The Trump effect- on Indian Job Scenario

The Trump effect
The Trump effect

With President-Elect Donald Trump due to assume office today, Get Industry Ready brings you our analysis of his most probable economic policies- sourced on his election manifesto, its critical analysis by leading economists and journals, as well as our own meticulous study of his actions and announcements since his victory was declared.

Economic policies have been one of the most biggest USPs of Trump’s presidential campaign and, thus, it can be assumed that it is one of those areas where he can be expected to walk his talk the most, since any attempts to rescind on his electoral economic promises will only draw more criticism from his political opponents and disillusionment amongst his most passionate supporters and defendants.

For Indian students and professionals, it does not fare well.

True to his Republican party’s traditionally conservative economic outlook, Trump promised to “bring jobs back to America”, “impose heavy import taxes and duties”, and “lower the corporate tax to 15% from the current 35%”. Also, Trump has initially been one of the loudest voices of dissent against H1B visa program.

All of these directly mean a threat of drastic reduction in employment opportunities for skilled professionals- especially IT and solutions/services engineers.

A majority of business volume and clients for Indian software, solutions and IT industry comes either directly from US-based clients and firms, who utilize currently liberal economic policies of US to outsource the jobs to India, due to lower salary expectations and higher level of average skill sets.

However, if Trump does deliver what he promised- extra taxes/penalties/ economic liabilities (due to Donald Trump’s lack of political record, it is hard to say which route he will take)- it will mean that the Indian IT firms- Tech Mahindra, TCS, Wipro, Infosys etc.- might be in for losing a lot of clientele. Also, a lot of product-based companies of US that have been outsourcing projects to Indian software and solutions industry, including big names like Google, Microsoft and Oracle, might also prefer relocating their hiring focus to US.

The next policy of Trump, if successfully actualized (which remains yet to be seen), that can majorly affect Indian job scenario is taxation. The current federal corporate income tax is set at 35%, with state and local taxes’ addition taking it as high as up to 39%.

If, as promised, Trump lowers just the federal corporate income tax to 15% (or anywhere near that), it is bound to cause a major change in international employment demographics; US companies with plans to expand outside-US operations, like Ford, GE etc., would most likely opt for heading back to US.

Note: One more way in which the lowered US corporate income taxes would adversely affect Indian jobs is by weakening Prime Minister Modi’s “Make in India” push, which had non-Indian companies as a major part of its plans for the initial phase- until the subsequent technology transfers, as well as a boosted R&D (as planned), would have imparted more autarky to the “Make in India” campaign.

The decrease in/scrapping of H1B visas, or even the rules for granting turning more stringent, would further mean a decrease in in-US employment opportunities for Indian professionals. The level of impact that it would create can be understood by this one instance: 86% of the total H1B visas issued in 2014 for technology firms was used to hire IT professionals from India!!

However, in his third presidential debate, Trump did soften his stance about “talented people…. so they can go to work in Silicon Valley”. While this second statement could definitely be a ray of hope for high skilled IT professionals, it would be pragmatic to not get the hope too high: Trump’s being inexperienced in public administration and delicate nuances of policy making has indeed given rise to some cynicism about his administration’s ability to discern between high-skilled and low-skilled workers.

There are also some indirect ways in which Trump’s policies may impact job scenarios in India.

For instance, if Trump moves to renegotiate/break the trade agreements with the traditional trade partners of US, it might mean that some trade barriers set up against the non-members (which doesn’t include India) might loosen up a little, giving Indian companies and products some additional breathing space in American markets. So, a slight glimmer of hope for Make in India can be seen there….

In case of some other Trump policies, however, India does need to be concerned. If he goes ahead with his electoral promise of increasing military expenditure, it will increase US’ debt burden to a possibly insurmountable-for-a-long-while-to-come level, which has all the potential to trigger another global economic slowdown, and a loss of jobs therefore. A subsequently weakened dollar is also highly likely to adversely affect economic growth and investments in India- not just directly from US, but from most countries.

To showcase his intent, Trump has already threatened to impose extra duty on the German car-maker BMW’s imports from the neighboring Mexico’s manufacturing plants- and that’s when the globally biggest plant of BMW is already in South Carolina itself. However, some good news is Germany’s “pushing back” following the statement.

Seeing that most of the major contending economies- Britain, Germany, India- also have conservatively inclined leaders as Trump’s counterparts, one can only hope that, at the end of the day, either Trump would soften his hard-right economic stances, seeing that there’s no truly turning back from globalization, or at least the internal and external oppositions- from some of Republican party’s more liberal leaders, from Democrats, and from other world leaders equally determined to maintain the global economic balance and protect their own national interests.

But right now, it would not be overly pessimistic of Indian students and professionals to brace themselves for some tougher times to come- at least for the time being….


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