How the US election outcome will play out for Indian economy

The Indo-US Economic Summit starting next week in New Delhi should signal to many new ideas in motion for a long-term partnership between India and the US. It is obvious to both sides that if the strategic relation between the two countries is to thrive it must be built on a much stronger trade and business relationship. As one of the faster growing markets in the world US's interest in India is unequivocally market-driven. It's also interesting to note that the industry pitch from the US hasn't quite changed since Obama's first visit to India which I covered extensively – that's when he said India was a market that needed to open up for the American industry. But a strong and forward-looking trade framework eludes the naturally aligned democracies.

There are few key points to be watched out for. The two countries are talking of taking trade from $100 billion to $500 billion. First, it is important to keep the political calendar of the next few months in mind given that the new President in the US in November could be a decisive factor in how trade relations are defined between the two countries. Second, the $500 billion aim is a lofty target and India can't potentially be the consuming party alone. It needs to open its markets and also will need greater access to the US markets. What kind of foreign direct investment could one expect? How significant can this be and would it come in new-age sectors or defence or food processing? Andrew Holland of Ambit Capital shares "There may not be a big leap with respect to FDI but given the scope of improvement in trade numbers, it could only get better." Holland like many market analysts are basing their comments on the assumption that Hillary Clinton would win. From a stock market point of view, that would spell continuity. "Relationship between the two will be strong under Clinton. Markets will find a base to remain neutral." However, there is a high chance of volatility if Trump was to come, says Holland, as few know how he would react to economic partnerships.

Former banker Meera Sanyal who has worked with Hillary Clinton on her council for women empowerment reflects on many other nuanced reasons on why she could make for a good leader for India. For trade, she asserts that while there will be US pressure to open up markets India will need to demand access for its labour in return to make it a fair deal for its service exports. This means sorting visa issues, export of skilled labour, etc. For starters, the US is planning to give a major push in attracting Indian tourists by making entry processes simpler starting next year. But will this mean that Indian skilled resources can also get easier access to the US markets? Overall, one can expect India to play a little more constructive role since it also wants its own interests to be taken care of in the broader trade agenda.

On the broader economic view, Sanyal sees the need for a more cogent perspective to emerge from the US at a time the global economy stays fragile and funnelled with excesses. "I believe we are a facing a global glut with quantitative easing. There is a fundamental shift." Sanyal superimposes this discord with the realities of American earners. "Wages in real terms for the middle class have been lower over the last four decades. They have not gone anywhere. They make the cornerstone of any economy. In the last few decades, people who were making stuff have been replaced by those who were financing stuff. That course correction might be needed." Sanyal hopes Clinton will involve Bernie Sanders. "He had a pulse on the fact something was dramatically wrong with the economic landscape. I do hope that he will say have in the next administration. If Hillary can do with Bernie Sanders what Obama did with Hillary, that would be a winner."

While the upcoming summit may be just one of the bilateral ones focussed on industry and not be able to break new ground, it will surely set the tone for what to expect in the next six months while clearly identifying the strategies of how to enhance trade between the two countries irrespective of the outcome of the US elections.