MUMBAI: Despite expectations that US President-elect Joe Biden may come out with a much smaller stimulus than what his predecessor Donald Trump had talked about, Indian corporates are not likely to face any problem with raising capital abroad. The US is the biggest source of financial investments into India and easing of fiscal and monetary policies also end up benefiting Indian companies that seek to raise capital globally.
One of the reasons for the positivity is the stability that Biden’s conciliatory approach to trade is expected to bring. “The Biden administration would seek to mend relationships with allies. We could expect moderation of the immigration stance, if not a full turn-back, plus a more favourable trade regime for India. It is an opportunity for us to evaluate whether we can strategically align with the US or continue an issue-based posture,” said Barclays Bank India CEO Ram Gopal.
“In the short term, the dollar is expected to strengthen. Under Trump, the market was talking about a stimulus of $3-4 trillion. With Biden, it is expected to be $1.5 trillion. The stimulus was expected to cause the dollar to weaken. Although the US budget will be announced only after Biden takes over in January, the market moves on expectations and this could cause the dollar to gain,” said DBS country treasurer Ashish Vaidya. He said that although the dollar was now expected to strengthen, there may not be a corresponding weakening of the rupee as India is one of the very few countries that is building up foreign currency reserves.
“In the long term, however, I see the dollar weakening as the continued printing of currency would put pressure on prices and US inflation is likely to rise.”
According to Care Ratings chief economist Madan Sabnavis, traders will view Biden positively because he has been speaking the right language for global markets. “The US trade war will be behind us. Biden will be positive to immigration, more cooperative in his approach and the markets should be reacting positively,” said Sabnavis.
“Things might change from a global standpoint as well. Trump was prepared to dump trade agreements and be more closed. Biden is unlikely to dump trade agreements. He is more likely to increase taxes and, once they announce the budget, the overall impact may change,” Sabnavis added.
As far as interest rates are concerned, there is not likely to be much change. “Interest rates are unlikely to change as the Federal Reserve is an independent body and will continue with their accommodative policy and decision to keep interest rate low,” said Sabnavis.
Source From : Times Of India