Indo-US relations under Trump

Trump seems surprisingly indifferent towards India considering its large outsourcing industry. Could this have something to do with his business interest in the country or his closeness to right-wing Hindu groups?

India US relationship

Do opposites really attract? Photo: Twitter/KNE

by the Know Nothing Enquirer   02/02/2017              

Donald Trump’s infamous rants on countries ripping off the United States have not only included America's major trading partners China and Mexico, but also its close strategic allies Japan and Germany. He doesn’t seem to care about the prospect of a resulting trade war or long-term economic and diplomatic interests. The only thing that evidently counts for him is “America first”. However, the new president has barely ever mentioned India in this context, which is quite baffling considering India’s huge outsourcing industry and the recently launched “Make in India” campaign. Rather, he has called India an "amazing market", maintains close ties with prominent Indian business figures and holds strong sympathies with right-wing Hindu groups.

 

Some would point out that this has something to do with Trump’s large business interests in the country and his confessed love for Narendra Modi - after all they are both “anti”-establishment with ties to big business, like to see themselves as strong men who can get things done and are extremely good at manipulating the media. According to The Trump Organisation’s website, two massive real estate development projects in Mumbai and Pune are currently marketed under the Trump brand. In total he holds financial interests in over 16 projects in India’s major cities (such as Gurgaon and Kolkata). NDTV has reported that property prices in Trump buildings have increased significantly since the elections; some sell for more than 30% compared to similar properties. Are they possibly expecting to establish closer ties to the president of the United States? After all the website promises the residents "a host of benefits", such as a "private jet at their disposal" and the "prestige of living" in a Trump Tower.

 

However, not all of Trump's projects in India have gone too smoothly. His first attempts to “build” a Trump Tower in Mumbai failed in 2013 after the deal with the developer fell apart. The project in Pune has also been proven to be controversial. According to The Guardian, it is subject of two investigations by Pune police surrounding the legality of the land ownership of the Indian developer.

 

So what does this mean for India? Despite Trump sparingly mentioning India in his campaign, he actually has announced policies that would deeply interfere with existing relations and could cause tensions between the two countries. The future of the H1-B visa programme could be an important issue. Shalabh Kumar, one of Trump’s prominent Indian-American donors and a close confidant, claimed today that there won’t be an executive order to limit the visa category and told reporters that “the number of people on H-1B from India is certainly going to increase”. Considering Trump’s latest actions, this seems somewhat unlikely. Under the visa scheme, US companies can hire foreign workers for limited time periods to perform specialised tasks. It is especially popular with American tech companies but has also been criticised heavily by labour experts. They claim that Indian outsourcing companies are dominating the programme and that American companies wishing to hire legitimate foreign specialists are often squeezed out of the process. In other words, the visa programme is actually pushing jobs abroad in the long-term and hurting American workers. In that sense many share Trump’s concern that reform is needed and Democratic Senators might be willing to pass legislation on the matter. However, it seems more likely that Trump would want to abolish the scheme altogether, as it is an easy way to reduce immigration. This would be a huge problem for Prime Minister Modi. Not only are outsourcing companies important tax payers but Indians working under the visa scheme also send considerable remittances back home. Often the jobs move back to India with them, which is obviously also a reason why the scheme is so controversial. In other words, this scheme is a big economic factor for India and Trump might be about to end it.

The Indian government’s “Make in India” initiative also stands in stark contrast to Trump’s “America first” pledge. Even though the initiative has been extremely ambitious from the start, it hasn’t really increased foreign direct investment (FDI) to manufacturing, which is actually lower than in the 2011-2012 period - before Modi was prime minister. The share of manufacturing has also decreased - albeit only very slightly. Red tape, corruption and poor infrastructure still remain big problems that have discouraged a lot of investors. Despite this, India is obviously still highly interesting for many companies due to the huge size of the market and the political stability. While many companies currently move their production to India to sell to the domestic market, the long-term goal of the government is to make India a manufacturing hub akin to China. Needless to say that Trump and Modi will be at odds.

Okay, he might have threatened India's outsourcing industry before.

But trade between the two countries is by no means a one-way street. Even though America has a trade deficit with India, it exports mostly high-end, sophisticated commodities, such as machinery, medical equipment and aircrafts to India. Moreover, New Delhi is one of the largest military spenders in the world and is planning on expanding its military even further. In 2015, the country spent $51.3 billion - slightly more than France, making it the 6th largest spender. Between 2012 and 2015, the United States were the second largest provider of military equipment after India’s traditional partner, Russia, with American companies securing over $4 billion. Further, since 1991 India has become a key strategic ally to the US to counter Chinese dominance in the region and fight terrorism. Hence the increased military expenditure, especially with US equipment, must be seen as a strategic partnership and not merely commercially motivated.

 

It seems clear that Trump doesn’t necessarily see India as a strategic and economic competitor, at least not openly. Maybe India is part of a greater plan to counter China’s growing assertiveness in the region and could prove to be the less controversial partner than Russia to achieve this. In other words, a continuation of Obama’s “Pivot to Asia” strategy with a focus on India and without the multilateral trade deal TPP. While Trump might tighten the H-1B visa scheme in the future, he would be ill-advised to scrap it altogether and possibly prompt an angry reaction from New Delhi. But this is completely speculative as Trump’s first two weeks in office have only proven how unpredictably predictable he is - if it doesn’t fall under his definition of “America first”, it isn’t in the interest of America. Yet Modi seems to be in a rather comfortable situation, especially compared to Enrique Peña Nieto or Xi Jinping. Moreover, only time will tell what role Trump will play in the strained India-Pakistan relationship or with domestic communal tensions; so far he has only sent very mixed, or rather contradictory, messages.

“I am a big fan of Hindu and a big fan of India; big, big fan, big, big fan. Let me start by saying right upfront that if I’m elected president, the Indian and Hindu community will have a true friend in the White House and I can guarantee you that.” Donald Trump

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