Context: With the election of Democratic candidate Joseph Robinette Biden Jr., as the 46th President of the United States, beating incumbent U.S. President Donald Trump, India is looking forward to strengthening its ties with the US and weeding out differences.

More on the news:

  • Biden secured more than the required 270 of 538 Electoral College votes needed to win the White House.
  • Mr. Biden’s running mate, Kamala Devi Harris, a U.S. Senator from California, will become the first woman and first Indian and African-American Vice-President of the country. 
  • Unlike Trump, Biden’s approach could have a salutary impact on how the US leads the rest out of this tricky phase for the world economy amid Covid infections.

Possible impacts on Indian economy:


  • Trade surplus: Over the past 20 years, India has always had a trade surplus with the US, which has widened from $5.2 billion in 2001-02 to $17.3 billion in 2019-20. In other words, India exports more goods to the US than import from it.
    • Apart from trade in goods, India accounts for nearly 5 percent of USA’s services imports from the World. 
  • Foreign Direct Investment (FDI): Beyond trade, the US is the fifth-biggest source for FDI into India. Of the total $476 billion FDI that has come in since 2000, the US accounted for $30.4 billion (roughly 6.5 percent) directly. 
    • Only Mauritius, Singapore, Netherlands, and Japan have invested more FDI since 2000.
  • Foreign Portfolio Investments (FPI): Apart from FDI, the US also accounts for one-third of all FPI (investment in financial assets) into India. 

Present scenario: In the Trump worldview, trade was a zero-sum game. In other words, a country had to lose for another to gain. This has resulted into

  • H1-B visa issue: India had suffered the most as a result of severe curtailment of the visa regime, thanks to his policy of “America First”. 
  • GSP: India’s exclusion from the US’s Generalized System of Preference.
  • Data localisation: Tricky issue of data localisation or capping prices of medicines and medical devices was the result of radical approach of earlier administration.
  • US sanctions on Iran: It severely limited India’s sourcing of cheap crude oil. 
  • On China: The US apprehensions about China and clubbing both India and China together.

Future projections

  • On trade: Biden is likely to be less obtrusive than the current Trump administration.
    • Under the new administration, India’s trade with the US could recover from the dip since 2017-18.
    • It may also see a renewed push towards a rules-based trading system across the world, as well as a move away from the protectionist approach that has been getting strong across the world.
  • Relations with Iran: The normalisation of US-Iran relationship and lifting of sanctions would be more than useful for India.
  • Relations with China: The new administration will help India against China, instead of clubbing the two together.
  • Climate change: Biden has promised to rejoin the Paris Climate Accord, and this may help.

Amid Covid infections, the US could yet again provide a growth impulse to the global economy that countries such as India need for their economic recovery.

Source: TH