Article: Whoever becomes the President, India will have to remain alert

Author: Maithili Bhushanurmath
The answer to who will be the next President of America will be known tomorrow and everyone is eagerly waiting for it. The reason for this is that today wars are going on in some areas of the world and there is also economic turmoil. In such a situation, it is very important for the world and an emerging economy like India that who becomes the 47th President of America.

Let us understand how America’s policies in three sectors will impact our economy. These are fiscal, monetary and trade related policies. First let us look at fiscal policy.

overspend
The condition of the government treasury in America is not good. Its fiscal deficit has remained more than 6% annually for many years. If the condition of any other country was like this, the IMF would have been reprimanding it and an attempt would have been made to impose expenditure cuts on it. But the dollar reigns supreme as the international reserve currency and America controls the World Bank-IMF. Therefore America can spend more than its limits.

the public will be burdened
The sad thing is that neither Kamala Harris nor Donald Trump is going to solve this deficit problem. They know that in the current world order they do not need to do this. But it is also true that the burden of this increase in government expenditure will ultimately fall on the people there.

Trump, Harris stance
In fact, Trump does not believe in controlling government spending. During the election campaign in the last few months, he/she has made the list of tax cuts long. If he/she becomes President, fulfilling these promises would reduce the income of the US federal government by more than $7 trillion over the next decade. This means that the US government’s deficit will increase by another $5.8 trillion during this period. On the other hand, if Kamala Harris becomes President, as per her promises, this deficit may increase by 1.2 trillion dollars by 2034.

impact on india
Due to increase in government deficit in America, loans will become expensive there. Therefore, the cost of borrowing will increase in other countries also. This will have a negative impact on growth. If the US central bank Federal Reserve makes loans cheaper in these circumstances, it will increase inflation. With great difficulty the world has controlled inflation, which had reached a record level of 40 years a few years ago.

impact on monetary policy
The Federal Reserve is an autonomous institution, so whoever becomes the next President of America, it should not make any difference on paper regarding monetary policy. But Trump has said many times that as soon as he/she becomes president, he/she will oust Federal Reserve Chairman Jerome Powell. Interestingly, when Trump was the President, he/she made Powell the chairman. Trump also wants the central bank to work at the behest of his/her government. Therefore, if Trump wins, there could be a sharp cut in interest rates.

what will harris do
Unlike him/her, Kamala Harris respects institutions like the Fed. If she becomes President, Powell can complete her term till May 2026. In such a situation, interest rates in America are expected to be gradually reduced.

Trump’s promises on trade
Now let’s talk about business. Trump has said that if he/she becomes president, he/she will impose an import duty of 10% on everything coming into America. he/she has talked about imposing 60% tariff on Chinese goods. he/she will also snatch the Most Favored Nation (MFN) status from China. Although the snatching of this status does not make much difference, it may indicate that the policies made over the years regarding foreign trade are about to end.

protectionist policies
Trump also wants to stop outsourcing. he/she has promised to ‘build American, buy American, and hire American’ during the election campaign. he/she has also talked about punishing those who outsource employment and set up factories in countries like Mexico. Although he/she has not taken the name of India in this regard, but earlier he/she has accused India of discriminating against tariffs. Therefore, the possibility of his/her policies having an impact on India’s service exports cannot be ruled out.

attack on free trade
Harris is better in this matter. But he/she is also not averse to keeping American interests uppermost in trade. She is in favor of giving subsidies to American companies so that the manufacturing base in the country increases. They don’t care that it will hurt the free trade system. If China ignores the rules then they also have no objection to imposing tariffs on it.

be alert india
Here the question has to be asked that who makes the rules of international trade, is this not the job of WTO? Harris believes that this is America’s right, not WTO. This is not good news for India, which has been in favor of WTO rules for global trade. This means that whoever wins the elections, we will have to be alert to protect our economic interests.