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The American Elections

The Economist Magazine rates Donald Trump winning the U.S. presidential elections as the third biggest source of global risk and gives the event the same impact score as that of the rise of Jihadi terrorism, currency depreciation, and a clash of arms in the South China Sea. I know you're shocked to read this. What I suggest is to put your thinking caps on and sit calmly as you might experience a few more shocks like this one in the next few minutes. For those of you who don't know already, the 59th U.S. presidential elections 2020 are to take place on the 3rd of November. The candidate contesting for the presidential elections opposite Donald Trump is the former Vice-President Joe Biden, a part of the Democratic Party. Also, various American National polls show that Joe Biden is significantly ahead of the Republican President Donald Trump. Whatever might be the result of the elections, there arise bigger questions. 

How will the U.S. presidential elections impact the Indian Economy? What is the significance of these elections in the Indian context?

You'll be able to answer this in a very short while.

American Election

In the recent past, Donald Trump has imposed a restriction on temporary work visas such as the H-1B and the L-class visas until the end of the year 2020, which will supposedly have a detrimental impact on Indian IT professionals and India's whole IT Industry as well. The main reason cited by Trump for suspending these visas was the fact that more than 20 million U.S. workers had lost their jobs between February and April 2020. The Indian Government reacting to Trump's decision issued a statement to the effect that the movement of skilled Indian professionals would positively impact the U.S. economy. On this, Biden had stated that, if he's elected, he will work to swiftly lift Trump's suspension of H-1B visas.

Another important thing to note is that, when Biden was a U.S. senator, he voted in favour of the Indo-US Nuclear Deal. Also, Biden who visited India as the Vice-President of the United States of America in 2013, has been a strong supporter of strengthening the economic relationship with India. 

Now, putting light to an aspect in which India has had differences with Trump is in regard to the dealings with Iran. The U.S. President removed the waiver which India received on its oil purchases from Iran in May 2019. Trump's former National Security Advisor, John Bolton, in his book The Room Where It Happened: A White House Memoir, made a point that Trump was not sympathetic to India's request for a waiver on their import of oil from Iran. This worsened the ties between Delhi and Tehran since India stopped purchasing oil from Iran as a result of what Trump did. An important thing to know here is that Iran is strategically important to India, as Chabahar Port in Iran plays the role of India's gateway to Afghanistan and Central Asia. Trump's decisions have led to the souring of ties between India and Iran which has resulted in slowing down the work on the Chabahar project.

If Biden wins the elections and becomes the President, he may adopt a more nuanced approach towards Iran, which might help in the improvement of India's economic links with Iran. In his book, John Bolton also pointed to the fact that Trump had objected to India's decision to purchase S-400 missiles from Russia as well. He also threatened to impose sanctions on New Delhi under the "Countering America's Adversaries Through Sanctions Act". 

Also focussing on a more recent issue, i.e. the ongoing tussle between India and China. Trump has evidently been pretty vocal against China on many global issues. Be it the issue of identifying the source of the Coronavirus outbreak where he openly calls it the Wuhan Virus or the Chinese Virus or the issue of disadvantages faced by the U.S. manufacturers. But there is a possibility that he might have done this in order to woo the American public. However, the tariffs he imposed on the imports worth over $370 billion can be seen as real action. Furthermore, his decision to curb Chinese investments in American companies, the stringent ban on the tech giant Huawei, the restrictions on intellectual imports, and their recent banning of Tiktok have created humongous lucrative economic opportunities our country and has led to making our products more competitive in nature.

American Election

An interesting thing to note here is that Joe Biden on several occasions has hinted towards ending the tariffs on the Chinese imports which Trump had imposed. If Biden comes into power, some of the economic benefits that the Indian markets are expecting may vanish to a certain extent. As per predictions made by some experts, Biden will be under tremendous pressure to manage the economic issues well, so making any policy supporting Chinese manufacturers will be heavily criticized. I believe that he might have a diluted and a very nuanced stance on this issue as India is strategically extremely important to the American trade. This strategic importance is highlighted by the fact that for the financial year 2019-20, bilateral trade between India and the U.S. was an astounding $88.75 billion.

Now, let's have a look on what implications these elections can have on the Indian stock market. According to some market watchers, the market is likely to grow more turbulent regardless of who gets elected. A UBS analysis of the potential impact on a dozen of Asia Pacific's biggest markets categorises India as a winner in all the three scenarios - a Biden and Democrat sweep, a Biden victory and divided Congress, and a status quo Trump victory. 

The only question that remains is, how big a winner will India be? 

November 3rd isn't far away. 

I hope you found the article to be interesting and informative.

Whom do you want to be elected?

Do let us know.

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