August 11, 2025

India is grappling with a huge trade deficit of over $250 billion, second only to the United States, says Nilesh Shah, MD of Kotak AMC. The country’s big challenge? US has slapped a whopping 50% tariff, practically a trade embargo on Indian goods. "Our companies in textiles, chemicals, auto parts and aquaculture must discover new markets," Shah warns. India's fight is tough but not hopeless. Shah suggests turning this deficit into an opportunity. How? "By giving access to the Indian market, we should push for opening local markets abroad for Indian products," he adds. India's huge spending on travel and education—like the 1.7 million Indians who visit America yearly—can be used as a powerful tool to open new doors. But what about the frightening market slide? India's stock index has dropped for six straight weeks, with foreign investors pulling out funds. Shah says, "Strike at the root of the tree and branches will fall. Let us focus on the economy, the market will handle itself." He urges India to quickly push exports to other countries, stimulate the home economy using tax cuts, GST rationalization, and make it easier for businesses to work. On the tech front, Shah highlights India’s big need for self-reliance: "We must focus on becoming 'atmanirbhar' in R&D and technology." While this won’t happen overnight, a clear road map is essential for long-term success. Looking ahead to company earnings, Shah admits growth has slowed—now around 7-8% instead of past double digits. But it’s not all gloomy. He says, "FY26 is a year of consolidation, and we expect Nifty's earnings per share to be around Rs 1,100 to Rs 1,125." The festival season may bring some sparkle back. In Shah’s view, profits alone don't promise good stock returns. Valuations must stay strong too. If earnings rise but valuations drop, investors won’t gain. Amid complex times, India’s focus on trade strategy, economic stimulus, technology, and steady earnings could light the path forward. As Shah sums up, "Let us hope for the best but prepare for the worst."

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Tags: Trade deficit, Nilesh shah, India exports, Us tariffs, Domestic economy, Earnings growth,