Ride the wave of change
Ride the wave of change in US
President Obama has swiftly named an economic team and taken some bold actions. His team has forged ahead with the stimulus packages, which will eventually result in a rebound of the US consumer market
The US presidential election spurred an
unprecedented swell of hope among the ‘aam aadmi’ (common people) across the world. India was no exception. There was, I must confess, a mixed reaction to Barack Hussein Obama’s election among some Indian business people. There is a belief among a section of our business leaders that Republican regimes have historically been friendlier to India than Democratic regimes. Keeping this in mind, what are our expectations from president Obama on the economic front?
First, I think, there is an expectation that the Obama team will rebuild confidence. President Obama has swiftly named an economic team and taken some bold actions. He has increased sensible oversight and empowered agencies such as the Securities Exchange Commission and Commodities Future Ex-change. He has demonstrated foresight and vision by pledging to work with governments of other nations and central banks to develop a synchronised regulatory response. His team has forged ahead with the stimulus packages, which will eventually result in a rebound of the US consumer market. Large exporters of electronics, cars, manufactured goods and services such as Japan, Germany, China, Mexico, Brazil and India will be closely watching the impact of Obama’s economic initiatives.
Second, there is hope that the Obama administration will reach out and rebuild relations with other key nations. This multilateral diplomatic posture will not be compatible with a protectionist economic agenda. Hence, I think the fears of a rigid, protectionist policy framework are unfounded. Last week, at a seminar of the World Bank in Washington DC, predictably, I was asked if the Indian IT industry was apprehending a protectionist backlash from the Obama administration. My response was as follows: President Obama is a wise, knowledgeable, IT-savvy president. He has the interest of his countrymen uppermost in his mind. He will do nothing to impair the competitiveness of American industries.
Outsourcing is done often to captive units of US companies in India to reduce costs dramatically. US-headquartered multinational companies outsource to India to enhance their capabilities and competitive advantage. Indian companies buy technology and other products on a massive scale from the US. In many cases, American and Indian technology companies are joined at the hips. It is most unlikely, regardless of the rhetoric, that president Obama will do anything that will destroy the benefits of outsourcing to US companies, the American economy and the American consumers.
Third, it is expected that there will be a dramatic reduction in defence expenditure and increase in healthcare, education and infrastructure. Indian companies that export to the US will need to shift gears and build capabilities to take advantage of the new opportunities landscape. Obama plans to streamline the US healthcare system. In part, this would entail the deployment of technology to promote cost efficiencies of the healthcare sector as baby boomers turn grey. India may witness new opportunities in medical tourism, manufacture and export of generic drugs and in the computerisation of medical records and services in the US.
Fourth, Obama’s commitment to promote alternative energy will expand the global market for green technology. The Obama agenda includes several initiatives on greening the economy by providing incentives and tax breaks to conserve energy and buy energy-efficient products, to promote research and development in alternative and renewable energies. Thus, solar power, wind power, clean coal technologies and nuclear power, which reduce the carbon footprint, will receive much attentionand provide unprecedented opportunities.
Germany, for instance, is one of the largest wind power producers in the world and its large solar energy industry employs over 40,000 people. Spain and the Iberian peninsula are home to some of the largest alternative energy companies and the sector growing at 30 per cent per year. France is at the cutting edge of safe, nuclear power technologies. There is likely to be intense cooperation between the US, France, Spain, Germany and India in these fields.
Last, putting America back to work is good news for all of us. The Obama administration is planning to spend $25 billion on a Jobs and Growth Fund in support of infrastructure projects and create a national infrastructure reinvestment bank funded by several billion dollars over 10 years, focusing on roads, bridges and ports. As a rule, any acceleration of spending and the increase in purchasing power in the US is good news for the rest of the world and India.
It would be prudent, however, to be optimistic in a cautious way. The uphill task that Obama faces mustn’t be underestimated. The US economy is not in the best of health. The extent of funding needed to stimulate the market and nurse it back is yet to be conclusively determined. But Obama represents the best hope to steer the US economy through the choppy seas. Instead of debating whether president Bush was more aligned to the Indian economic agenda, the captains of industry and business in India would do well to keep a sharp eye on emerging prospects and work with the Obama administration to ride the waves of change and create new business and partnership opportunities.