How the US economy and its policy choices likely to affect India

Context: How a Biden presidency likely to benefit India’s economy

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  • “In a democracy, someone who fails to get elected to office can always console himself with the thought that there was something not quite fair about it”-Thucydides 431 BC.

What is the Significance of U.S to India’s Economy?


  • India enjoys a trade surplus with the U.S over the past 20 years. The trade surplus has widened from $5.2 billion in 2001-02 to $17.3 billion in 2019-20.
  • Also, India accounts for nearly 5 per cent of USA’s global services import. In 2019, US imports of services from India were around $29.7 billion.


  • The US is the fifth-biggest source for Foreign Direct Investment (FDI) into India after Mauritius, Singapore, Netherlands, and Japan.
  • The US also accounts for one-third of all Foreign Portfolio Investments (that is, investment in financial assets) into India. US accounted for Rs 11.21 lakh crore of FPI as of September 2020.

How the US economy and its policy choices likely to affect India?

On Trade aspects

  • Biden’s administration is expected to support a strong rule-based order as well as a move away from the protectionist approach.
  • Biden understands the need to control the Covid pandemic before any sustainable economic recovery. With the control of Covid infections and the economic recovery, the US could provide a growth impulse to the global economy that has benefits to countries like India to boost their exports.
  • Under a Biden administration, the view that trade is a zero-sum game is likely to change.
  • Also, under Biden there are chances of reconsidering the India’s exclusion from the US’ Generalized System of Preference.
  • All these changes are likely to help India to get a renewed push in trade from the dip since 2017-18.

On H1B Visa

  • H1-B visa issue, affects Indian youth far more than the youth of any other country.
  • Visa regime was severely curtailed under Trump’s administration that favoured “America first policy”
  • This could change under Biden, who is unlikely to view immigrants and workers from India with suspicion.

Better resolution on existing issues

  • Data localisation, capping prices of medicines and medical devices have remained as a contentious issue between India and US.
  • With Biden, moving away from radical approach to Pragmatism all these issues stand a better chance of getting towards a resolution.

Normalisation of US-Iran relationship

  • US sanctions on Iran severely limited India’s sourcing of cheap crude oil.
  • normalisation of US-Iran relationship leading to lifting of sanctions would benefit Indian economy which needs a regular supply of cheap oil to grow fast.

Climate change

  • The US under Biden is expected to rejoin the Paris Climate Accord. This will help countries like India in dealing with, both technical and financial challenges related to climate change mitigation.


  • Civil liberties and democratic rights in India will be monitored closely an aspect to which the Trump administration largely ignored.
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