Global trade volatility, while detrimental to India's short-term growth prospects, could also catalyze needed reforms, HSBC Global Research said in a Thursday note.
Potential US tariffs could prompt India to slash its own tariffs, attract regional foreign direct investment (FDI), expedite trade deals, and enhance the rupee's flexibility, according to the research firm.
High import tariffs along with weak FDI in mid-to-low tech sectors have constrained India's export potential over the past decade, HSBC said.
This was in contrast to the country's "high growth" period between fiscal years 2001 and 2010, when lower tariffs fueled export expansion.
Although India has excelled in services exports, replicating this success in goods trade requires reforms to "run deep," HSBC said.
The research firm also pointed to the potential of attracting FDI in labor-intensive manufacturing sectors, where India has lagged behind Southeast Asian countries, to capitalize on potential supply chain shifts.
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