Joe Biden’s victory a mix bag for India; low FDI, high tariff may hurt country’s economy

The victory of Joe Biden may bring a mixed bag of consequences for India’s business. On one hand, where the newly elected US President may boost the growth of the Indian IT Industry, on the other hand, India may receive fewer pharma players from the US due to the new policy that may be rolled out by the new US government. The policy documents showed Biden’s will to eliminate incentives for pharmaceutical companies to move production overseas and establish incentives for the production of key pharma products in the US itself. Further, the India–US defense and counterterrorism cooperation would remain intact and likely strengthen further due to the common threat of a rising Chinese economy, said the EcoScope report by Motilal Oswal. 

On the trade front, despite Biden’s plans to tackle the China trade war situation, it is expected that the Indo–US relations would remain largely unaltered. It is to be noted that India’s trade relationship with the US is important because the US alone accounted for 17 per cent of the total exports from India in FY20. Biden’s plan to rejoin the Iran Nuclear Deal would also be a big positive for India as it could resume its economic relations with Iran sans restrictions, the report added. From being the third-largest supplier of crude oil in 2018 (26 MT, which was 13 per cent of total oil imports), Iran supplied only 6 MT in 2019, which was nearly 3 per cent of the total oil imports by India. 

However, on the contrary, Biden’s plan to ‘Make in America’ by penalising American companies that build overseas, and rewarding businesses that employ US residents may prove to be negative for India, the Motilal Oswal report underlined. Also, policies such as ‘Make in America’ may restrict India’s potential to host much more FDI from the US.

India needs to be watchful on the climate front as well because Biden’s focus on tackling climate change may include “carbon adjustment fees” on goods imported from countries that are large carbon emitters. Since the US is a major export partner for India and the latter runs a trade surplus with the US, an effective import tariff on Indian products may hurt India’s foreign trade.