Indian strategic analysts are reassessing the India-USA relationship prospects as they watch the Donald Trump presidency lurch with the final months of its first and plausibly the only term in the oval office.
For most leaders worldwide, the Biden Presidency is a honeymoon, stated Ian Bremmer, American political scientist.
“They will delight with a President that isn’t trying to pull the US out of the Paris Climate Accord or the WHO and doesn’t disparage the WTO.”
– Ian Bremmer (1).
The Biden Presidency is likely to be smooth over ruffled feathers; however, we can expect individual policies to remain the same. The primary focus of the democrats would be to contain China by countering Chinese tech firms and brands like TikTok with rhetoric like “Buy American” echoed in Biden’s campaign.
India would remain a pivotal partner to contain China for Biden as well. The Indo-US relationship has been growing steadily since 2010, and the change of guard in Washington is not likely to derail it.
With Joe Biden winning the hotly contested election, the relation is likely to see a shift to the institutional basis of friendship and take it to another level with more transparency and making it more predictable.
Why Wasn’t Donal Trump Great for India?
Donald Trump has been more than happy to address crowds with Modi. While Modi spoke the words, Abki Baar, Trump Sarkar, (this time, vote Trump), he almost got an endorsement. However, if you look at the concerns, the Trump presidency has not been great for India.
The inward-looking and isolationist stance of Trump has left the nation’s friends, including India feeling betrayed. He has hurt the Indian economy with his protectionist policies and hurt Indian immigration visa-seekers more than all the Islamic countries put together with his xenophobia (2).
Trump had forced India not to purchase cheaper oil from Iran and Venezuela and forced to buy more expensive gas and oil from the United States (3). He even pushes for non-viable long-term commitments, thinking Modi would be okay (4). Moreover, Donald Trump had not given India a waiver from an American law that put sanctions on nations for buying arms from Russia., despite the border tensions between India and China (5).
Meanwhile, Donald Trump had also increased tariffs on India’s imports on everything that caused a mini trade war with India (6). He further also removed preferential treatment to Indian exports, which gave extra stabs to the Indian economy when it was already bleeding (7).
Why Would Biden Be Better for India?
The world expects a democrat administration to be more reasoned and mature towards India if it were a friend. Moreover, they expect them not to club the country with China and other nations on trade issues, climate change, defense exports, and oil.
During the Trump administration, the hard-line drawn on China had aligned well with India, while Chinese aggression is growing at the Line of Actual Control, LAC. He also took a hard line on Pakistan, if only to dodge giving money to the country. However, in the bargain, he also ceded space to Islamabad in the peace talks with Afghanistan.
Biden is likely to go back to the drawing board on the US and Iran nuclear deal (10). It would up not only Iranian oil for India but also a strategic space with Iran in the middle east. The Biden and Harris presidency is most likely to look at the Paris Agreement, Indian work visa, etc., differently.
While considering all these things, Biden should be right for India, even if he is less keen on personalizing India’s relations. As our PM, Narendra Modi prefers and sees them more as the government to government relations.
US India Trade Ties
The trade relations between Indian and the US have observed several hindrances under the Trump administration. Obama worked systematically to overcome the long-standing disputes in the trading relationship between the two nations valued over 142 billion USD. In contrast, Trump has complained about India imposing tariffs on American goods and retailing with similar duties on products and services of Indian imports (10).
“American apprehensions over India’s tariff and non-tariff market-access barriers have been prevalent. The only difference is that the Trump administration has not shied from divergences over trade play out in the open. Hence, a Biden administration, too, would continue negotiations over trade issues, but probably underplay its relevance given developments in the strategic domain.”
– kashish Parpiani, Research Fellow at Observe Research Foundation, New Delhi (11).
In February, when Trump was on his official visit to India, he stated that he wishes to negotiate tariff with New Delhi; however, Modi is a tough negotiator (12). Notably, both economies had taken a protectionist stance, with the latest one being Modi’s “Atma Nirbhar” (self-reliant) to businesses (13).
The protectionist approach is likely to remain a sticking point between India and the USA. Self-reliance is getting popular in the geopolitical climate. As India is reluctant to join RCEP, its instincts would grow more robust if the WTO remains restrained to manage trade disputes. In that case, countries are also likely to find covers over national security cards in increasing trade barriers.
However, under Biden’s presidency, India is likely to get benefits on the trade front.
“It’s hard to predict with certainty, but a Biden administration would likely follow a more traditional approach to bilateral trade with India by focusing more on growing the total volume of trade than on the narrow question of deficits. A second Trump administration would continue the current focus on reducing the trade deficit. Historically, the Republican Party, with its belief in free trade, has been more favorable to India in this regard, but this has changed since the advent of Trump.”
– Sadanand Dhume, resident fellow at American Enterprise Institute (14).
According to the consensus, the bi-partisan agreements are most likely to perform better under the Biden presidency, solidifying India’s geopolitical position.
India and USA Trade
According to a recent analysis, India has always been a trade surplus with the US over the past two decades. In other words, India exports more goods to the USA than it imports. It has increased from 5.2 billion USD in 2001-2002 to 17.3 billion USD in 2019-2020. As the report points out, the trade surplus was at its peak during 2018 at 21.2 billion USD.
In 2019-2020, India exported goods worth over 53 billion USD to the USA, roughly 17% of all Indian exports in the same year. Similarly, it has imported goods worth over 35.7 billion USD from the US, roughly 7.5% of all Indian imports.
The report also added that India accounts for almost 5% of the US’s services imports globally apart from trade in goods. Between 2005 to 2019, US service imports from India have expanded at a compound annual growth rate of 14%. In 2019, the US imported services from India worth about 29.7 billion USD.
Over the past 20 years, the US is India’s fifth-biggest source of FDI, Foreign Direct Investment. Of the total 476 billion USD that has come since April 2000, the US accounted for roughly 6.5% with a 30.4 billion USD investment. Notably, only Singapore, Mauritius, Japan, and the Netherlands have invested more FDI since 2000.
The Us also accounts for one-third of all Foreign Portfolio Investments, investment in India’s financial assets apart from FDI, and investment in the country’s physical assets. According to the FPI data, the US accounted for more than 11.21 lakh crore INR for this amount.
Prominently, Biden is likely to be less obtrusive compared to Trump.
The Climate Change Agreement
Biden is more likely to support global agreements on trade, and climate changed compared to Trump. It means that these two issues would have better chances to become expanded sectors of cooperation under Biden.
When Trump withdrew from the Climate Accords, he also abandoned India’s promise on clean energy corporation. His visit to India in February 2020 was optically significant but did not result in the promised trade deal.
Reva Goujon, Managing Director at Martin+Crumpton, expects Biden to rejoin the Paris Climate Agreement and remain on a multilateral path. It would pressure India to take more measures to reduce its carbon emissions and potential trade incentives to cooperate on green tech development. However, the frictions will remain as New Delhi argues that developed nations bully countries like India on climate policy.
It is another issue that ties India and the US together, and Trump has been far from helpful in this area. His approach to immigration has been chaotic and xenophobic. He marked it with shifting and burdensome legislature (15).
The Trump administration has clamped legal immigration pathways, including education, family ties, and work qualification. Notably, Indian wide use these avenues to immigrate to the US (16).
So far, India has been the largest recipient of H1B visas (17), which allows US entities to hire overseas workers for specialty occupations. Many employers view Indians as valuable employees to get skills that are in short supply locally. Until 2016 (18), there was a steady growth in the category, but the recent restrictions have hit Indians particularly hard (19).
Moreover, India is also the second-largest source of overseas students in America. However, the number of new international students enrolling in US universities has sharply declined due to the Trump administration’s aim at the F1 student visa category (20). Though US universities value Indian students, Trump’s actions made the country less attractive to qualified Indian students (21).
In contrast, Biden is likely to put similar efforts as the Obama administration to benefit Indian immigrants. It also permitted the H1B visa holder spouses to obtain work authorization to reduce the financial burden on families waiting to get green cards. Obama also proposed reforms to streamline the visa application process and offer more flexibility to Indians on work and student visas (22).
What Biden Would Bring For India
Biden has long supported.
India and the USA’s strong relation, and a democratic administration would build on it. His economic plans propose revising international trade rules in ways that would benefit the US and its partners, including India (23).
His team would focus on technology innovation, which can avail the Indian industry and Indian immigrants in the US.
Moreover, the Biden administration has promised to be fair, systematic, and rational on immigration (24). He has also proposed a strategic and extensive plan to limit China’s influence, and India will be a significant partner in those efforts (25).
Trump administration had focused narrowly on a few issues with India. It includes defense sales and trade retaliation. There has been no sustained and strategic progress even after massive rallies and tweets. Donald Trump has taken steps to make the two countries to work together even more difficult.
On the other hand, as Vice President and Senator, Biden has invested in building a long-term partnership between India and the US.
Which Sectors Would Shine in India with Biden Win?
The investors were on toes with the uncertainty over who would lead the world’s most powerful country for the next four years. Though it would not be a political concern for India, several sectors would be at an advantage over others under Biden’s presidency from an economic point of view.
“For India, who wins might not make any material difference in the long run, but in the near term, a Trump win is likely to benefit IT along with chemicals and tiles, whereas a Biden presidency would be better for pharma. We would hold on to our portfolio bias: global reflation, IT, and pharma.”
– Edelweiss Securities (26).
Biden is likely to raise taxes, and big tech companies are likely to face more scrutiny. Moreover, he would be more focused on renewable energy and increase spending on education and health.
In short, if Biden wins, the big tech firms are likely to face more effective regulations and tax oversights, a hiccup for Indian IT firms. On the other hand, pharma firms would get several advantages of increased government spending. However, it could come with higher price concessions for Indian firms.
Trade is likely to immerse in more predictable policies; however, a sharp easing of trade tensions could weigh Indian beneficiaries such as chemicals and manufacturing. Simultaneously, commodities and agriculture are likely to face uncertainties.
In the Trump perspective, trade is a zero-sum game. It means that a country had to lose for another to gain. However, it is not always the case. Trade is mutually beneficial, though it may be true that it is not always equally beneficial to all countries. Market experts are hoping India’s trade with the US would recover from the slip since 2017-2018.
Briden administration may also observe a renewed push towards a rule-based trading system globally, unlike Trump’s outright ad-hocism. He is also more likely to move away from the protectionist approach, which is getting strong globally.
Under Biden Presidency, the US may again provide a global economy impulse with the control of coronavirus spread and the economic recovery that nations like India need to boost their exports and grow.
Apart from these very direct ways, where the US is crucial for India, there are other massive policy concerns. For example, how the US President handles the H1-B visa issues affects the Indian youth far more than any other country. President Trump had severely curtailed the visa regime, thanks to his “America First” policy. Biden could change the scene since he is unlikely to view Indian workers and immigrants with suspicion like Trump.
At the same time, India’s exclusion from the Generalised System of Preference could come up for reconsideration under the Biden administration.
As we are moving from Trump’s radical approach to Biden’s pragmatism, India and the US relations have a better chance of the tricky issue of data localization or crapping prices of medical devices and medical devices with a better chance of a resolution.
For the Indian economy, who constantly requires a regular supply of cheap oil for fast growth, the US and Iran relationship’s normalization and lifting of the sanctions would be more than useful.
While it is unlikely of the US apprehensions even under the Biden administration, Biden would help India against China instead of clubbing them together.
Moreover, Biden has also promised to rejoin the Paris Climate dean, and it may help countries like India deal with the massive challenges both technical and fiscal.
The Biden administration would also take a closer look at democratic rights and civil liberties in India, an aspect that to which Trump largely turned a blind eye.
Trading Over Hugs
With Biden as the Presiden of the US, he is more likely to focus on diplomatic relations with India rather than a personalized relationship with Modi. And that’s how it should be. Narendra Modi has seen how over-personalized diplomacy can backfire with Nawaz Sharif, Pakistan, Xi Jinping, Chian, and as the Biden has won the election and became the 46th President of the United States, his stadium rallies with Donald Trump has been an embarrassment.
Let’s not forget how Trump frequently lashed out at India while mimicking Modi, which Indians have swallowed without a sniffle. For instance, Trump had recently insulted India by stating that it has ‘filthy air’ (27). At the same time, Biden tweeted, saying that’s not how you talk about friends (28). The Biden administration won’t embarrass the nation with offers like Kashmir mediation.
It is time for India and the USA to put their national interests above politics at a time of great Chinese expansionism (29). If India gets a good trade deal with the US alone would be worth a lot more than civilian honors that Russia and other countries helpfully give Modi before a general election.
Before Joe Biden takes the White House next January, it would have been a long time since the US would have inaugurated a president so versed in foreign policy. Apart from serving as the vice president of Barack Obama, Biden has long held his leadership on foreign policy committees in the Senate.
Overall, the outlook for the Biden administration is positive for India. It would benefit from its partner, America, while also being more present and engaged globally. Biden’s efforts for a global coalition would also serve India well since many of the group’s goals are to pursue, such as counterterrorism, connectivity, and counterbalancing China align with India’s foreign policy objectives.
Biden’s goal to ease the tensions with Iran and the probability that he would take more hands-off responsibility in the Middle East than Trump would also be useful for India, which values its commercial relationships with middle east actors.
If not all good, Biden’s foreign policy could arouse certain concerns for India, including his inclination to pursue corporation with China, which can create chaos in New Delhi when the Indo-China relationship is tenser than in decades.
Also, Biden’s global push for more human rights and democracy means that he may call India for its policies in Kashmir. Further, Biden is more likely to take a harder draw on Russia, a difficult position for India since the government continually values its relationship with Moscow.
Besides these potential bumps, Biden, impelled by a shared interest in fighting terrorism and countering China, would certainly build momentum in India and the USA’s relations. Moreover, Biden’s foreign policy would bring more stability and predictability to the nation’s foreign relations, a welcome relief for India and the world since the order has been relentlessly agitated in the last few years.