With Trump In Power, Uneasy Times Ahead For India – Analysis

By Saroj Mohanty*

India is cautiously optimistic about the trajectory of its relationship with the United States as billionaire businessman Donald Trump takes office as the country’s 45th President on Friday. Prime Minister Narendra Modi has said he is looking forward to working with him closely to take the bilateral ties to “a new high”.

The positive outlook stems from the fact that there is bipartisan support for expanded and elevated relations with India as exemplified by the 16 long years of close partnership under the leadership of Republican George W Bush and Democrat Barack Obama. Moreover, Republican administrations have traditionally been better for India which is currently one of the fastest growing economies of the world. The Republican Policy Platform 2016 described India as a “geopolitical ally” and a “strategic trading partner”. Trump has said he would be “best of friends” with India and promised to boost intelligence sharing with New Delhi in its fight against terrorism.

Yet, there are huge concerns that India-US ties could face serious challenges in the days and weeks to come. Policy-makers and independent observers are circumspect about the likely turn of events and policy shifts that would occur under the Trump presidency, especially changes in approach to economic and trade issues.

This is because of the man himself and his declared domestic and foreign policy agenda which have brought in an element of uncertainty into future bilateral conversations and negotiation of mutual interests. The new Republican President is of “unknown quality” and it is not known how he would exercise the enormous power he would hold now. There are doubts whether his statements in the past about business opportunities with India would translate into benefits for India. There is anxiety as to what extent his campaign rhetoric would turn into policies, especially on trade, immigration and investment.

The concerns get accentuated when seen in the context of the global economic scene which has become cloudier after Brexit and the growing tide of protest against globalisation. Over the years, trade and technology have increased inequality, helping only those who have the skills and capital.

In fact, Trump’s main support base has been the less-skilled working class white males who have found their economic position declining over the years. This has changed the political dynamics of the Republican Party which, analysts point out, have traditionally attracted more educated and higher income voters and advocated free trade and liberal immigration. Today, Trump and advisors favour trade protectionism and curbs on immigration. Trump has warned companies against offshoring and threatened to slap 35 per cent tax if they fire their workers, move to another country and ship their products back to the US.

There are many sectors of the Indian economy which are likely to see troubled times ahead. The US is the biggest market for the Indian Information Technology industry, which is also the beneficiary of the visa system.

Trump has said in his first day in office he would ask the US Department of Labor to investigate the work visa programme. His administration is most likely to introduce changes in visa regulations and immigration process. Jeff Sessions, in his Senate affirmation hearing for Attorney General, said the Trump administration would push legislative reforms to curb H-1B visas for foreign workers.

India’s software exports would then certainly be affected if the US immigration policy becomes more restrictive as India has been the biggest beneficiary of H1B visas that allow companies to employ foreign workers for specialist jobs in science and technology. “We need to wait and see how things will happen there,” says Vishal Sikka, Chief Executive Officer of Infosys.

The US is also the most profitable market for Indian drug-makers. Trump has vowed to force US drug companies to produce at home and cut prices which along with healthcare costs figured high during the presidential election. Indian companies may face more regulatory inspections, beside stiff competition from the Big Pharma.

The US has not been an admirer of the World Trade Organisation and has gone ahead with plurilateral agreements instead of the multilateral approach. Trade experts say US would like “new Issues”’ like e-commerce, fisheries and investment in the formal agenda of the world body ahead of the ministerial meeting in Buenos Aires in December 2017.

Trump has so far trained his guns against China and the 12-country Trans-Pacific Partnership. There are now fears in some quarters that he could turn his gaze to the $30 billion-odd trade surplus that India enjoys with the US. Both countries also have differences over the issue of trade in services. The US has been asking for further liberalisation in India’s agriculture. It is also opposed to subsidies offered to the textile sector. It is unclear what would Trump’s India policy be on this.

Trump has suggested cracking down on multilateral tax offshoring. Investment flows to India could also be impacted if multinational companies chose to repatriate larger share of their income, says a report by Citi analysts.

Ahead of the inauguration of the new US administration, the Indian government has reached out to the Trump team. There are reports that members of the Indian diaspora and the business community having links with the new President have made contacts. In the days to follow, there would be opportunities for more bilateral engagements to clarify and thrash out issues.

Trump, a Wharton School of Business product, is expected to be far more transactional than previous US Presidents and would like to see what is put on the table. He is seen to bring in a style of governance that is an inalienable part of the corporate world which aims at effective deal-making. If his recent interview to the Wall Street Journal is any indication, he would use every available leverage to promote American interests.

After all, it is the same person who wrote the book “The Art of the Deal” some three decades ago. Prime Minister Modi has told his party colleagues that he is looking forward to meeting Trump at the earliest as it is important for sustaining the relationship which is helpful for India’s rise in a multi-polar Asia and the world. Till then, uncertainty is likely to reign high.

*Saroj Mohanty is a Delhi-based researcher-writer. Comments and suggestions on this article can be sent to [email protected]