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The potential impact of a Joe Biden’s presidency on the Indian economy

Posted by Balaji on January 21, 2021
| 0

Joe Biden has been elected the 46th president of the United States, while senator Kamala Harris who is of Indian and African-American origin, has become the first-ever woman vice president-elect of the United States. Experts believe it would largely spell good news for Indian companies and domestic financial markets.

Biden’s victory is most likely to be a favorable outcome for Indian markets as it will increase confidence amongst investors by reducing policy uncertainty. The market believes Biden is a more proactive and less-dominant person. There will be less rhetoric that Trump has been famous for. Equities are at a sweet spot,” said Sanjiv Bhasin, Director at IIFL Securities.

According to Global Markets Researcher Jim McCafferty, a Biden win will bring longer-term certainty, not just for the US but for the rest of the world.

As Biden in office, investors have been keeping a close eye on the overall seats in the House and Senate.

Brokerage firm Centrum Broking pointed out, it seems that there will be no majority in Congress, i.e., looking at the ongoing trends a Democrats are likely to gain a majority in the house while the Republicans are likely to gain control of the Senate.

“This clearly means that a lot will then come down to negotiations between the Democrats & the Republicans on a possible fiscal relief bill, thereby keeping investor’s breath on hold,” Centrum report said.

The change of power in the United States is likely to have profound implications domestically, of course, but will also have a significant effect on the Indian economy. US stocks rose steadily during and in the aftermath of the election, and there is reason enough to suggest that Indian equities might copy the trend seen in Wall Street.

But beyond the stock markets, there is also likely to be a strategic shift in India-US relations as they relate to trade. The United States is among the few countries that India enjoys a trade surplus with i.e. India exports more to the United States than it imports from it.

For all the unity on display between President Trump & Prime Minister Narendra Modi and at events like the ‘Namaste Trump’ event in Chennai, or the ‘Howdy Modi’ rally in Houston, their apparent friendship hasn’t yielded any material change in India’s trade account with the US.

The transactional nature of Trump’s handling of bilateral trade ties may have had some part to play in this, and some are of the view that Biden’s more pragmatic approach to trade could be beneficial to India. Biden may also aim to normalize the US’s fractious relationship with Iran, plagued by economic sanctions that have prevented India from buying low-cost crude oil from the Middle East country.

Biden’s election manifesto also discusses increases in healthcare spending and the expansion of the Affordable Care Act, both of which could have significant implications to India’s pharmaceutical sector that exports large quantities of generic drugs to the US annually. However, this will entirely depend on whether Biden is capable of pushing through his policies in the US Senate where Democrats command only a razor-thin majority.

The COVID-19 pandemic has also exposed the dangerous overreliance on China as it relates to their supply chains. The strengthening of India’s bilateral relationship with the US may go some way toward assisting India in marketing itself as a prime alternative to China in this sector.

Finally, the ascendancy of Joe Biden to the US’ top seat could prove to be extremely beneficial to India, opening up new avenues for funding and establishing new manufacturing centers in India.

The list of expectations is very long however even if the above-mentioned demands or expectations are met, the Indian Real Estate sector will gain a significant boost for many years to come.

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