The new US administration under President Donald Trump has vowed to follow an isolationist trade policy that is both against global trade norms set out by the World Trade Organisation and America's own 'open economy' stance vis-à-vis other countries.
If taken to its logical conclusion, Trump's 'America First' policy would badly maul India's two major foreign exchange earners – the IT and pharmaceuticals industries – and wreck havoc to the Indian economy. This could lead to trade frictions between the two friendly economies.
The National Association of Software Companies (Nasscom) has warned that US President Donald Trump's protectionist policies could hurt both Indian economy and the US tax revenue and employment.
Indian IT companies contribute billions in annual tax revenues to the United States while 60 per cent of the industry's sales comes from the US. Trump's avowed polices could mar this mutually beneficial arrangement.
American industry is greatly dependent on IT for maintaining its primacy and India remains the cheapest source of this industry's needs of high-skilled workers, which is scarce in the United States, Nasscom points out.
Trump's 'America First' strategy, belted out at his inauguration has sent worrying message for the Indian economy, especially the IT and pharma sectors, and the domestic financial markets are bracing for a fresh round of volatility.
In the four-year period between 2011 and 2015, Indian IT industry paid $20 billion in taxes to the US. Besides the revenue hit, the industry has also warned about the adverse impact that curbs on outsourcing will have on the US economy, which lacks high-skilled workers.
The premier trade body plans to take a delegation to the US in February in an attempt to reach out to the Trump administration.
President Donald Trump had promised to follow a 'Buy American, Hire American' policy in his inaugural speech on 21 January in Washington.
Such a policy could slow down US cormpanies' IT outsourcing to foreign (primarily Indian) companies, squeezing margins.
Pharmaceuticals is another sector that is jittery as Trump has vowed to force the US drug industry to produce at home and cut prices.
While the actual harm of Trump's protectionist policies are yet to be assessed, it is clear that any US curbs on the IT and pharma industries will further dent India's economic growth.