6 Big Reasons why Joe Biden is ‘Better’ for Indian Economy

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It wasn’t long ago when in Texas, from the stage of ‘Howdy Modi’, the Indian PM appealed to Indian Americans to vote for a ‘Trump Sarkar’ and welcomed Trump in a huge Motera Stadium in Ahmedabad.

Nations don’t have permanent friends. Nor permanent enemies. They only have permanent interests.

“My dream is that in 2020 the two closest nations in the world will be India and the United States.” – Joe Biden

Historically, Democrats have been friendly with India and Joe Biden is a Democrat.

With his 47 years of experience and an eight-year term as the Vice President, Biden understands the global diplomatic, economic, and military challenges.

6 Big ways Joe Biden can play a vital role in boosting the Indian Economy:

Less Geopolitical Tensions with China

India has border disputes with China. China claims Arunachal Pradesh and large chunks of India’s land in Ladakh. China-India military standoff is likely to continue. India needs to build its military capability to counter the China threat.

Defense Trade and Technology Initiative (DTTI) formed in 2012 during Obama-Biden administration to enhance cooperation between the US-India armed forces will get a boost under Joe Biden.

US has already agreed to provide satellite imagery that will be of immediate military benefit at the India-China LAC. Twentieth-century was America’s century.

The US was the only Hyper Power. Will twenty-first-century be China’s century?

The US is acutely aware of that possibility and needs India’s support to avert it.

“This [Xi Jinping] is a guy who is a thug,” – Joe Biden

Global Supply Chain (GSC)

China uses its economic power for shocking economic force & the Covid 19 pandemic disrupted the Global Supply Chain (GSC) forcing many countries to set up manufacturing.

The disruption offers a good opportunity for India to offer an alternative, secure, and reliable GSC.

The US wants a GSC which is not China-centric.

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It has been talking to Australia, New Zealand, Japan, India, and South Korea on supply chains.

But India with its young populace, skilled workforce, and relatively low labor costs is better placed to offer the alternative GSC.

“If that [India-US come close] occurs, world will be safer.” – Joe Biden

GDP Superpower

Expected GDP. By 2050:

1) China ($58.499 trillion)
2) India ($44.128 trillion)
3) United States ($34.102 trillion)

US GDP will be less than sixty percent of China’s. But US-India combined GDP will be thirty-four percent higher than China’s.

If the European Union, Indonesia, Japan, and the United Kingdom join US-India, then their combined GDP ($126.68 trillion) will be more than double that of China.

It is in the interest of both India and the US to ally and to get other nations to ally, to tackle China’s egregious economic coercion.

“strengthening and deepening the relationship with India is going to be a very high priority.” – Anthony Blinken, Biden’s Secretary of State nominee.

Ease of H1B Visa:

The H-1B visa is a work permit that allows foreign workers to go to the United States and work for American companies. The foreigner must specifically work in a field that requires specialized knowledge, for which the employer cannot find a US-based worker. In a note Trump said:

“As we speak, we’re finalising the H-1B regulation so that no American workers be replaced ever again. H-1B should be used for top highly paid talent to create American jobs, not as inexpensive labour programmes and destroy American job,” – Trump

Many of us wouldn’t know it but Indian students contributed $7.6 billion to the US economy last year but on June 23 Trump suspended the H-1B visas along with other types of foreign work visas until the end of 2020 to protect American workers in a crucial election year.

He gave this order to ensure that the federal government lives by a very simple rule, higher American.

Now, US President-elect Joe Biden plans to increase the number of high-skilled visas, including the H-1B, and eliminate the limit on employment-based visas by country, both of which are expected to benefit tens of thousands of Indian professionals impacted by some immigration policies of the outgoing Trump administration.

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Lessor US-India trade disputes

India and the US share a very interesting trade connection.

India exports more goods to the US than we import from them. It’s quite good for India to have a trade surplus but Trump didn’t like it and he believes that this gap must be reduced.

So, on March 4, he terminated the preferential trade status for India under the Generalized System of Preference (GSP). He determined that India has not assured the US that it will provide “equitable and reasonable access to its markets.”.

India was the largest beneficiary of the program.

India was getting benefits to the tune of $6 bn Under the GSP program, as nearly 2,000 products including auto components and textile materials can enter the US duty-free.

Once India kicked out of this program its export started becoming costly.

In retaliation, India increased import duties for the US on goods like almonds, pulses, and apples. This further soured relations.

The big problem was, There are no winners from today’s decision. It would cost American companies $300 million in additional annual tariffs.

American importers will pay more, while some American exporters will continue to face current market access barriers in India, and others, including farmers, are very likely to be subject to new retaliatory tariffs.

Many experts believe that under Joe Biden’s administration, this trade relationship could be better as he is a seasoned politician as compared to Trump as a transactional type politician.

Possible Ease with Iranian Sanctions

During Trump’s tenure, India was unable to buy oil from Iran (10 % of India’s supply) due to sanctions imposed by the US.

Any country or company importing crude oil from Iran will now invite penalties from the US.

Iran’s economy is largely dependent on its oil exports; with the sanctions in place, the country is cut off from its main source of revenue.

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Further, companies such as Airbus and Boeing had agreed on deals with Iran to sell 100 and 80 aircraft respectively after the JCPOA was signed in 2015. These deals now stand void at a loss of billions of dollars.

The immediate impact of the sanctions on India was that it could no longer use US dollars for transactions with Iran. Investment by Indian companies in Iran’s oil and gas development projects and pipeline projects,

India being the second-largest importer of crude oil from Iran, the relation between Iran-India is of vital importance for India strategically because of Iran’s Chabahar port, which plays a fundamental role in India’s trade connectivity with Afghanistan, Central Asia, Eurasia, and Europe.

If Biden works on these sanctions for the overall benefit of all the countries then India can easily fulfill its oil requirement from Iran.

Nutshell

Many Indians believe that another term for Donald Trump would have been better for India as many see him as a close friend of Prime Minister Narendra Modi, but Indians should not worry much over Biden’s election as the new president of the US is likely to be a ‘Good News’ for India.

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Akshay Seth
Research Analyst (SEBI Regd.)
Linkedin | akshay.equity@gmail.com

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Akshay Seth is a SEBI Registered Research Analyst. Has taken sessions on 'Equity Analysis' in IIT Madras, IIT Delhi, IIT Guwahati, IIT Mandi, NMIMS Mumbai. Can be contacted for Stock Advice and Learning Stock Analysis (Fundamental & Technical). +91 8826423141 | info@equityboxx.com
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