The Financial Literacy Cell
Why US Presidential Elections are important to India?
“The First Tuesday after the first Monday in November” has always been curiously observed all over the world when the U.S. Presidential Elections occur once in every 4 years. And that falls on November 3rd, 2020 this year. While we write this article, Nevada along with few other swing states are busy counting the final votes that will decide the next POTUS. Although we saw the political rallies and debates between the Democratic nominee – Joseph R. Biden and Republican nominee – Donald J. Trump, we must also acknowledge that there are 30+ third-party and independent candidates including Kanye West, Howie Hawkins, Brock Pierce running for the same Presidential Post along with their running mates for the post of Vice-President.
Amidst the hype of rallies and exhilarating Presidential debates, we almost forgot that Congress is also going for elections this year on the same day. To give you an idea, the Legislative Branch of the United States (called Congress) is made up of a 435 member - House of Representatives and a 100 member – Senate, similar to that of the Indian Parliament with Lok Sabha and Rajya Sabha.
Now, all this said and done, what does it hold, say, for an Equity Research Analyst or an Investment banker sitting in India? Why are the C-Suite executives of large-cap companies listed in BSE & NSE are keen about the results of the elections? Why does a student discuss the U.S.A.’s elections and candidates when we don’t really care about the elections conducted in our neighboring countries?
All this is because “THE UNITED STATES OF AMERICA” is not just another country on the earth. The amount of influence on India and other countries is clearly evident through The Bretton Woods System then, and The Petrodollar system (payment in dollars for trading oil) now. Hence, the keen watch.
Bretton Woods System was formed after World War II with the main objective to attain exchange rate stability and promote international trade. This system pegs all the national currencies to the U.S. Dollars which in turn was pegged to Gold. This meant that India was able to print currency only to the level of reserves RBI held in U.S. Dollars which could be exchanged for Gold. President Richard Nixon announced the suspension of this system in 1971.
Cut to the elections of 2020 and we see the agenda of Mr. Trump and Mr. Biden. A quick detour into their past. Donald Trump is a billionaire real estate mogul and former reality television personality who went to become the 45th President of the United States. Joe Biden was the former Delaware Senator and the 47th U.S. Vice President with President Barack Obama in 2008 and 2012. Their respective running mates are Mike Pence and Kamala Harris.
Let’s analyze the possible impacts waiting for India in either case of victory.
What would a Biden win mean for India?
In case of a scenario where Joe Biden along with his running mate Kamala Harris take over the White House, India might sense a relief towards measures taken in matters of H1B visa and immigration policies.
An H1B visa is a non-immigrant visa sponsored by employers who are willing to hire highly-skilled candidates outside of America. This is mostly applied and provided for Indian citizens who work for Big Tech Firms like Google, Microsoft as well as Indian firms like Infosys and TCS abroad. Trump’s stance on #MAGA and “Buy American, Hire American” made him temporarily suspend the H1B visa along with other visas till the end of December 2020 as Covid-19 amplified the unemployment claims. Both Trump and Biden intend to replace the computerized lottery system with a wage-based selection process but a Biden-win would mean less stringent immigration laws. By the way, too much of Brain drain is not so welcomed in India.
Biden has also pledged to leverage over $150 billion to help and strengthen small businesses owned by Black and Brown people in America.After acting as the Vice-President under the Obama Administration, Democrats WILL return back to the Paris accord as they will bring stability and structure back into the fields of climate change, green energy, and sustainability and even turn out the defunding of WHO. Democrats have a clear pathway to achieve net-zero emissions by 2050.
The adverse effect of the Biden win is that Democrats are unhappy with India’s internal affairs like the decisions relating to the National Registrar of Citizens (NRC), Citizenship Amendment Act (CAA), and Article 370. Biden and Kamala Harris have been vocal about these and would ask India to restore the facilities in Kashmir as these are officially part of their “Agenda for Muslim-American Communities”.This might force New Delhi in its internal affairs but overall Washington will not be able to over-power as both the parties consider India as an important ally in the Asia-Pacific region.
What would a Trump win mean for India?
As opposed to Trump’s protectionist policies, Biden proposes to follow a multilateral approach with other countries. This would mean that he might rejoin the Joint Comprehensive Plan of Action (JCPOA) and repeal the crippling sanctions on Iran making it easier and cheaper for India to trade with Iran as they provide us oil in exchange for Rupees instead of dollars among other benefits.
JCPOA – “Joint Comprehensive Plan of Action” or “Iran nuclear deal” or “Iran deal” is an agreement signed between P5+1 members (P5 – 5 permanent members of UNSC plus Germany) along with the European Union to make Iran reduce the stockpile held of nuclear ammunition and materials in the year 2015. JCPOA was spearheaded by the Obama Administration but Trump walked out of the deal and imposed sanctions on Iran.
Although Biden’s multilateral approach helps us to re-attain relations with Iran & Afghanistan, this is not true in the case of Pakistan and the Middle East. Trump’s anti-China policy has benefitted us even more in these testing times of the Border clash. As America took a stand and the Quad alliance of the U.S., Japan, Australia, and India renewed to subdue the rise of China in the Indo-Pacific region, it acted as a great boost in our efforts to curb the Chinese influence on us.
Trump win would further fortify the US-India relations as we share similar motives and competitive spirit towards China. The similarity is also seen in the Protectionist front, might it be “The Atmanirbhar Bharat” or “Buy American, Hire American”.
“Howdy Modi” and “Namaste Trump” are successful visits by both the leaders in establishing robust bilateral trade deals in the interest of both the nations. While India is still trying to get back on the GSP – Generalized System of Preferences Program of the U.S., Biden victory would mean a leeway in this instance. Trump is always a green signal for the Indian Manufacturing Sector.
Indian Equity markets are expected to boom irrespective of the result while both the parties are trying to woo the Indian-American voters who are affluent and hold significant power in the swing states like Ohio, Florida, etc. Predicting who will win is an act in futile and so we leave it to you to decide who might be superior for a prosperous India in the long term.
By Tejaswini GB
1. Observer Research Foundation - https://www.orfonline.org/expert-speak/2020-us-elections-what-stake-india-67724/
2. Quartz India - https://qz.com/india/1913781/whats-at-stake-for-india-in-the-trump-versus-biden-us-election/
3. Indian Express - https://indianexpress.com/article/explained/an-expert-explains-why-us-president-poll-matters-to-india-6883348/
4. India Today - https://www.indiatoday.in/world/story/what-is-the-importance-of-the-us-elections-for-india-1737327-2020-11-02
5. Finshots - https://finshots.in/archive/make-in-india-vs-america-first/
Trade Brains -https://tradebrains.in/impact-of-us-elections-indian-equity-market/#Why_is_US_Election_important_to_India