📰Explained: Why India Worries About a Trade War

Good afternoon, 

Welcome to the best way to stay up-to-date on India’s financial markets. Here’s what’s in today’s newsletter:

• With Trump’s reciprocal tariffs set to take effect on April 2, India stands to be one of the hardest-hit economies,

• Coinbase is making a second push into India’s cryptocurrency market,

• and Bharti Airtel’s agreement with Starlink could significantly challenge Reliance’s dominance.

Then, we close with Gupshup, a round-up of the most important headlines.

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—Shreyas, [email protected]

Market Update.

How A US-India Tariff War Would Hurt India.

With Trump’s reciprocal tariffs set to take effect on April 2, India stands to be one of the hardest-hit economies due to its historically high tariff regime. Despite the warm public rapport between Trump and Modi, India’s status as a "very high tariff nation" has long frustrated US policymakers. The US runs a significant $46 billion trade deficit with India, and Trump views these imbalances as a sign that American businesses are at a disadvantage. With India’s average tariff rate at 17 percent—compared to just 3.3 percent in the US—several key industries, particularly agriculture (39 percent tariff), automobiles, and textiles, could face severe consequences under the new trade policies.

The actual figures: Citigroup estimates that $7 billion (₹609 billion) in Indian exports to the US could be wiped out, particularly affecting farming goods like shrimp, dairy, and processed foods plus jewelry and pharmaceuticals. Remember that farmers are one of the poorest groups in India and would be disproportionately affected. A 25 percent blanket tariff on Indian steel and aluminum will add further pressure on an economy already facing slowing growth, with GDP forecasted to rise by only 6.5 percent in 2025, the slowest in nearly four years.  

In an effort to stave off a full-blown trade war, Modi’s government has slashed tariffs on 8,500 industrial goods, including Harley-Davidson motorcycles and bourbon whiskey, two products Trump has frequently criticized. Further reductions are being considered in automobiles, agriculture, chemicals, and pharmaceuticals. Additionally, India has agreed to take back thousands of Indian nationals living illegally in the US, a key demand from the Trump administration.  

As both nations work toward a broader trade agreement, Trump and Modi have pledged to increase bilateral trade to $500 billion (₹43.5 trillion) annually by 2030 from $129 billion (₹11.2 trillion) right now. The US is also eyeing major defense and energy deals with India, potentially selling F-35 fighter jets and increasing natural gas and oil exports.

The old regime: India’s protectionist trade policies date back to its post-independence era when its economy was structured around self-sufficiency and state-controlled industries. The 1991 economic reforms dramatically reduced tariffs and opened up markets, yet India has maintained high barriers in key sectors to protect domestic champions like Reliance, Tata, and Aditya Birla. Now, these companies are dependent on such tariffs, and under the guise of protecting jobs and nationalistic fervor, lobby heavily to protect them.

The silver lining: Former RBI Deputy Governor Viral Acharya, along with many other prominent economists, has called out India’s tariffs as a net negative on Indian industries: high tariffs force Indian companies to use less desirable materials and produce less attractive products for the global market. Last month, Bloomberg columnist Mihir Sharma wrote that Trump’s tariff threats has at least forced Indian policymakers to take a sober look at how the country’s own trade policies were hampering the nation. A reversal of India’s high tariffs will be a major economic unlock for the nation.

Coinbase Tries India Debut Again.

Coinbase is making a second push into India’s cryptocurrency market, having successfully registered with the country’s Financial Intelligence Unit (FIU). This registration allows the US-based exchange to legally offer crypto trading services in one of the world’s fastest-growing digital asset markets.  

There was a first time? The company’s previous attempt to integrate with UPI in 2022 ended within three days due to regulatory pushback. This time, Coinbase has emphasized its commitment to working "in full compliance with local regulations", according to Coinbase's regional managing director for APAC.  

India’s growing crypto ecosystem presents a massive market opportunity. The country now has the highest concentration of blockchain developers among emerging markets, with its share rising from 3 percent in 2018 to 12 percent in 2023. As a result, India has become a key strategic focus for major crypto firms despite regulatory challenges.  

Those regulatory challenges: India has taken a tough stance on cryptocurrencies, introducing a 30 percent tax on digital asset gains and a 1 percent tax deduction at source (TDS) on all crypto transactions in 2022. These measures caused domestic trading volumes to plummet, forcing many high-frequency traders and market makers to exit Indian exchanges.   

Coinbase still plans to launch its retail trading platform later this year, with additional investments and product offerings to follow. The company is betting that India’s tech-savvy population and booming developer ecosystem will fuel long-term growth in the country’s crypto sector, even amid regulatory uncertainty. With this move, Coinbase is positioning itself to compete with both local and international exchanges, banking on regulatory clarity and market demand to drive its success in India. 

Despite the risks, Coinbase joins Binance, Bybit, and KuCoin in securing FIU registration, signaling that global exchanges still see long-term potential in the Indian market.

Musk Joins Bharti Airtel for India’s Starlink.

Bharti Airtel’s agreement with Starlink could significantly challenge Reliance’s dominance, especially in rural and remote areas where satellite internet has the potential to bridge the digital divide.

Airtel’s strategic move also strengthens its position as a global player in satellite communications. While it already has a stake in Eutelsat OneWeb, partnering with Starlink gives it access to cutting-edge low-earth orbit (LEO) satellite technology, which offers higher speeds and lower latency compared to traditional geostationary satellites.  

From a regulatory perspective, the Indian government faces a balancing act. While attracting investments from global players like SpaceX aligns with Modi’s push for technological advancement and FDI, domestic telecom giants like Reliance Jio have raised concerns about an uneven playing field. Jio’s demand for an auction-based spectrum allocation system — rather than pre-determined pricing — reflects its interest in maintaining a level competitive landscape. An auction still holds risks for Jio, but it is evident that FDI right now trumps domestic competitiveness. 

Meanwhile, SpaceX has already been expanding its Starlink presence in South Asia, with operations launched in Bhutan and impending rollouts in Bangladesh. With the rising demand for internet services in India, especially in underserved regions, this partnership could reshape connectivity options for millions.  

Ultimately, the success of Bharti-Starlink’s collaboration depends on SpaceX securing the necessary regulatory approvals in India. If successful, it could mark a significant milestone in India’s broadband evolution, intensifying competition while improving internet accessibility nationwide.

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Gupshup.

Macro

• Traders selling Russian crude are signing deals with state-owned refiners for April. The booking window has just opened up, and non-sanctioned cargoes are booking deals with India. Normally, oil deals are done two months before delivery but Washington’s sanctions against 161 tankers have led to a tighter delivery window. 

• The RBI is asking all lenders to report offshore interest rate derivative trades. This can include foreign currency swaps, interest rate swaps, and many options trades as well. For the RBI, this increases information flow on how rupees are flowing in and out of the economy. Offshore dollar-rupee trades come in at $46 billion (₹4 trillion) and the RBI is trying to bring them back on-shore.  

Equities

• Ather Energy, an electric-scooter maker, may pursue an IPO in Mumbai at a valuation of $1.2 billion (₹104.6 billion) by March or April. The proceeds will go towards the expansion of sales to gain market share. It would be the second IPO by a pure-play EV manufacturer; the first, Ola, has not gone so well in recent times. 

• IndusInd shares fell 27 percent after the bank disclosed one-time losses in its derivative portfolio. Derivatives were used to hedge foreign currency deposits and borrowings but internal trades have been halted since April 2024. The bank’s shares slumped another 40 percent in 2024 but the bank’s owners are ready to invest into the bank, if need be. 

• Valuations falling are hurting IPO involvement, especially for green tech. Only two listings have happened this year for a $18 million (₹1.6 billion) raise compared to a $2.3 billion (₹200 billion) raise in the back half of 2024. Bankers are now recommending valuations down by 30 percent compared to management expectations, something that limits any potential IPO action. 

• India's metal stocks will likely outperform as China's economy recovers.If the Chinese economy recovers, there will be less dumping into the Indian market and also more exports from India to the globe. If both things happen, metal prices should go upwards again. Potential safeguard duties on the sector could also boost profitability.  

Alts

• TA Associates is selling its majority stake in OmniActive Health. OmniActive was founded in 2005 and focuses on dietary supplements and beverages. The company will likely be valued at around $1 billion (₹87.2 billion). 

• Startups are competing with big tech for Indian talent — just look at Motive hiring 300 people in Bangalore.AI companies are betting on the Indian talent supply with billions being invested into Bangalore in particular. Hundreds of positions are being recruited for in that city alone.  

Policy

• A parliamentary panel is releasing a website to gather suggestions. The goal is to aim for full transparency and inclusivity within the country. This is to help also finetune a synchronized voting calendar to combine state, local, and national elections into one day.  

See you Wednesday.

Written by Yash Tibrewal. Edited by Shreyas Sinha.

Disclaimer: This is not financial advice or recommendation for any investment. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.