US election: What a Clinton or a Trump victory may mean for India Inc

09 November, 2016

So, the D-day is here and voters in the US will cast their ballot to elect their next president on Tuesday. Although owing to its influence in global affairs, US presidential elections have forever evoked interest from all over the world, this election has been especially closely watched as both the candidates—Republican Donald Trump and Democrat Hillary Clinton—have had a controversial past. Although most polls have been putting Clinton in the lead, Trump has significantly narrowed the gap. And at least one major poll, conducted by the ABC news network, had even put Trump ahead of Clinton.   

But America’s internal political dynamic notwithstanding, the election is being watched globally, as markets fear renewed uncertainty, especially if Trump gets elected to the White House to lead the world’s largest economy. Here is what investors in emerging markets like India should expect after the election.

Will there be major policy changes? 

Investment research firm Faraday Research says that if Clinton wins, her policies will only be marginally different from those of the current regime. In effect, she will be “continuity candidate” with few major policy changes. However, there could be a period of uncertainty if Trump were to edge past her for the post, as his campaign has not outlined his policy in any great detail. Trump has, however, said that he will renegotiate multinational treaties like the North Atlantic Free Trade Agreement and has criticised countries like China and India for taking away US jobs. He has also promised to come down hard on immigration, which could have a bearing on Indian students and IT workers looking for jobs in the US. 

How big an issue is immigration in this election? 

Immigration has been a dominant theme during much of the Trump campaign. Trump has vowed to get back jobs lost to countries like India and to end the H-1B visa regime that has benefited Indians. Clinton has, however, largely been welcoming of immigrants and has proposed automatic green cards for science, technology, engineering and mathematics PhD holders.  

Which of the two main parties have traditionally been better for Indian business?

A look at historical data for the past 30 years throws up a mixed picture. A VCCircle analysis using India-US trade data since 1985 showed that when the Republicans were in power between 1985 and 1993, the two countries saw a nearly 45% increase in their bilateral trade. The next time the Republicans returned to power in 2001 under George Bush Jr., trade zoomed more than 200%, registering the best figures for the period under consideration. The two Democrat presidential terms saw trade grow more than 150% during Bill Clinton and just over 50% under Barack Obama. 

While the increase in trade volumes during the Clinton years is understandable, as he presided over the US at a time when India liberalised its economy, the relatively slower growth during Obama years is interesting, as this period saw the Indian rupee depreciate by nearly 36% against the US dollar.

However, beyond the headline trade numbers, data show that the best period for Indian exports was under President Clinton, when India’s exports zoomed 180%, the largest increase during the past three decades. In contrast, Bush Jr.’s years at the White House saw imports from the US go up by a staggering 380%.

Further perusal of publicly available numbers on Indian immigration to the US show that while in percentage terms the number of Indian immigrants to the US doubled from 1980 to 1990 (during most of this period, Reagan was president), the largest absolute increases have been during the Obama years.

Should India be watchful when it comes to any international agreements?

One key agreement that India may be watching out for is the Trans Pacific Partnership (TPP), a secretive preferential trade pact among 12 countries along the Pacific Rim including Canada, Japan, Chile, New Zealand, Mexico, Vietnam, Singapore and the US. While Clinton opposes the TPP, Trump supports it. India is not a TPP signatory, and so, it could have a negative bearing on Indian goods and services, which could lose preference in these markets. Moreover, the onus of regulatory compliance could fall on Indian companies, if they want to trade in these countries. 

How are stock markets likely to react to election results on Wednesday? Which stocks should you watch out for?

Although major markets have seen a more than 2% surge since the latest opinion polls signalled a Clinton win, a Brexit-like shocker (an unexpected Trump victory) could see markets nosedive. Indian IT and pharma companies have a significant revenue exposure to the US and will be impacted the most either way. Some of the most important such companies include TCS, Infosys, Wipro, HCL Technologies, Lupin, Glenmark Pharma, Bharat Forge, Reliance Industries, Tata Motors and Tech Mahindra.


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US election: What a Clinton or a Trump victory may mean for India Inc

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