The Impact of the U.S Elections on the Indian Economy

November 7, 2016
US Elections

In the News

While The United States Of America is going in for its 58th quadrennial election this week, the whole world has their eyes on this election and on the way things will be going down in the biggest superpower of the world. While it is common knowledge now that the two major players and the only contenders for the post of First Citizen are Donald Trump, a Republican Candidate, and Hillary Clinton, a Democratic Candidate. The high points of both of their campaigns go ahead to show that whoever becomes the next president, radical changes when it comes to trade relations.

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A lot of the candidates keep their main points focused on the issue of America’s trade policies with different countries. It is a fact that, regardless of Hillary Clinton or Donald Trump becoming the most powerful person in the world, America’s trade relations with different countries are bound to change radically. There are chances that some countries would benefit and others would not. The probability of countries like China and Pakistan not benefiting is highly likely if Donald Trump becomes the president. This mainly is because the former two countries have been milking USA for their own economies.

While both the candidates have wholeheartedly rejected the Trans-Pacific Partnership Trade Deal, that the soon to be ex-president Barack Obama promoted, Donald Trump has come on strong regarding the issue of doing away with any trade that is economically not beneficial to his ‘great’ country. While these changes are more likely to impact countries like Russia and China, who right now are going through somewhat of an economic instability crisis, they wouldn’t be making much of an impact on India.

One of the most important reasons for this is India’s strong economy and has also been predicted to surpass China in the next few years in lieu of becoming a super power. So basically, India as a country does not really need any improvements in terms of trade deals with America. Stock MarketAlthough one fact, that cannot be overlooked is that India most definitely is in a rut with America when it comes to trade policies; while Hillary Clinton would continue and maintain the same tandem, Donald Trump might stir things up a bit, in his bid to make it ‘great’. The various reasons why India as a country seems to not be affected by any future changes is mainly, that the I.T industry is booming here. The field of data analytics and online marketing has experienced a massive growth and popularity here, adding more fuel to the fire, is the increase in status of India, as an importer of oil, which is a result of the prices falling down. Other reasons why this country is economically strong are that the government and private companies here show 80% more recruiting capacities in the coming years, coupled with increasing salaries and rapid development across the industry of technology.

 

With the United States Federal Reserve announcing its last policy decision, there were a lot of signals hinting that the interest rests could hike come December, as the rate of inflation picks up and the economy gathers momentum. In spite of all of these presumptions making rounds, the US Fed has as of now, not made any changes to the interest rates. It released a statement saying that that the economy has gained steam and the job gain still remained solid. Policymakers, in a more optimistic vein stated that the inflation was moving towards their 2 per cent target.

While the trades in Asia seem to be a little on troubled waters, so far the US dollar has remained on the defensive as the Presidential election comes to a close. This mainly has resulted in most of the investors to take refuge under safer harbours. While on the other hand JP Morgan Asset Management stated that this election would not prove to be a risk for financial markets because there are high chances of Congress putting a break on many policies. In the case of India the country’s policy stability and improved monetary credibility is applauded while at the same time no upgrade is foreseen. This is mainly due to its weak public finances and low per capita income. This country has received the lowest investment-grading rating but with a ‘stable’ outlook.

There are a lot of fears about the impending elections, because of which, the overnight trade has suffered its longest losing streak in the past five years. The NASDAQ composite has dropped below 0.93 per cent, almost slipping down another per cent, while the Dow Jones fell 100 points, with the index closing in below 18,000 for the first time ever. The crude oil prices have also taken a beating when a build-up in the US stoked concerns of a global supply glut.

 


 

This, and a lot more, is one of the topics we discuss in our Investment Banking Courses in India. You can also watch the video on our students discussing about what goes on in our classes.


 

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