1. India’s Trump card: US investments in India to rise even as those in China fade

India’s Trump card: US investments in India to rise even as those in China fade

In all his speeches, president-elect Donald Trump has expressed good sentiments for India. While, he has developed a relationship with president Vladimir Putin of Russia, China, Iran, Islamic-terrorists and their sponsors and Latino immigrants, are on his hit list.

By: | Published: November 22, 2016 6:14 AM
His defence policies will see much less money being spent on NATO and protecting other allies. (Associated Press) His defence policies will see much less money being spent on NATO and protecting other allies. (Associated Press)

In all his speeches, president-elect Donald Trump has expressed good sentiments for India. While, he has developed a relationship with president Vladimir Putin of Russia, China, Iran, Islamic-terrorists and their sponsors and Latino immigrants, are on his hit list. His defence policies will see much less money being spent on NATO and protecting other allies. His aim will be to create jobs, but also reduce expenditures on social security. He will renegotiate all international trade agreements to reduce the burden on the US. He will stimulate business via lower taxes apart from reducing competition from imports.

His immediate actions will be to deport over 3 million illegal immigrants mainly from Latin America. This will help uneducated whites who have suffered job losses and static real wages for over a decade. From his speeches he does not appear hostile to immigration of skilled labour, especially when it serves superior American technologies. Thus, India may not have to fear the return of its labour employed in the information technology sector in the US. Nor is there likely to be a freeze on more such skilled immigrants.

Clearly, Trump’s underlying political philosophy is that the Cold War is over and new alliances with former enemies are possible; economic growth and not communism is the ideology for all nations; democracy does not need American evangelism as it did in past decades; forms of government and governance can be developed in all countries to suit themselves; Islam has propagated worldwide terror and this must be stopped.

A Trump administration will have no difficulty in working closely with autocrats and dictatorships. He will not go for regime change as his predecessors did in Iraq and Libya. Trump may well try to rein in Saudi export of fundamentalist Islam. This will benefit India which for long has experienced Saudi fund inflows to preach Wahabi Islam in Pakistan.

Pakistan will experience a tighter squeeze in American military and economic aid. This will reduce its capacity for terrorist attacks on India. Pakistan already has a major donor in China. But China will expect much more in return than the US did. Also, China will come under considerable economic pressure as its exports get reduced and its foreign reserves decline in value. With Trump attacking terrorism, India can certainly expect some respite.

Trump’s demand that Europe, Japan and South Korea, among others the principal countries receiving American protection at American cost, pay for it, will not only save money for the US but result in new alliances. Europe already dependent on Russia for fuels will get much closer to it. Japan, Korea and other Asian nations will move closer to India to create a bulwark against China. Trade and investment with these countries are bound to grow greatly as a result.

Trump had vowed to cut social security expenditures. His savings on defence and social security may not be enough to balance his promised tax cuts for business, and increases in infrastructure spending. American deficits will increase under a Trump administration. So will inflation, dollar values will fall. A side effect will be a loss to China since it holds over $3 trillion in US Treasury bonds.

To stimulate business, Trump may not go for the long anticipated rise in American interest rates. This will be good for India. Especially, since the recent demonetisation of R500 and R1,000 notes will compel a reduction in Indian interest rates. Competitiveness of Indian business will improve.

The renegotiation of all trade agreements by the US under Trump can benefit India since we have had little in preferences or as dumping by us. American investments in India will rise as American business reduces its commitments to China. This will be in addition to what others like Japan invest in India.

Trump’s thinking appears to be very short-term. He does not believe that there is any threat from climate change. India is already experiencing some of its effects. This is one area in which India and many others must actively press him to meet the agreed to norms.

We must welcome Russia into the the “free” world. Opportunities for Indian investment in Russia will rise as will prospects for trade. We could look for energy imports from Russia. The “cold front” against China can only help us, as we join the rest in curbing imports from China. We must expect that American manufacturers will divert some of their assembly line parts for manufacture in India instead of China. Static and low interest rates in the US will also help our economy where many have feared an increase, with adverse consequences for our businesses. We could be at the centre of a new alliance in Asia with Pacific Ocean countries. Our confrontation with China on the border might diminish because of China wanting to avoid repercussions on other Chinese interests elsewhere.

Trump Presidency will certainly benefit India.

The author is former director general, NCAER, and was the first chairman of the CERC.

Views are personal

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