 "Republican US presidential nominee Donald Trump and his Democratic counterpart Hillary Clinton. (Photo: Reuters)")
From being the clear favourite to be the next American president, Hillary Clinton is now almost at par with Republican candidate Donald Trump in various polls predicting the next American president. Clinton has big shoes to fill. Clinton’s ability to take forward Barack Obama’s two term legacy is not just challenged by history but also an opponent who cares little about what the world thinks of him. A majority of polls still show Clinton in lead, but the odds have heavily tilted in Trump’s favour. Despite that, Clinton remains the favourite to be the next American president.
Unlike Trump who has a fixed 15-point agenda, Hillary has divided her agenda into 41 issues. And unlike Trump, Clinton’s agenda has a more socialist tinge to it. Clinton has travelled to India as the first lady and the secretary of state. The Clinton Foundation does extensive work in villages across India. If Clinton as the next American president were to come true on her promises made during her election campaign, it could impact India in several ways. Here are some of the issues in her agenda and how they could impact India if Clinton were to walk the talk on her pre-election promises.
1) Tax crackdown on American corporations: Many American corporations thrive by operating in a grey area between what is legal and illegal to avoid taxes and increase profits. Clinton has promised to crack down on companies that make profits in the U.S and shift profits abroad to avoid paying domestic taxes. She has also promised to implement the ‘Bufffet rule’ that calls for taxing those earning more than $1 million a year at minimum tax rate of 30%.
For those millionaires looking to exit America after these conditions are imposed, Clinton has also planned an exit tax. While India, given its low standard of living is rarely on the list of millionaire Americans looking for a second home, India also cannot hope to attract American corporations deciding to exit the U.S to avoid Clinton’s crackdown. That’s because in 2015, both India and US signed the Foreign Account Tax Compliance Act popularly called FATCA. Under FATCA, American corporations making profits in India will have to report their Indian financial accounts to U.S which makes them susceptible to tax demands in America. If American corporations fail to do so, the Indian government is obliged to share the information with the U.S. This has made India, along with other nations with whom the US has signed FATCA, unattractive for companies looking to avoid the kind of situation Clinton intends to put them in if elected President.
2) The ‘Make It In America’ plan: Clinton’s Make In America plan, like PM Modi’s Make In India plan, is driven by focused spending on the manufacturing sector. But a closer look at Clinton’s plan shows that a principal component of this objective would be achieved by the imposition of anti-dumping duties on China. Like Trump, Hillary too has labelled Chinese trade practices as unfair and has specifically promised to prevent China from dumping cheap steel products in the US.
That would be bad news for the Indian economy whose domestic manufacturers have been severely hit by the glut of Chinese steel. If Clinton were to permanently restrict the import of Chinese steel to prop up American manufacturing, more of it would be diverted towards India. That’s because steel comprises the main component of primary product manufacturing and India’s growing economy needs more of it. Indian measures to restrict cheap Chinese steel are also short term in nature. India has imposed an anti-dumping duty between $499 to $538 per tonne on some Chinese steel products. But these duties are only for a period of six months. If Clinton was to go ahead with her Make In America plan, Indian steel manufacturers could be in for more hard times unless the Indian government intervenes with more anti-dumping measures. That could lead to complications in bilateral relations with the Chinese.
3) Tackling an impending ISIS surge in Afghanistan: Unlike Trump, Clinton clearly understands that the threat of ISIS expanding in Afghanistan is an impending catastrophe in the making. Clinton, a seasoned foreign policy hand, has clearly mentioned in her election campaign that she would target ISIS affiliates not just in their Syrian and Libyan strongholds but also in Afghanistan. This would be comforting for the Modi administration which is increasingly dealing with the threat of ISIS propaganda spreading in India. ISIS flags have been raised in Kashmir and home grown terror outfits are increasingly looking to ISIS for inspiration. If Clinton decides to carry forward with her plans to tackle ISIS influence in Afghanistan, it would indirectly benefit India.
On the flip side, India would be well aware of the repercussions of the Bush era intervention of the U.S in Afghanistan. The U.S war in Afghanistan had choked access of opium to lucrative western markets and pushed more of it into India. The result of that was a ballooning of the drug crisis in the state of Punjab.
4) Plan to cut America’s oil addiction: Clinton during her campaign has clearly said that she wants to wean America away from fossil fuels. Her plan involves cutting America’s oil consumption by a third by investing more in solar power. Hillary has no plans of exploiting America’s 3.7 trillion barrels worth of reserves of shale oil. India was hoping that with a greater exploitation of America’s vast shale resources, it could wean itself away from its dependence of Oil and Petroleum Exporting Countries (OPEC).
If Clinton were to be President, the power of dictating global oil prices would continue to be with the OPEC. Clinton has also promised to take completely make certain areas in the U.S a no go zone for oil companies. If she follows through with this promise after being elected president, America’s shale oil reserves would continue to be under-exploited even though it has potential of lifting millions of people out of poverty across the world. That would also be bad news for Indian oil companies which were looking to tie up with American companies for a share of the extraction business once more reserves are available for exploitation.
5) Raising the minimum wage: One of the highlights of Clinton’s campaign is her plan to increase minimum wage and her promise to eliminate tipped minimum wage. While tipped minimum don’t affect Indian IT companies much, minimum wages certainly do. Indian IT companies thrive on getting low cost Indian labour to work in the U.S through the H1B visa programme. Most of these workers are paid the minimum wage or a little more than that in a bid to boost profitability.
For most Indian workers, a minimum wage in America is way more than a high pay package back home. If Clinton were to raise the bar, Indian IT companies could see a major cost escalation owing to enhanced salary outgoes in their American operations. This could lead to redundancies or reduced hiring by IT companies back in India. On the brighter side, Clinton hasn’t clearly specified the rate at which the minimum wage would be increased. The argument of skilled Americans losing jobs to Indians has been invoked by both Democrats and Republicans in the past. Indian IT companies could take solace in the fact that these promises are often forgotten after the elections are over.
6) Free education for all: Clinton has promised to provide free graduate college education to all families earning less than $85,000 a year as soon as she is elected president. She has promised to make graduate education free to students from families earning up to $125,000 a year from 2021. Additionally, she has also vowed to make all community colleges tuition free. This could be good news for thousands of Indian students who often take huge loans to fund that coveted American degree.
Although American colleges provide generous scholarships to deserving Indian students, a majority of them still have to rely on bank loans. With many Indian banks unwilling to give education loans without a collateral many Indian students flock to countries like Germany where public education is free for everyone. Taking a loan for an American education often involves mortgaging the family house in India for the purpose. Most Indians still bank on a house as their only fixed asset. But Clinton hasn’t yet specified whether international students would also be eligible for debt free education that she plans to usher in if elected the next president. Moreover, Clinton hasn’t yet made her stand clear on higher education. More than 1,32,000 India students from India were admitted in US universities in a masters or research programmes. If Clinton implements her promise, more Indians could head to the U.S for pursuing bachelor degrees rather than a masters.
7) Setting a precedent on tackling corporate crimes: Clinton has been more vocal than Trump when talking about corporate crimes. Her slogan “Wall Street must work for Main Street” has caught the fancy of voters. Clinton has promised to extend the statute of limitations to prosecute financial frauds in addition to holding executives responsible for corporate wrong-doing. This could involve criminal prosecution rather than just imposing fines which corporations treat as a cost of doing business.
If Clinton comes good on this promise it could put more pressure on the Modi government in India which is perceived as pandering to the interests of large corporate groups. According to data published by TRAC, the number of white collar crime prosecutions in the U.S in 2015 was just above 5000 cases. Not all of these pertained to big corporates. In India, while the police are untrained to investigate complex economic crimes, investigative agencies too have found themselves under pressure while probing fraud by big corporate houses. If Clinton were to come down hard on corporate misdemeanors as promised by her, the precedent could well catch up in India where complex financial crimes are still under reported and under investigated.
The implicationd for India if Trump wins
The implicationd for India if Trump wins
Trump has a 15-point agenda. If he decides to implement them, it could impact India in several ways. While some of them like the second amendment and veteran affairs reform affect America more than India, others could impact the Indian government, people and businesses in several ways.
Here is a lowdown on the implications Trump’s policies as the US President could have for India
1) The Tax Plan is a negative: One of the highlights of Trump’s economic campaign is his plan to reduce corporate tax rates in the U.S to 15%. At present the rate stands at 35%. This would make the U.S one of the most attractive destinations in the world for businesses, especially for American businesses that have set shop in other countries to improve their profitability by paying less taxes.
If Trump were to implement this plan, U.S businesses in India could be lured back to American soil
Take the case of Ford Motors. Trump has repeatedly flayed Ford during his campaign for moving manufacturing outside U.S especially to Mexico in a bid to circumvent high taxes. Now Ford India has been making good progress in India. Its manufacturing unit in Chennai recorded its highest ever exports this August. Ford India exported 67% of all its vehicles manufactured in India. In addition, it made a substantial investment in the growing business of car rentals in India by investing in Zoomcar. For all the money Ford India earns, it pays the same corporate tax rate in India as it does in the U.S. If Trump were to come true on his promise to slash corporate tax to 15%, Ford India could well be tempted to move a part of its revenue earning processes back to Chicago from Chennai. That would be bad news for over 2000 employees working at the Ford factory in India. Trump’s massive tax cut would more than offset the advantages of cheap labour that India provides to Ford. Other American businesses in India could be tempted to do the same.
2) Plan to curtail Chinese Trade is a positive for India: If there is anyone Trump has lambasted more than Clinton during his campaign, it is China. The Republican candidate has threatened to label China as a currency manipulator. He has called for imposing higher tariffs on Chinese goods, initiate litigation against China for stealing American trade secrets and bring trade cases against China at the World Trade Organisation (WTO) to force it to cut down its trade subsidies. All through his campaign, Trump has harped on the need to reduce the trade deficit with China which touched a record high of $365 billion in 2015. If Trump fulfils his promises and decides to curb Chinese imports, it would hardly benefit India. That’s because Chinese manufacturing and existing trade with the U.S is eons ahead of India. The biggest imports of the US from China are computers. According to data available with the US Census Bureau, Americans imported computer hardware worth $74 billion in 2015 from China. Add telecommunications equipment and the figure touches $100 billion. In comparison India’s computer and telecom equipment exports to U.S was just above $2 billion. India’s biggest exports to the U.S are gems and diamonds followed by pharmaceuticals pegged at $66 billion. China, meanwhile, exports pharma products worth $20 billion to the US. Given India’s strong pharma manufacturing, Trumps promise to curtail China could open possibilities of diverting capture a part of the trade that China would lose.
3) Cutting Down Immigration is a negative for India Trump has at been at his radical worst while talking about immigration. His attacks have been directed towards the Mexicans, with Trump advocating building a wall along the border and making the Mexicans pay for it. He has also called for making Americans being prioritised for open jobs and restricting skilled visas to make more jobs available to Americans. That would be bad news for top Indian IT companies that make their billions by using the H1B visa programme that allows low cost skilled Indians to work in the U.S. In 2015, the US issued 1,72,748 H1B visas, many of which were issued to Indians employed by companies like TCS, Infosys and Wipro. In 2014, Infosys alone filed more than 24000 Labour Condition Applications (LCA) required to obtain these visas. Many US companies operating in India like Cognizant also send their Indian staff to U.S on these visas since Indians are cheaper to employ as compared to American workers. Trump had earlier termed the H1B visa regime unfair. And later in a bid to earn the support of the Indian-American community, he softened his stand. But Indians companies know that every American presidential candidate always opposes the H1B visa programme in the run-up to the elections and never follows through with the promise of curtailing them once in office.
4) Reviving the American Economy is a positive: Trump plans to boost GDP growth to 4% by adding 25 million jobs over the next decade. He plans to do this through his lower corporate tax rate plan and easing regulatory frameworks for businesses. He has also promised to cut federal spending to balance the budget through his penny plan that envisages cutting one cent for every dollar in the federal budget over the next few years. That would mean an enhanced role for private businesses in creating jobs to achieve Trump’s targets. That would mean enhanced opportunities for not just big businesses in India but also smaller ones to invest in the U.S. The EB-5 visa programme is likely to further gain traction in India if Trump were to follow through with his agenda of cutting federal spending while at the same time easing regulation for businesses. Under the programme, Indian businesses would require to invest a minimum of $1 million and create at least 10 jobs for American workers. If any entrepreneur can do this in the U.S, they are eligible for a green card. India has 2.5 lakh millionaires and the number is expected to double by 2025. That would mean more opportunities for Indians to invest in the U.S and get that much coveted and aspirational green card.
5 Foreign Policy and Terrorism is a positive for India
Trump has used strong words on the need to curtail ISIS and curb immigration from countries that export terror. This would comfort India, which has seen a surge in support for ISIS among its young population. If Trump fulfils his promise of restricting immigration, that would further hurt Pakistan. But what would truly be eagerly watched by the Modi government in India is Trump’s controversial plan to establish a Commission on Radical Islam. Trump’s plan involves launching an ideological offensive that includes using the media as an instrument to inform people about the core ideology and convictions of radical Islam. Trump has also planned to expose networks in American society that promote radical Islam and rewarding people to report those exhibiting signs of radicalisation to authorities. This would come as a big boost to Modi government’s own domestic security policies which focusses on the need to curb growing Islamic radicalization in India. After coming to power, the Modi government has been proactive in using the National Investigative Agency (NIA) to apprehend people influenced by or supportive of ISIS. Trump’s ideological offensive against radical Islam could be a force multiplier for the Modi government. On the flip side, if Trump decides to walk the talk he could further alienate the Muslim community already apprehensive of a right wing government in India.
6) The Energy Plan would benefit India: Trump has promised to unleash America’s shale oil, natural gas and coal reserves to make U.S energy self-sufficient. If elected president, he has also promised to open onshore and offshore leasing on federal lands and lift the moratorium on coal leasing. India, like many other nations in the world, is at the mercy of Organisation of Petroleum Exporting Countries (OPEC) when it comes paying a price for oil. A rise in the price of fuel bleeds India’s domestic oil companies, throws the government’s fiscal deficit targets in disarray and leads to a spike in the prices of essential goods. Rising fuel prices and the escalating price of food has the potential of making incumbents loose an election in India. If Trump were to come true on his promises, India could benefit massively. Opening up of the US oil sector could lead to price stability globally. It could also throw open massive business opportunities for Indian oil companies including the state owned Oil and Natural Gas Corporation of India (ONGC) whose foreign arm ONGC Videsh Limited (OVL) has been expanding its operations globally.
7)Scrapping Obamacare is a negative for Indian pharma: Trump has used colorful adjectives to describe Obamacare during his campaign and has vowed to scrap the scheme aimed at providing affordable healthcare to Americans. That could be bad news for the Indian pharma sector. As pointed above, pharmaceuticals constitute the second biggest exports of India to the U.S. India’s strength in manufacturing affordable generic drugs complemented the objectives of Obamacare. Indian generic drug companies had gained massively with a sub-legislation under Obamacare that allowed the use of ‘biosimilars’. According to US Census Bureau data, when Obamacare was signed into law in 2010, India’s pharma exports to the U.S were $31 billion. Five years of Obamacare more than doubled pharma exports from India to the U.S to $66 billion. If Trump implements his promise to junk Obamacare, Indian drug companies could be severely hit. Indian IT companies which provide support to the program could also end up losing their business that could lead to job cuts in India.
