As we all are aware that the US Presidential elections are live and the fate of both the candidates, Joe Biden (from Democratic Party) and Donald Trump (from Republican Party) hang in between. As of 03.36 pm IST, the counting shows that Joe Biden is in lead and needs 6 votes to win. 

So, why are we even talking about it? General Knowledge! Maybe! Well, thanks for that you would say. But no! That’s not it. US elections have an impact on stock markets, countries’ foreign relations, development opportunities, etc. and therefore we bring you this article wherein we discuss “Why and How are US elections important”.

The answer to this question is simple and yet not that simple. The answer lies in their stance towards issues and economic policies.

Both the candidates of the US Presidential election have quite contrasting views. To clarify, Joe Biden, who has a soft stance against China and wants to mend the tarnished relationship with China on one hand and on the other Donald Trump has very stringent views against China and blames them for the Corona Virus creation out loud.

As the US accounts for 20% of the entire global income and accounts for only 5% of the world population, which leads to the economic implications which are caused by the presidential election. Therefore, till the final outcome of the election is out, it is expected that the market will see a lot of movement and once the results of the elections are declared there will be a fresh infusion of money in the Asian economies. Such infusion will be helpful for India, which is one of the biggest players in the Asian market and can see a surge up and infusion of foreign capital in the Indian equity market. Hence, happy news! Growth in the Indian market.

If we talk about Trump, everyone knows that he is from a business background. Most of the policies made by him are pro-financial development and if he comes back in power, the surge in global economies is expected to continue at a faster pace. It is said that the Global stock market indices might have record-breaking levels.

As mentioned above, Trump has been very vocal about his stance toward China. He, in his several press conferences and public appearances, has pointed out the CoronaVirus as “Wuhan Virus” or “China Virus”. To show that his words were just not words he has imposed a lot of restrictions against China and its trade in the US, and also has imposed tariffs on $370 billion worth of goods imported from China. This entire situation has given indirect benefit to Indian goods and made them more competitive in the market.

That means if we look into the long term positive impacts on India of Trump’s win, we can say that;

  • Make in India: The US investors will look into and invest more in the Indian market as the Indian market will be feasible for them;
  • Indo-Pak relations: Pakistan has been receiving aid from the US of more than $3 billion since 2002 for fighting radical Islam. Trump has indicated his intention of keeping Pakistan in check. It is likely that he would leverage the aid given to Pakistan to influence its policies and curb radical Islamic groups otherwise would cut down on their aid. In both scenarios, Pakistan will be less of a threat to India;
  • IT and service industry: Trump, in most of his campaign speeches, has railed against outsourcing and has vowed to trade imbalances of the sort that India currently enjoys with the US. Since India’s rapidly increasing IT related service industry gets a major chunk of its revenues from the US, Indian IT industries stand to lose millions of dollars in contracts if they cannot send their Indian staff to the US on work. However, the US does not have an overabundance of skill-sets in the IT industry nor does the rest of the English-speaking world. So like it or not, one way or the other Indians will be involved in this whether in the US or sitting here in Bangalore, Hyderabad, or Gurgaon.

Now, if we consider Biden and the policies he put across, what we see is that they are more inclined towards mending relations with the allies, which also includes relations with China. That means if Biden wins the election, we might see the restrictions against China lifted and which will cause an adverse impact on the business volume between India and the USA and we could also see an initially negative reaction from the market hence, there might not be happy news for India.

Even when we look into his Democratic vice presidential candidate, Kamala Harris, she has not been very kind towards the Indian Government on the Kashmir issue. Her take on the issue was much like that she called it as ‘Human rights abuse Inflicted by India’.

Basically, the Democrats have shown an inclination towards Pakistan whereas Trump has ridiculed Pakistan and supported India.

All-in-all India has three clear strategic choices;

  1. Hedging;
  2. Balancing; or 
  3. Bandwagoning.

In Hedging, the prospects of continuing cooperation with China on areas of mutual interest will persist while building India’s defense and confronting Beijing on the a-la-carte basis (at a time and place of New Delhi’s choice).

Under Biden Presidency, demand for continued strategic Hedging will be seen.

Bandwagoning is a defeatist option of capitulation and accepting Chinese hegemony (“If you cannot beat them, join them!”). Which no self-respecting Indian would be comfortable with. Which means, this is not an option anyway.

Our relations with the foreign countries are based upon a number of factors out of which this is one of them. Balancing is an art that we have been doing for a long time.

We wish both the candidates the best of luck. May the best player win.