PTI New Delhi

While the Indian economy is relatively insulated from a slowdown in the United States, the stock markets of both countries show a strong correlation, according to a report by investment bank and financial services firm Goldman Sachs.

The report highlighted that India's economy is less exposed to a slowdown in the US when compared to other countries, mainly because of India's lower trade dependency. It said, "While the Indian economy is relatively insulated from a US slowdown compared to other markets that have higher trade with US, there is a strong correlation between Indian equity markets with the US market".

India's merchandise exports make up for around 12 per cent of its GDP, whereas in China it is 19 per cent, and in Vietnam it is as high as 82 per cent. This helps shield the Indian economy from the full impact of any economic slowdown in the US. The report noted that over the last 20 years, India's GDP growth has only been slightly affected by global factors, except during major global crises like the Global Financial Crisis (GFC) in 2008 and the COVID-19 pandemic in 2019-20.

But, despite the relative insulated economy, the Indian equity market remains closely linked with the US market. According to Goldman Sachs, the movement of the Indian stock market, particularly the Nifty 50 Index, has shown a strong correlation with the S&P 500 Composite Index in the US over the past decade. Meanwhile,  India's private sector capital expenditure (capex) could take a backseat in the near future due to rising uncertainty around global tariffs, according to a report by Goldman Sachs.