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Abu Dhabi, UAEMonday 10 December 2018

India faces double-edged Donald Trump

Donald Trump’s US presidential election triumph is a mixed blessing for India. On the one hand he favours it over China, on the other he plans to bring outsourced jobs home and curb visa allocations.
A billboard promotes the luxury residential apartment complex Trump Tower Mumbai. The US president-elect has substantial business interests in India. Indranil Mukherjee / AFP
A billboard promotes the luxury residential apartment complex Trump Tower Mumbai. The US president-elect has substantial business interests in India. Indranil Mukherjee / AFP

MUMBAI // Indian business leaders are largely upbeat on the American president-elect Donald Trump and the future of US and Indian economic relations.

Despite some concerns that his immigration policy and plans to reduce outsourcing could hit the Indian IT industry, many believe that his victory could in fact signal a move towards stronger economic and trade relations.

“While the scope and nature of impact will only be seen when Donald Trump assumes office, it is my belief that the US-India relations should experience a new high under the Trump administration,” says Arun Ramamurthy, the director of Credit Sudhaar, a finance and credit company in India.

“Trump during his presidential campaign had clearly pronounced suspicion towards China and its skewed trade policies. In case the Trump administration decides to take a tough stand on China, Indo-US ties can experience a new surge. This will have a positive impact on the trade and economic ties as well.”

Tensions between Trump and China have been rising, even before the controversial president-elect comes to power next month, which could signal that relations are set to deteriorate between the world’s largest economies. Trump was critical of China’s trade and currency policies during his campaign and following a recent call to Taiwan’s president, which China objected to, a few days ago he posted a series of tweets attacking China’s monetary policy and military operations.

Meanwhile, Trump has described India as “a great country” and promised that their relations will be “the best ever”.

“It’s important to understand that Donald Trump is an enigma so it’s very hard to predict anything,” says Raghu Kumar, the director of Upstox, an online brokerage, and a US citizen who is currently based in Mumbai. “But no matter how you slice and dice it, I think India will benefit.”

He believes that if tensions with China spirals into an issue that affects trade between China and the US, that could be to the advantage of Indian manufacturing and trade, as the US turns to India instead.

There could be “huge jump in the [Indian] markets” as a result of Trump’s victory, something that is not happening now because of India’s demonetisation move, Mr Kumar adds.

What is also promising is the fact that Trump has significant business interests in India. In Mumbai, he has lent his name to a branded Trump luxury apartments project, being built by Lodha Group, a local developer. He has a similar project in Pune, being developed by Panchshil Realty, as well as projects in Kolkata and Gurgaon. An analysis by The Washington Post revealed that Trump’s company has created more business ventures in India with developers than any other country.

But the president-elect has signalled that he does want to bring jobs that have been outsourced overseas back to America and that he wants to reduce the number of H1-B visas, which allows employment of specialised foreign workers in the US. This would impact the number of Indians that could work in the IT sector in the country, which would hurt Indian IT firms, already under pressure and facing increased competition from other countries. Indian IT companies including Infosys, Tata Consultancy Services, and Wipro, use H1-B visas to send IT professionals to the US to service clients there.

“The world over, there’s a lot of protectionism coming in and push back on immigration,” Pravin Rao, the chief operating officer at Infosys told Reuters. “Unfortunately, people are confusing immigration with a high-skilled temporary workforce, because we are really a temporary workforce. We have to accelerate hiring of locals if they are available, and start recruiting freshers from universities there.” This would inevitably push up costs for Indian IT companies.

Mr Rao also said that Infosys was looking at accelerating acquisitions in the US to boost their presence in the country and try to defend themselves from protectionist measures.

The message that Trump wants to stop the flow of jobs out of India could also be bad news for the Indian manufacturing sector. US aviation firms Boeing and Lockheed Martin have proposed to build jets in India, but it is not clear if Trump’s victory could have an impact on these plans.

“The administration plans to prioritise the jobs and wages of the American people by establishing new immigration controls which could ensure that American workers are offered, open jobs, first,” says Abhishek Shindadkar, a research analyst at Equirus Securities in Mumbai. “Election results could raise protectionist voices leading to measures such as higher visa costs.”

But others are more optimistic about the situation.

“The change of guard at the US government will not have any significant impact on the Indian IT industry,” says BVR Mohan Reddy, the founder and executive chairman of Cyient, an engineering services and technology company headquartered in Hyderabad and with a presence in the US.

“Over the years, India’s IT sector has consistently added value to the US economy in multiple ways. Indian IT companies have not only helped make US companies more efficient and competitive, but have also helped them develop new technologies and new products thereby significantly benefiting those companies, their customers, American job growth and contributing to the US economy at large.”

He thinks that on closer examination of the issue, Trump will be unlikely to do anything that would jeopardise the Indian IT sector’s contribution to the US economy.

“As the rhetoric of the presidential contest fades into the past, the Trump administration will need to make way for mutually beneficial trade with India. Trump will need to take a more balanced approach to high-skilled visas, and cannot overlook the Indian IT sector’s instrumental role in the US economy.”

Mr Shindadkar is of a similar opinion.

“Economics could replace rhetoric’s given outsourcing is not a one-way-affair and that outsourcing while generating employment in India has saved millions for corporate America,” he says.

Ajay Kolla, the founder and chief executive of Wisdomjobs.com, says that there are “three things that go in favour of the Indian IT industry is its cost effectiveness, superior domain knowledge and availability of quality talent”, which should protect the sector, he believes.

And there are strong indications that Trump has been trying to win favour among Indians in the US.

“Before the elections were closing, [Trump] was trying to generate good vibes among NRIs,” says Mr Kumar.

Trump’s daughter, Ivanka Trump, celebrated the Diwali festival with Indian Americans at a temple in Virginia, for example.

“Indians have a lot of respect in the US,” says Mr Kumar. “It would be extremely damaging for Trump to come out tomorrow to say, ‘India is stealing all our jobs’. I think he wants to encourage more business between the US and India.”

Despite the controversies surrounding Trump, it is clear that he seems to have won over substantial support from businesses in India.

 “I feel Trump will be very positive for India and business,” says Srinivasan Gopalan, the chief executive of Ozone Group, a property developer in Bangalore.

He cites the fact that Trump has appointed two women of Indian origin, Nikki Haley and Seema Verma, to his cabinet, as evidence of the importance of the Indian community.

“The Indian ethnic community in the US is educated and affluent and holds considerable clout.”

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