India reemerges on investors’ radar amid improved trade alignment with the United States

India is preparing to offer substantial trade concessions to the United States to enhance geopolitical alignment and address trade imbalances, with bilateral trade surpassing $129 billion in 2024. Prime Minister Narendra Modi's upcoming meeting with President Trump aims to capitalize on their strong relationship and explore further collaboration, particularly in counterbalancing China's regional influence. Modi's commitment to repatriate undocumented Indian nationals from the US is part of this strategic engagement, alongside efforts to restore India's preferential trade status under the expired Generalized System of Preferences.

India's focus on financial inclusion and fintech innovation is bolstering its financial, consumer discretionary, and technology sectors, despite challenges like sluggish credit growth and high youth unemployment. Recent budget reforms, including tax cuts, are expected to stimulate economic growth and attract investment, with current equity valuations appearing attractive. In contrast, US stock valuations are perceived as high, with potential inflation posing risks to market optimism, suggesting that broader international exposure, including investments in India, could mitigate volatility.

India's strategy to enhance its export-oriented manufacturing through new free-trade agreements with countries like the UAE, Australia, and EFTA, while excluding the US, is anticipated to significantly boost foreign direct investment. These agreements are expected to improve market access and create a more competitive environment, with projections of substantial economic gains. Given the shared interest of the US and India in countering China's Belt and Road Initiative, there are strong incentives for enhanced cooperation, which could benefit India's economic positioning in Asia.