Will FIIs return to India with Biden?

With Democrats ready to take the charge at the White House, there is likely to be the material impact on how the power center of the world dictated the international trade. We believe the event is quite important for the medium-term outlook for domestic equities.

Though, the outgoing president Donald Trump shared great comradeship with the PM Modi, India was not at a great advantage with the US in terms of trade compared to it’s previous status. With the Democrats regaining the power, the equations may change. Below are the major levers –  

  1. Trump administration reinstated tariffs on certain Indian Import by removing India from the list of Generalized System of Preferences (GSP) in JUNE 2019. India can expect a review of it’s GSP status under the new administration. 
  2. Massive relief on immigration and H-1B visa expected under the new regime. Biden had voiced strongly against the restriction imposed by Trump administration on skill worker visa. A truly positive for India.
  3. Any change in sanctions on Iran would again be positive for India. Iran used to be the third largest exporter of oil to India. India had to brought it’s its oil trade to zero following the US sanction on Iran since June 2019. Biden has described Trump’s policy on Iran as a ‘dangerous failure’ and has vowed to take steps to reverse it.
  4. A shift of focus back to Obamacare under Democrats will again be positive for Indian generics drug makers.

FPI/FII Investment under different US Presidents –

US accounts for roughly 30% of the entire kitty of FII investments India has received since 2000.

Of five previous presidential terms, the minimum average yearly investment from FPI/FII that India received was under Donald Trump. On the other hand, the highest FPI/FII investment India received was in the first term of Barack Obama. The second term of Obama continued to see significant FPI inflows. President elect Biden was the vice president during the entire term of Obama.

Whether history repeats itself will be difficult to say but India remains an attractive destination for foreign investors.