowdown in earnings growth, and heavy outflows by foreign institutional investors (FIIs) have intensified the pressure. And volatile global markets are adding to the painThough the NSE Nifty rose for the second straight year in FY25, gaining over 5%, the last few months have brought a litany of bad news. The index fell 15% till April 9, from its 52-week high of 26,277 on September 27, 2024. Nifty Midcap 150 and Nifty Smallcap 250 indices plunged 19% and 23%, respectively, during the period. The Nifty50 tanked nearly 5% in the first seven trading sessions of FY26 till April 9. On April 2, Trump announced tariffs exceeding expectations in scope and severity. Since October 2024, investors on Dalal Street have lost over `80 lakh crore as market capitalisation of all listed Indian companies declined nearly 17% from `475 lakh crore on September 30,2024, to `395 lakh crore on April 8,2025. As we stepped into the new financial year, Trump's reciprocal tariffs worsened the rout. According to DSP Asset Managers, global growth is stagnating, trade is sluggish, and the new tariffs exceed expectations. This combination is likely to further strain global growth. "Weaker economies may struggle to avoid recession. Historically, policy-driven disruptions have led to crashes, often triggering spillover effects," it said in a reportShares of around 1,200 companies have tanked 50% or more while around 2,100 have retreated between 25% and 50% from 52-week highs. Even large-cap shares are bearing the brunt. Tata Motors, Jio Financial Services, Hero MotoCorp and Bajaj Auto dipped nearly 40% from their 52-week highs in FY25. "Our current bull market started in March 2020. We are already into the fifth year. So, it is safe to say that it is over, and we are now in a bear market, which will last for several months or two-three years," says Shankar Sharma, Founder, GQuant InvestechThe selling has been relentless. FIIs sold shares worth `2.16 lakh crore between October 1, 2024, and March 28, 2025, compared to an inflow of `90,040 crore in the first half of FY25. In April, they have sold shares worth `27,088 crore till April 9. One of the biggest reasons for the exit of FIIs was the relative attractiveness of Chinese equities, which became significantly cheaper after prolonged underperformance, say market experts. Another was reduction in the relative appeal of Indian assets as the US dollar strengthened against the rupee. A weaker rupee erodes FIIs' dollar returns and increases capital outflows. Simultaneously, rising US bond yields provided FIIs an attractive fixed-income alternative, prompting a shift from emerging market equities to safer,