Global firms can’t ignore India’s middle class boom, says Milken Institute economist

India’s growing middle class makes it impossible for global companies to look away, even as US tariffs weigh on trade, said William Lee, Chief Economist and Executive Director at the Milken Institute.Lee noted that India’s role as both a massive consumer market and a credible alternative to China in supply chains ensures it will remain central to global business strategies.

While he believes some goodwill between New Delhi and Washington had been lost, India continues to hold a special status for global supply chains.

“India is still a very special country. It is the alternative to China for production. It is a marketplace that is a growing marketplace that every company wants to be in,” he said.On tariffs, Lee said India may need to take a pragmatic approach. “Smart thing to happen next would be to find the exemptions. Tim Cook found exemptions. Jensen Wong found exemptions. And I think going forward, there will be circumstances whereby important sectors of the Indian economy will find exceptions,” he noted.

Lee also highlighted the importance of integrated economic ties, stating that future investments should focus on industries in India that complement developments in the United States, particularly in technology and pharmaceuticals.

Prashant Paroda, Portfolio Manager for Emerging Markets at Allspring Global Investments, agreed that some of the additional 25% tariffs could prove temporary, depending on progress in Russia-Ukraine talks. He said India should aim for “outside of the box” strategies to lower the effective rate closer to 20%.

Also Read | ‘This will break our backs’: Exporters warn 50% US tariff will wipe out margins, cripple trade

Paroda believes the Federal Reserve looks set to ease as the labour market softens. “I think we should expect to see cuts,” he said. Upcoming inflation data and jobs numbers in September, he added, will be key in determining the pace of those cuts.

Also Read | September Fed rate cut uncertain, market ‘melt-up’ risks ahead: Ed Yardeni

For the entire discussion, watch the accompanying video

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