1. Donald Trump and India: Little to suggest his presidency will prove to be positive

Donald Trump and India: Little to suggest his presidency will prove to be positive

There is no indication that Trump’s policies will encourage direct investment by US firms in India, unless they are part of the president-elect’s crony network

By: | Published: December 2, 2016 6:25 AM
A small but vocal minority with Hindutva leanings were enthusiastic supporters of Trump. (Reuters) A small but vocal minority with Hindutva leanings were enthusiastic supporters of Trump. (Reuters)

In my last column, I offered a negative and pessimistic view of the coming presidency of Donald Trump. I certainly hope that I am proved wrong, although his early White House staff and Cabinet appointments, and the pattern of his behaviour in meetings and in his tweets does not bode particularly well. On the other hand, one might ask if there is some difference in the prospects for India—could a Trump presidency have some positives? Some Indian Americans certainly seemed to think so. A small but vocal minority with Hindutva leanings were enthusiastic supporters of Trump. His appeal to them was based on his anti-Muslim stance, which also fits well with many in the Indian ruling party and external organisations that support it. Aside from the violations of American values and legal precedents that Trump contemplates in his domestic policy toward Muslims, which should give pause to these American Hindutva enthusiasts (to modify Martin Niemoller’s poem about the Nazis and the Holocaust, “First they came for the Muslims and I did not speak out – Because I was not a Muslim…”), could Trump’s promises to combat terrorism emanating from Islamic State and similar organisations help India? Unfortunately, all of the experience of the last 25 years suggests that Trump’s belligerence will only escalate the conflicts, which have roots in West Asia’s own social, political and economic problems. It is these problems that have spilled over to India’s neighbours, making matters worse in South Asia. Trump’s promise to pressure Saudi Arabia will have no effect on an entrenched regime (think of what happened in Syria) and his threat to renege on the Iran nuclear deal will further destabilise the entire region, including Pakistan.

Trump also has business dealings in India, and, as president-elect, met with his Indian business partners. This might seem like the beginnings of closer business ties. George W Bush supposedly warmed toward India because of his personal friendship with an Indian American businessman. But Trump is a real estate entrepreneur, something that India has more than enough of. India has enough luxury hotel chains, and a Trump-connection will bring little to the Indian economy except more cronyism and non-transparent financial operations—behaviour which Trump is known for. On the other hand, there is nothing in Trump’s world view to suggest that his policies will help Indian businesses. Whether it is Indian manufacturing or exports of software services, Trump’s policies will only hurt India—not as much as China in manufacturing, but much more in software, especially if he squeezes work visas and skilled immigration. His close adviser, Steve Bannon, is on record complaining about there being too many South Asian CEOs in the US—although, like Trump’s habitual freedom from the truth, his claims were highly distorted. Even in manufacturing, US companies like Apple, which might have moved some production from China to India, are now being pressured to shift instead to America.

What about US macroeconomic policies? Political uncertainty and the prospect of a fiscal stimulus have already been pushing up US interest rates and strengthening the dollar. Normally, this would help exports to the US from countries with weaker currencies, including India. But, because of the likely direction of US trade policies, India is unlikely to benefit on this front. And there is no indication that Trump’s policies will encourage direct investment by US firms in India, unless they are part of the president-elect’s crony network. So, the transfer of technology and other know-how that comes with such investment is not likely to flourish under a Trump regime. India will do better to continue looking to countries like Japan, South Korea and Germany for knowhow.

Finally, could a tougher Trump stance on China help India? Economically, it is difficult to estimate the indirect or spillover effects on India of Trump’s desire to reduce Chinese exports to the US. Certainly, his withdrawal from the Trans-Pacific Partnership only increases China’s regional economic influence. Strategically, the US was already incorporating India in a policy of trying to contain China’s regional military power. This is a delicate game, and it is difficult to say whether Trump’s impetuousness and lack of tact, along with his monumental ego, will make the game more difficult. With Putin in Russia, the triangle might become more Orwellian than one could have imagined 25 years ago.

To sum up, there is little to suggest that a Trump presidency will provide any positives for India. Of course, India has its own internal challenges, including weak and arbitrary policymaking, and a continued failure to create a stable environment for the private sector to thrive (beyond its own oligarchs). It might seem that what happens in the US is of second order importance. But America remains the world’s largest economy, and is now home to a relatively elite group of people of Indian origin. India will need to think carefully about how to adapt to the new regime, and mitigate potential damage from the changes it might trigger in the world order.

The author is professor of economics, University of California, Santa Cruz

Please Wait while comments are loading...

Go to Top