This past week felt like a rude awakening. After months of riding high, India’s equity indices stumbled, the rupee lost ground, and even bonds struggled to maintain their footing as market sentiment took a sharp turn for the worse. Adding to the unease was a surprising rise in the trade deficit, inflation figures that dampened hopes for policy easing, and increasing worries about consumer demand. Just weeks ago, Indian markets were scaling new peaks, with investors confident in their ability to withstand global uncertainties and foreign fund outflows. But as they say, a week can feel like a decade in the world of finance.

Market Mayhem Unveiled

The catalyst for this shift? The return of Donald Trump to the White House. His ‘America First’ agenda, reminiscent of his previous term, signals a potential trade war through tariffs, reduced corporate taxes, a crackdown on immigration, and a diminished focus on climate change. This news has refocused attention on the dependence of emerging markets, including India, on US capital. While we Indians pride ourselves on resilience, Trump’s policies pose challenges for our markets, exchange rate, and monetary policy. Experts like Alan Beattie of the Financial Times and Vivek Kelkar have highlighted the dilemmas facing emerging economies in this new global landscape.

Resilience Imperative Emerges

However, amidst market anxieties, a recent mega-event in India, attended by major investors, corporate leaders, and policymakers, painted a surprisingly upbeat picture of the Indian economy. Reserve Bank of India Governor Shaktikanta Das, a staunch believer in India’s growth story, maintained his optimistic stance. Domestic investors echoed this sentiment, advising patience and long-term investing during market corrections. Yet, anxieties are palpable. Ramesh Damani cautioned about the significant impact of US policies, while Samir Arora of Helios Capital pointed to lacklustre corporate earnings. The underlying message was clear: understand compounding, stay invested, and avoid market timing. The market’s current wobble might be a necessary correction, a recalibration to reflect the real economic picture.

Urban Shield Against Shocks

Beyond market volatility, another crucial aspect of resilience is emerging – urban resilience. Tokio Marine Group’s partnership with the Resilient Cities Network (R-Cities), as reported by Insurance Business Mag, underscores the growing need to invest in cities’ ability to withstand shocks. This collaboration aims to bridge the significant funding gap for urban resilience projects, highlighted by the fact that insured losses from global catastrophes are lagging economic losses by over $100 billion annually. With cities facing increasing climate risks and infrastructure vulnerabilities, public-private partnerships like this are vital to develop innovative financing solutions and empower local governments to build robust urban infrastructure.

Indian Tapestry Strong Threads

India’s economic tapestry, like any other, has its strong threads and weaker patches. While luxury consumption thrives, mass consumption is muted, creating a K-shaped recovery. However, a strong focus on capex-led growth and infrastructure investment offers a counter-narrative. As corporate loan growth outpaces retail lending, it signals a revival in manufacturing and private investment. Historically, such investment has fuelled sustained growth. To navigate the choppy waters of global uncertainty, India needs to reinforce its strong economic threads and address the vulnerabilities. Just as urban resilience is crucial for cities, economic resilience is paramount for the nation. By strengthening both, India can weather the global storms and continue its growth trajectory.

What next for Indian markets? While short-term volatility may persist due to global factors, India’s long-term growth story remains intact, provided we focus on building both economic and urban resilience. The grit of the Indian economy will be tested, but with strategic policy and investment, we can emerge stronger.