SCO Summit 2025: Outcomes of Modi-Xi Meeting
The renewed efforts by the Trump administration to implement tariffs on imports from major economies, including India, represent more than just a fleeting trade issue. They present a significant challenge to India's ability to compete in exports. However, this scenario could also serve as a crucial moment for domestic policy adjustments and alignment with national goals.
In a significant shift in relations with China, Prime Minister Narendra Modi attended the Shanghai Cooperation Organisation (SCO) summit, marking his first trip to the country in seven years. During the event, the PM held discussions with Chinese President Xi Jinping on a personal level.
The two leaders pledged to boost trade and investment ties to stabilize international commerce and agreed to bolster their bilateral relationship to tackle pressing challenges. This development takes place against the backdrop of high tariffs imposed by the US on Asia’s two largest economies.
According to reports, the recent improvement in India-China relations could have a beneficial effect on the Indian stock market. From sector-specific effects to overall market sentiments, here are the ways the Modi-Xi meeting could serve as an uplift to India's economic graph.
Solutions for Trump tariff tensions
The 2025 SCO Summit occurs at a crucial time for India’s capital markets, as Donald Trump's significant 50 percent tariff package on Indian exports has unsettled investor confidence and heightened concerns about ongoing trade tensions with the US. If there are advancements that allow China to partially open its market, it could help alleviate this deficit. Markets like Russia and China are key areas to concentrate on.
If US tariffs result in a 15–25 percent impact, bolstering relationships with these nations to mitigate that pressure will be essential. This is something that investors should monitor. The SCO summit signals a transition from relying on US concessions to seeking regional alternatives. Both China and Russia are now increasingly welcoming India into their economies, facilitating a redirection of trade patterns and softening the impact of US tariffs.
Decreased unpredictability in the relationship between India and China
The relationship between India and China, which has deteriorated over time due to border tensions and China's backing of Pakistan, experienced a change. This development could be advantageous for the markets. Investors may find reassurance in the fact that this meeting lessens the risk of unpredictability in key sectors that influence the economy. If these discussions evolve into genuine agreements and actions, it would be beneficial for both nations.
Support for electric vehicles and renewable industries
Rare earth elements are a significant issue as they affect multiple industries, particularly electric vehicles and renewable energy. China had guaranteed India supplies of fertilizers, rare earth materials, and tunnel boring machines. Tata Motors, which has historically depended on rare-earth magnets imported from China for its electric vehicle production, saw its stock rise by 3 percent in trading. Additionally, other renewable energy companies like Suzlon Energy and Waaree Renewables also experienced an increase in their stock prices.
Also Read: UK's AI Summit Urges AI Policies to be Beyond Techno-Libertarianism
From the aviation industry to tourism, various sectors will benefit
Enhanced collaboration among Asia's major economies provides India with access to Chinese knowledge in solar technology, electric transportation, and large-scale infrastructure implementation, facilitating the rapid expansion of renewable capacity and lowering costs for the adoption of green energy.
Areas such as shipping and logistics may experience positive momentum as this trilateral partnership advances Eurasian trade routes and diminishes Western influence over supply chains.
Additionally, the initiation of direct flights between India and China is advantageous for sectors like aviation and tourism. These advancements bolster India's long-term competitiveness narrative, adding strategic depth to its growth story in the context of shifting global geopolitics.
Also Read: US Tariffs on India an Economic Boon?
Sustained energy reliability
India ranks as the third largest consumer and importer of oil globally, with inexpensive Russian crude oil playing a significant role in moderating overall energy import expenses. As a result, Russia's contribution to total oil imports surged from just 1.7 percent in 2019-20 (FY20) to 35.1 percent in FY25, making it the leading oil supplier to India. Historically, as one of the major oil importers worldwide, India has encountered pressure on foreign exchange due to crude purchases priced in dollars. However, with more transactions involving Russian oil being conducted in rupees and yuan, there is a decrease in dollar reliance, which helps stabilize reserves. This shift promotes macroeconomic stability and strengthens long-term energy security.