Tariff wars can disrupt supply chains, cloud investment decisions: Sitharaman

The escalating tariff wars and growing protectionism can disrupt global supply chains, clouding investment decisions around the world, finance minister Nirmala Sitharaman said on Thursday.

“We recognize that the global landscape is changing and changing rapidly… the recalibration efforts on trade are very, very challenging. It is worrisome, but it is also going to be very challenging. The intensification of tariff wars and the rise of protectionist policies have the potential to disrupt global supply chains, increase production costs and create uncertainty in investment decisions across borders as well," Sitharaman, who speaking at an event marking the 150th anniversary of BSE, said.

Sitharaman said that uncertainty induced by the tariff wars has had a “ripple effect” on financial markets across the world, including on Indian markets.

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The US on Wednesday slapped a steep 245% import tax on a wide range of Chinese goods, which could lead to a rerouting of Chinese exports to India. The hostility between the world's top two economies has worsened since the US imposed 145% tariffs on Chinese goods earlier this month. China retaliated with a 125% levy on American imports and also tightened exports of rare earth metals critical to high-tech and defence sectors.

Indian stock markets

However, despite the global uncertainty, India's financial markets had shown “remarkable resilience”, thanks to retail investors investing through mutual funds, categorised as domestic institutional investors (DIIs) , as well as directly.

“Testament to this is the fact that in the second half of March 2025, just a month ago, foreign portfolio investors made substantial investments in India's financial sector, channeling over ₹17,500 crore into financial stocks. Simultaneously, domestic investors, particularly the institutional investors (DIIs), have played an increasingly central role in the last financial year (FY25).”

DIIs, she added, had recorded total inflows of ₹6.1 trillion, far outpacing the ₹1.3 trillion net outflows from FPIs.

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“This transition of DIIs from a supportive to a dominant force, underlines the growing maturity and depth of India's capital market. And I think this happening in the 150th year of BSE marks a major impact changing profile to the Indian stock markets.”

“So, the DIIs are no more just being supportive, but have now taken up the goal of being a dominant force in our markets.”

Highlighting the role of “unprecedented primary market activity”, she said the number of domestic initial public offerings (IPOs) had surged threefold from 106 to 320 in the last five years, culminating in a record issuance of shares worth ₹4.2 trillion in FY25, twice the amount raised in the previous fiscal year.

“Notably, India became the top country globally in IPO volumes, surpassing the US with nearly double the number of listings," she noted.

She said retail investors were becoming more informed while placing their faith in the stock markets.

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“I really appreciate how the retail investors have placed their faith in the markets today, and they are doing their own homework, and I'm sure the awareness campaigns are all paying off. (They are) looking at companies whose performance is transparently laid out, and reading Ministry of Corporate Affairs (MCAs) records constantly.”

“You know that the interest which the retail investors have taken to come in a big way into the bond market is very well informed and not a rush into the market thinking they are going to mint gold. So, this is an informed move of the Indian retail investor, from just depending on bank fixed deposits to taking a bit of risk and coming into the market because the transparency element in corporate governance has given them a chance to learn better about companies and choose to invest them in them directly or through the funds.”

Sitharaman said the median age of Indian investors was just 32 , with over 40% under the age of 30 and one in four being women.

“I am so glad to give you this data because you and women are the ones who are placing their trust and faith in the stock markets, and it is that which we have to carefully nurture, and any small omission or commission will shatter this new-found faith," Sitharaman added.

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Meanwhile, Securities and Exchange Board of India (Sebi) chairperson Tuhin Kanta Pandey said that to attract both domestic and global investors, the market regulator will aim for optimum regulation along with investor education.

For optimum regulation, he reiterated that Sebi will intensify consultations with stakeholders to prepare a pragmatic roadmap for simplified yet effective regulations. "Under the auspices of Financial Stability and Development Council (FSDC), financial regulators come together for harmonization of policies and regulations... We will intensify these efforts in a comprehensive manner," he said.