A better bromance? How a Biden admin could boost India’s economy

Biden’s approach to trade, the climate crisis and even the pandemic could bring more benefits to India than Trump’s, say analysts. 

Some analysts expect President-elect Joe Biden to roll back tariffs the Trump administration put on Indian goods and reinstate the GSP as a way to rebuild trust and strengthen relations [File: Adnan Abidi/Reuters]

Mumbai, India – Indian Prime Minister Narendra Modi has been heaping congratulations on US President-elect Joe Biden.

On Wednesday, the two leaders had their first phone call since Biden emerged victorious in the race for the White House.

On November 8 – a day after the former vice president clinched Pennsylvania and enough electoral votes to secure election victory – Modi’s office tweeted images of himself and Biden embracing back in 2014 and 2016.

India’s media has also latched onto the idea of a slow-burning bromance, touting the long-standing relationship between the two.

For the Modi government, these gestures are key to ensuring good relations continue with India’s largest trading partner, as Donald Trump prepares to exit the Oval Office.

In the run-up to the election, critics accused Modi of breaking with practice and tacitly endorsing Trump’s re-election bid during last year’s Howdy Modi! event in Houston.

The Namaste Trump event in Gujarat this February brought Trump and Modi together on stage again, further generating accusations that the Indian prime minister was playing favourites.

But for all the perceived chumminess between Modi and Trump, some analysts believe a Biden White House may prove more beneficial to India and its economy than the outgoing administration.

US President Trump and India’s Prime Minister Modi embrace during a joint news conference after bilateral talks at Hyderabad House in New Delhi, India, in February [File: Adnan Abidi/Reuters]

Less transactional, more multilateral

Biden’s world view is fundamentally different from Trump’s “America First” focus on rebalancing trade deficits.

Some believe the President-elect’s foreign policy could approach trade as part of a broader strategy to deepen ties with global partners and bring a sense of stability back to trade negotiations.

It is also possible Biden could roll back the tariffs that the Trump administration slapped on Indian goods and reinstate the Generalized System of Preferences as a way to rebuild trust and strengthen diplomatic relations.

But a better bromance does not mean all trade tensions are likely to melt away.

“India still has many tariff and non-tariff barriers that irk Americans – even the Obama administration tried to nudge India on this,” Kashish Parpiani, a research fellow at Mumbai-based Observer Research Foundation told Al Jazeera. “Biden will be familiar with these issues and will continue working on them, just not out in the open or as vocally as Trump was”.

Bilateral trade deal not a top priority

While trade negotiations will continue, few see a US-India bilateral free trade deal to be an immediate priority for a Biden White House, given the immense economic challenges the US faces at home.

“You have to look at the situation Biden is inheriting and the current economic environment,” Rupa Chanda, professor of economics at IIM Bangalore told Al Jazeera. “He has to first deal with unemployment domestically and think of the labour unions backing him – I don’t think he will push for any major deals any time soon”.

A bilateral trade deal may not be on the cards at all, said Amitendu Palit, senior research fellow at the Institute of South Asian Studies, National University of Singapore.

“We may see the Biden administration renegotiating the Trans-Pacific Partnership [TPP) to include India,” he told Al Jazeera, noting that Democrats have long favoured multilateral agreements over bilateral ones.

The TPP was the linchpin of former President Barak Obama’s pivot to Asia. Envisioned as a 12-member pact between the US and other Asia-Pacific nations, it crucially excluded China.

But the TPP withered after Trump pulled the US out of the agreement due to concerns that it could undercut US manufacturing and jobs.

The Biden administration may renegotiate the TPP to include India [File: Tom Brenner/Reuters]

The US’s exit eventually became China’s gain.

Last week, a limited trade deal – the Regional Comprehensive Economic Partnership, or RCEP – was formally signed by China and 14 other Asia-Pacific nations.

RCEP does not include the US or India. New Delhi withdrew from it last year to shield domestic producers from cheap imports from China and other RCEP partners.

But the successor to the TPP – the Comprehensive and Progressive Trans-Pacific Partnership or CPTPP- could bring strategic benefits to both the US and India.

Biden has not said whether he would rejoin the pact when he takes office. But Palit believes the CPTPP could be re-positioned as an anti-China economic alliance across the Indo-Pacific.

“[RCEP is] seen as a China-driven Free Trade Agreement”, he said.

But analysts are split over whether India would want to opt into any multi-nation trade deal.

“We would have to wait and see what comes out of any renegotiation, but on the whole, we have seen the Modi government reluctant to join multilateral trade pacts,” Priyanka Kishore, head of India and South East Asia for Macro and Investor Services at Oxford Economics, told Al Jazeera. “At the moment, India is more inclined to pursue bilateral trade agreements which they feel would not disadvantage Indian manufacturers.”

Persistent barriers

Regardless of what kind of trade agreement India enters into, trade barriers to certain imports will almost certainly remain.

Gaining access to India’s agricultural and dairy markets, for example, has consistently blighted trade talks. New Delhi is loath to jeopardise the livelihoods of the country’s small, independent farmers- a politically important voting bloc.

India has also rejected US dairy imports on socio-religious grounds because American cattle are fed blood-meal, a protein-rich supplement made from slaughtered animals.

“India still has many tariff and non-tariff barriers that irk Americans - even the Obama administration tried to nudge India on this.

by Kashish Parpiani, a research fellow at Mumbai-based Observer Research Foundation

“A lot of cynics say this is just shadowboxing though,” said ORF’s Kripalani, explaining that India is already nearly self-sufficient in dairy products. “Foreign producers would have to comply with extra certification in order to cater to the Indian market which would raise their costs and make their products too expensive”.

Dairy issues could also raise objections from other CPTPP members, such as Australia and New Zealand, if India joined the pact.

But Palit said the agreement could carve out an exception – a practice not uncommon in multilateral trade deals – and that finding a workaround could prove worthwhile for India if it brings in investment from US agricultural companies.

“India’s recent agricultural reforms show it clearly has ideas to become a regional export hub,” said Palit. “If it allows US companies access, it can expect investments in food processing, storage and logistics in return – this could then make the deal easier for India to sell to constituents at home”.

Mobile COVID tests amid the pandemic, at a wholesale market, in Delhi, India [File: Adnan Abidi/Reuters]

The US turning more to regional or even global partnerships could also help resolve another thorny issue – digital trade.

India currently insists that companies that handle sensitive data on its consumers must store and process that data in India. This raises problems for US tech giants like Google and Amazon, as well as foreign payment providers like Visa and Mastercard, who rely on cross-border data transfer to operate.

In 2019, the office of the US trade representative described the regulation as “onerous” and also referred to the country’s draft e-commerce policy as one that further “threatens to undermine the digital economy”.

But Malachy Nugent, vice president of financial services at the US-India Strategic Partnership Forum believes Biden’s administration is unlikely to take a position on the data issue that runs contrary to its predecessor.

“They would also recognise that data localisation is inefficient and makes it harder to protect consumers from financial fraud and criminal activity,” he told Al Jazeera. “It’s not just a commercial issue. There are some real national security issues at stake, as well”.

We may see increased investment in renewable energy and green technology companies in a way that was not really forthcoming under Trump.

by  Rupa Chanda, a professor of economics at IIM Bangalore

Nugent suggested that rather than presenting the data issues as a two-way trade dispute, a multilateral approach typical of Democrat-led governments may be more successful.

“If the US can show some leadership here and bring both developed countries and emerging markets to the table, that is the most likely way that these data issues will be resolved,” he said.

The US regaining its position as a leader on the global stage could bring other benefits to India as well.

India is one of the most vulnerable countries in the climate crisis. Biden’s commitment to rejoining the Paris climate accord, as well as rolling back several Trump-era climate deregulation policies, could reignite global efforts to reduce greenhouse gas emissions and achieve climate action goals.

The US re-entering the Paris Agreement could also boost India’s tech sector, said IIM Bangalore’s Chanda.

“We may see increased investment in renewable energy and green technology companies in a way that was not really forthcoming under Trump,” he said.

In the nearer term, Biden’s approach to the COVID-19 pandemic could also resonate beyond US borders.

“None of our economies are going to rebound until the pandemic is under control, but now, with Biden in the White House, that looks more likely,” said Nugent.

“The US is one of the major drivers of the global economy – so if it does well, India will benefit indirectly.”

Source: Al Jazeera