Mon Nov 11 14:13:57 UTC 2024: ## Rupee Poised for 8-10% Depreciation as Trump 2.0 Takes the Helm: SBI Report
**New Delhi, November 12, 2024:** The Indian Rupee is expected to depreciate by 8-10% against the US Dollar during Donald Trump’s second term as President, according to a research report by the State Bank of India (SBI). The report, titled “U.S. Presidential Election 2024: How Trump 2.0 Impacts India’s and Global Economy,” predicts short-term volatility in the Indian currency, potentially leading to a brief depreciation followed by an appreciation.
The report notes that while Trump’s victory presents both challenges and opportunities for India, the potential for increased tariffs, H-1B visa restrictions, and a strong dollar could lead to short-term market disruptions. However, it also emphasizes that India has long-term incentives to expand its manufacturing, diversify export markets, and enhance economic self-reliance, which could ultimately benefit the country.
The SBI report acknowledges that a stronger dollar could initially result in short-term capital outflows as investors seek dollar-based assets. However, the report also highlights that a weaker rupee could provide an export advantage, potentially boosting revenues in sectors like textiles, manufacturing, and agriculture.
The report further suggests that India may see shifts in foreign direct investments (FDIs) during Trump’s second term. While Trump’s first term saw significant regulatory changes aimed at attracting investments back to the US, India is no longer dependent on traditional sources of FDI inflows. The report highlights the growing influx of FDI in new sectors like non-conventional energy, sea transport, medical and surgical appliances, which could offset any potential decline in FDI flows in traditional sectors.
The SBI report also expresses concerns regarding potential limitations on work visas, particularly the H-1B visa program. This could lead to increased costs for Indian IT and ITeS sectors due to decreased labor mobility and the need to hire locally in the US at higher costs.
Despite the potential challenges, the SBI report emphasizes that the fear of a sharp rupee depreciation is unfounded. During Trump’s first term, the rupee depreciated by 11%, less than during the Biden administration. The report also states that a 5% decline in the rupee would only increase inflation by 25-30 basis points, suggesting a minimal impact on inflation overall.
The report’s findings highlight the complex and evolving economic landscape under a Trump 2.0 presidency, with potential for both opportunities and challenges for India.
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