Can India survive Trump's bombshell?

The election of Republican Party candidate Donald Trump as the next President of the US has sent shock waves across the world. All along, America has been a strong protagonist of free flow of international trade and investment in goods and services. If Trump acts on his electoral pronouncements, this will tantamount to a reversal of the existing US policy stance. It will herald an era of “protectionism”. So what are the major areas of concern for India? 

 

- Uttam Gupta

President-elect Donald Trump wants American companies to operate from within the US and achieve this aim by imposing an import tariff of 35% on those who set up manufacturing facilities in other countries. Such a high tariff will seriously impact India where these companies have a big presence. This will be a huge setback to foreign investment and technology transfer and in turn to our Make in India initiative.

Trump has exotic plans to reform American tax laws. These include a steep cut in corporate tax rates as well as personal income tax rates in his country. These will leave hundreds of billion dollars surpluses in the hands of the rich and the super-rich and a corresponding loss of revenue to the exchequer every year. This can lead to a sizeable cut in spending on welfare programmes, and can affect the exports to the US from other countries like India.

The US President-elect believes that the extant visa regime has denied Americans their due share of jobs. So he will drastically reduce the number of H-1B and L-1 visas, besides substantially increasing the fees. This will affect Indian IT and ITeS [IT-enabled services] companies which have hitherto been major beneficiaries of such visas. A big slice of close to US$ 100 billion worth of exports to America could be at risk.