What does Obama’s winning mean for India?

US is India’s largest trading partner, accounting for over 17 per cent of total exports. When the whole world is facing slowdown, sentiments need to be improved, and then only economy will pick up a positive direction. Improvement in sentiments would mean that FIIs would once again start looking at emerging markets and that is what India needs the most. Right now, the whole world needs a change; a change from recession and slowdown, and this is the hope of change that America and the world expect’s from Obama.

H1B visa’s (which allows U.S. employers to employ foreign guest workers in specialty occupations) and Outsourcing which Obama talked about earlier, are too micro issues and do not make sense in the whole macro picture.

Positives

· Obama’s comments on outsourcing would not affect Indo-US economic ties. There should be no worries in Indian BPO firms, as long as the US government has a pro-business attitude. Outsourcing was not done to benefit India. It was done to improve the corporate bottomline so the shareholders can be happy. The US government’s role was extremely limited in businesses and hence it would not affect the US business here, it seems experts and Indian business leaders are optimistic about Obama’s win and its impact on Indo-US economic and political relations.

· Companies like IBM, EDS and Accenture have sent and are continuing to send thousands of jobs over to India, not to improve shareholder wealth, but to stay in business. When large business customers on Wall Street and elsewhere choose Indian companies like Infosys, Wipro and TCS as their IT providers over US-based providers, the US IT providers have little choice but to ship jobs overseas to cut costs and remain competitive.

· Outsourcing has gone beyond political debate. Of course, there’ll be an adverse impact on Indian economy if outsourcing is stopped. But Obama is required to create jobs within the US, which can’t be done in a few months. This will take 2/3 years for the new president to sort out. Moreover, outsourcing is a business reality, which will always be there. And for geo-political reasons, Indo-US relations will be stronger. Like China, India has a vast consumer base, which the US companies cannot afford to neglect. Earlier, MTV, Turner and other entertainment biggies independently set up their businesses in India. But the times have changed. Now, Disney is in collaboration with Yashraj Films; Spielberg is in financing deal with Reliance. Indian companies are having global dreams.

· The slowdown in the US had encouraged small and medium enterprises there to look at India for expanding their business plans in a high growth market economy with a low-cost manufacturing base.

· Increased presence of the Democrats in both US Houses is likely to benefit the Indian pharma industry through new legislations favoring. Obama has laid out a vision for reforming the US healthcare system in a way that protects the quality of care while making it affordable and accessible to all. This will encourage increased use of generics in government-funded programmes and should boost Indian generic drugs, which accounts for one fifth of the global production. It has more than 100 USFDA approved plants. However, pricing will continue to be under pressure due to recent financial bailouts.

· Mr Obama’s win will also allow for the reimportation of drugs, with a caution that prices of the reimported drugs should be lower than their cost in the US. Allowing reimportation would provide Indian manufacturers with greatly expanded access to the profitable US market.

· The new US government will be clearly more pro-generic. That will lead use of low-cost generic drugs, so to that extent, more Indian companies will gain.

· Although biogenerics are already being manufactured in Europe and India, there is no pathway for regulatory approval in the US, stalling their introduction into the lucrative US market. This will be beneficial to those Indian companies like Biocon and Dr Reddy’s who already have built capabilities in Biosimilars.

Negatives

· Though belated, Obama had endorsed the nuclear deal with India, it seems that he will not be content with what so far India had surrendered in the context of non-proliferation of nuclear weapons. He may not recognise India as a nuclear power and may insist on India signing the CTBT, which India has so far refused to do.

· During the long campaign, Obama said that his Govt. would stop giving tax breaks to companies that ship jobs overseas and start giving them to companies that create jobs in the U.S. That could trouble India’s outsourcing industry. Indian BPO gets nearly 60% of its revenue from U.S. companies.

· India is wary that any Democratic administration will include the same proponents of nuclear nonproliferation who opposed Bush’s exemption for India. Obama has publicly said he intends to push for a comprehensive test ban treaty, a treaty that India opposes because it feels its own nuclear deterrent remains incomplete.

· Obama has said it will put climate change at the forefront of its global policy concerns. If the focus is about mitigating carbon production through technological means, there will be few concerns. However, if the policy slips into more coercive measures such as carbon tariffs and the like, the result is likely to convert climate change into an energy security struggle. It will also pit the big carbon emitters of the future, like India and China, against present polluters like the United States and Europe.

· There is also a belief in India that the Democrats treat India worse than the Republicans do.