India will continue to enjoy benefits of a close US relationship and trade will continue to grow

Q1. The US elections are said to be one of the closest till date, what impact will the election of a Republican / Democratic party have on the US economy and how is that going to affect India in the short as well as the long term?

- Satish Ramanathan

A. The US Economy as of now is growing well, with unemployment levels lower than projected. The investment cycle is also contributing to growth. Recent reductions in interest rates bode well for continued growth in the US economy. Sectors such as housing that suffered due to sharp increases in interest rates could pick up, as well as household stress and default rates declining. In our view, regardless of who comes to power, policies will remain pro-growth and domestic oriented. This will mean that US economy will continue to grow well. The US also enjoys lower cost of energy than many others, implying that it is well positioned in global competitiveness. India will continue to enjoy benefits of a close US relationship and trade will continue to grow, implying that traditional export oriented companies will do well. Further, US companies may choose to invest in India to move some of their manufacturing facilities away from China.

Q2. With the turmoil in the Middle East and the Russia Ukraine war showing no signs of abating, how likely are we to see a wider escalation of hostilities and how will that affect Indian markets?