Why India Will Emerge Stronger from the Economic & Geopolitical Crossfire

When the world’s two largest economies sneeze, the rest of the globe catches a cold. But right now, India seems to be building immunity. While the U.S. and China juggle layoffs, tariff pressures, and industrial slowdown, India is quietly but steadily asserting its place as the most attractive alternative in global supply chains. That’s no accident and is part of a deeper shift that investors should pay close attention to. To add to the chaos, there appears to be  a concerted attempt to pull down into a geopolitical conflict (post Pahalgam) which India must handle carefully, i.e. take action without getting sucked into something that disrupts its rise.

1. The Post-Tariff Era

The U.S.China trade is beyond tariffs and an attempt to do a reset of global manufacturing dependencies. China, known as the world’s factory, saw companies look elsewhere for diversification. India, Vietnam, and Mexico were prime candidates. But now, with China staring at domestic economic weakness: factory shutdowns, a drop in exports, and a collapsing real estate sector. One can argue that it has a new strategic interest: slowing down India’s momentum.

Recent geopolitical events, like the Islamist terrorist attack in Pahalgam targeting Hindu civilians may not just be a regional flare-up. The Indian leadership’s measured response so far indicates they are keenly aware that economic progress and foreign investment inflows could stall if political instability rises. An unstable India, from China’s perspective, would slow the supply chain migration away from its shores.

2. India’s Focus on Manufacturing

China and the U.S. will eventually return to the negotiating table, but in the meantime, India could benefit if it plays its cards right. Electronics and Manufacturing are a couple of such areas.

Unlike its global peers, India’s macro indicators are holding firm. The Indian government is not just talking manufacturing; it’s walking the talk. A great example is the Electronics Components Manufacturing Scheme, launched by Tamilnadu state. It targets ₹30,000 crore in investments and promises 60,000 jobs. Tamil Nadu already leads India’s electronics exports, clocking over $14.85 billion. This dovetails well with the Union Government’s Semiconductor and Advanced Electronics Policy 2024.

3. Equities: India Pulling Ahead

Globally, stock markets are showing signs of stress. Many U.S. investors are choosing to hold on to cash, worried about slowing growth and ongoing global tensions. Historically, May tends to be a month when U.S. investors lock in profits and 2025 seems to be following the same pattern. The U.S. dollar is likely to strengthen this month, which often weighs on American stocks in the short run.

India, on the other hand, is standing out. The rupee is holding steady. Interest rates remain supportive. And more Indian investors are actively participating in the markets. Together, this makes the case for Indian stocks to do better than many global peers.

We’re especially positive on sectors that match our Roots & Wings stock selection philosophy, like defence, BFSI, and electronics. These aren’t just government-favoured areas; they’re driven by companies with strong financials and clear growth potential.

4. Commodities: Gold Looks Strong, Oil Finds a Floor

Prices of key global commodities like oil and gold are being watched closely. The World Bank expects overall prices to drop by 12% in 2025 and a further 5% in 2026. While they may remain above pre-COVID levels in rupee terms, the global slowdown is clearly reducing demand, especially from China.

India’s coal demand may go up, since renewable energy isn’t yet ready to take on the full electricity load. That means certain coal-related companies could benefit in the short run.

Gold continues to be a valuable asset for portfolios. May tends to be a good month for gold historically, and it could deliver 12–15% returns over the next year. Gold is a good component in a well diversified portfolio since it holds its ground when things feel uncertain.

5. Currencies and the Global Picture

The U.S. dollar is showing early signs of strength. But how much it rises depends on how the U.S. central bank balances inflation control with keeping the economy growing. A stronger dollar usually puts some pressure on currencies like the rupee, but India is better prepared this time. RBI has solid reserves and tools to manage any short-term swings.

That said, if geopolitical tensions rise, we could see short-term volatility in the rupee. But long-term investors shouldn’t get distracted by short-term news, they should focus on economic strength and company fundamentals.

What Should Investors Do

A common question we get is: should I invest now? And our answer is—yes, but invest wisely. Here’s how:

1. Follow the Liquidity Safety Growth (LSG) framework: Balance your investments across liquidity, safety, and growth.
   
2. Use this phase to shift more towards Indian equities if your portfolio is too global-heavy.
   
3. Pick companies with strong balance sheets and steady earnings—what we call the Roots & Wings approach.
   
4. Allocate a part of your portfolio to gold. It’s a reliable buffer when markets turn uncertain.
   

Peter Lynch once said, “Far more money has been lost by investors preparing for corrections than in the corrections themselves.” Waiting for the perfect time rarely works.

Conclusion 

To sum up, the global economy is changing, and India is stepping up. With China slowing and the U.S. facing its own challenges, India is quietly becoming the preferred destination for global capital and manufacturing. This is not the time to sit on the sidelines. It’s the time to reassess your portfolio, rebalance if needed, and ensure your investments reflect the new global direction.