Investor choice

Deepak Dwivedi

AMID the ongoing US-China trade tensions, investors are increasingly turning to India as a safer and more promising destination. An April 2025 Bank of America survey shows that 42 per cent of Asia-Pacific fund managers are now overweight on Indian equities, versus 39 pc for Japan and 6 pc for China. This shift is attributed to strong domestic demand, infrastructure growth, and India’s gains from global supply chain realignments. While China is beginning to see some recovery in global trade sentiment, India has emerged as the region’s top investment choice in this period of international trade recalibration.

India’s macroeconomic and geopolitical environment in mid-2025 highlights both its prospects and challenges. The country remains in the global economic spotlight: GDP growth estimates exceed 6 per cent for 2025, with inflation hovering around 4 per cent – reflecting one of the world’s highest growth rates alongside moderate price pressures. This strong footing is supported by a large domestic market and rising manufacturing investment, driven by Government initiatives, such as the Production-Linked Incentive (PLI) scheme. On the trade front, India has emerged as a leading alternative in global supply chains, attracting multinational companies seeking to diversify away from China.

With the US-China tariff war and other protectionist flashpoints shaking up global supply chains, India has emerged as a comparative ‘hiding place’ for investor. Less directly caught up in the USChina tensions, India’s economy has gained from an inflow of diverted capital and enterprise. Multinationals have increasingly adopted a ‘China-plus-one’ strategy – leveraging increasing capacity to mitigate geopolitical risks. India’s investor-friendly policies have capitalised on this momentum. In addition, India’s growth is driven more by domestic consumption than exports, offering a degree of insulation from global trade shocks. While trade tensions have undermined global investor confidence, they have also prompted an investment repricing that has reinforced India’s growth narrative. That said, India is not immune to international trade frictions – higher input costs from disrupted supply chains or a global growth slowdown could still pose challenges. On balance, though, India’s investment environment has benefited from global trade tensions; the country is perceived as an unaligned, dependable choice in Asia.

Even as US-China trade talks make headway – as seen in the partial tariff truce reached at the May 8 Geneva meeting – and investor sentiment towards China begins to soften, the consensus remains that this supply-chain realignment is structural rather than cyclical. Many corporations remain committed to their India strategy despite the US-China thaw, continuing to bet on India’s logistics strengths and strong market potential.

The recent flare-up along the Pakistan border was a déjà vu moment. In earlier decades, an incident such as this might have triggered panic among investors and a sharp market sell-off. This time, however, the tensions, while concerning, had only a limited and short-lived impact on foreign investor sentiment. Markets wavered briefly as headlines reported cross-border fire, but largely reflected confidence that the conflict would remain contained.

India’s economic fundamentals cushion it against such external shocks – strong growth, large forex reserves, and a diversified economy make it more robust than many emerging peers. Even during recent episodes of global banking turbulence and inflationary spikes, Indian equities and the rupee remained steadier than expected, supported by India’s domestic growth engine and sound monetary management.

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