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This is causing worry among several state governments, with officials telling ET that companies are holding off on finalising large investments as they await clarity on Trump’s policies after his inauguration as President on January 20. Several of them also expect the Trump administration’s policies to favour India over China and see it as a positive for Indian businesses.
“There is too much uncertainty right now,” one person from a large electronics manufacturing services firm said. “Any further investment into India is on hold until we get clarity on what Trump’s policies will be,” the person said. “We are also heavily reliant on our clients and their strategy to base our next moves and at the moment our clients are not wanting to commit to anything further as they may have to set up more factories in the US. We will ultimately go where the client wants.”
On the other hand, there are companies that are scurrying to diversify away from their large operations in China and are looking to increase their investment in India, but foresee several hurdles.
“Trump coming in means that there will be a tacit understanding that American companies should diversify away from China,” said an executive at an American insole firm based at Ambur near Chennai. “This is great news for India, but it is not going to be easy. We are keen to double down on our India presence but unlike China, raw material procurement is a challenge here. The demand is there but the scale of operations and the supply are big hurdles.”
Experts too believed that Trump’s second term brings with it heightened uncertainty, which is making companies jittery. However, they were quick to add that India will benefit eventually from the strained Sino-US ties.
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“There are huge amounts of uncertainty because Trump has won the House and the Senate – something that has never happened before,” Bob O’Donnell, founder and chief analyst at TECHnalysis Research, told ET. “There are expectations that he will bring in very dramatic changes but there’s still unquestionably demand in India and US companies will look to expand their reach in India. With more bad blood between the US and China, theoretically India wins.”He added that it would not be surprising to see companies like Apple doing some more manufacturing in the US through partners to cater to the domestic market.
“The tariff question is the big one that companies like Apple have to face,” he said. “They may move some manufacturing for the US market closer home but the only way to avoid tariffs in India is to build in India, so they are going to want to build some factories in India as the market opportunity grows.”
Short-term concerns, but net positive
Officials at some states said investments are getting delayed as companies go back to the drawing board and chalk out contingency plans.
Officials from two states confirmed that companies, especially American firms or those that had heavy exposure to American companies as clients, were playing the ‘wait and watch’ game at the moment.
“We were in talks with several American companies for very large investments but right now they are hitting pause,” one official from a South Indian state told ET. “They are waiting for more clarity to emerge before they pump in more money. They are bullish on India, but they just want to know what the lay of the land is before committing to invest more here.”
An official from a North Indian state said while it would be incorrect to say that companies were hesitant to invest in India, it was more that they wanted to be cautious about how Trump’s administration was going to view investments in India before they greenlit their plans.
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