The Indian startup ecosystem is optimistic about improved US-India business ties and increased venture funding as Donald Trump takes office as the 47th US president.

Impact of Trump’s Policies on Funding

In 2021, US Federal Reserve’s low-interest rates during the pandemic helped Indian startups secure a record $36 billion in funding. However, as interest rates rose to combat inflation, funding fell to a seven-year low of $8.8 billion in 2023.

Trump’s anti-China stance could make India a preferred destination for long-term investment funds. Sanjay Swamy, Partner at Prime Venture Partners, noted, “American funds are cautious about Chinese tech investments; some capital may shift to India if our policies remain stable.”

Tax and Policy Clarity

Indian startups registered in the US expressed relief over Trump’s win, avoiding potential tax hikes proposed by Kamala Harris. Groww has already reversed its holding entity to India, with Razorpay and Meesho following suit. A unicorn founder stated, “The risk of higher US taxes is less imminent under Trump, easing reverse flip concerns.”

A New Delhi-based venture capital partner added, “Republican control across the White House, Senate, and Congress will likely bring tax cuts, benefiting companies and large funds.”

Concerns Over Inflation

While Trump's policies may spur investments, his protectionist stance could increase inflationary pressures, leading to potential rate hikes by the US Federal Reserve. A venture partner warned, “Inflation from Trump’s policies could impact US and Indian investments alike.”

Shift in Global Investments

Trump’s expected slowdown in investments in China’s AI and semiconductor sectors could benefit India. Prateek Mehta, Partner at South Park Commons, stated, “There may be reduced reliance on geopolitically sensitive regions, potentially favoring India. However, these shifts will require sustained efforts beyond Trump’s presidency.”

Source: Economic Times