Why in news?

President Donald Trump, in his inaugural speech for a second term, announced a "revolution of common sense" to shift America away from "liberal extremism" and "declinist pessimism."

Criticizing the "corrupt establishment" for domestic and international crises, he promised bold changes in immigration, trade, free speech, identity politics, and environmental mandates.

Trump reaffirmed support for taxing imports to boost domestic manufacturing and introduced plans for an External Revenue Service to handle taxes on imports, complementing the Internal Revenue Service.

What’s in today’s article?

• India-US relations – Current status
• India-US Relations Under Trump 1.0
• Trump’s Vision for a Thrilling New Era
• Challenges for India

General nature of India-US relations

• Historical Context of India-US Relations
  • India-US relations have evolved over decades, overcoming challenges and building partnerships:
    • Prime Minister Vajpayee: Called the nations “natural allies,” emphasizing shared values and geopolitical interests.
    • President Obama: Defined the partnership as “a defining relationship of the 21st century.”
    • Prime Minister Modi: Asserted in 2016 that the partnership had overcome historical hesitations to form a long-term alliance.
• Economic and Trade Cooperation
• Trade Relations: The US is India’s largest market for goods and services.
• FDI: US foreign direct investment in India was $51.6 billion in 2022.
• WTO Disputes: Both nations resolved seven pending disputes, strengthening trade ties.
• Technological and Strategic Collaboration
  • India and the US cooperate in critical areas of technology and innovation, including:
    • Advanced Technologies: Blockchain, clean energy, cyber sciences, and space exploration.
    • Health and Agriculture: Collaboration on health security and agricultural advancements.
    • Strategic Trade Authorization: India’s elevation to Tier 1 status in 2018 allowed it licence-free access to regulated US technologies.

India-US Relations Under Trump 1.0

• During Donald Trump’s first term, India and US enjoyed a strong relationship marked by personal rapport between PM Narendra Modi and President Trump.
• Key highlights include:
  • Reviving the Quad initiative.
  • Renaming the US Pacific Command to the US Indo-Pacific Command.
  • Recognizing India’s emergence as a global power and strategic partner in the Indo-Pacific region.

Trump’s Vision for a Thrilling New Era

• President Donald Trump, in his second inaugural address, unveiled a bold agenda to transform America’s domestic and foreign policies.
• He emphasized reversing liberal policies and advancing an “America First” agenda to restore national sovereignty, renew traditional values, and bolster economic and military strength.
• Economic Revival and Energy Independence
  • Trump vowed to rebuild the U.S. economy by reducing inflation and removing environmental constraints on growth.
  • He plans to expand energy production, including drilling for oil, and gut climate controls, aligning with the priorities of his election supporters.
• Foreign Policy: Assertive and Transactional
  • Rejecting isolationism, Trump promised to prioritize defending U.S. borders over distant conflicts while taking a “peacemaker” stance abroad.
  • His policies aim to reclaim global primacy with a focus on strategic interests, including assertive claims on the Panama Canal and renaming the Gulf of Mexico as the “Gulf of America.”

Challenges for India

• India, which has shared strong ties with the U.S. in recent decades, must prepare for a transactional relationship under Trump.
• Trade, immigration, and internal reforms in India will play a critical role in navigating this new dynamic.
• Indian Markets Brace for Trump’s Presidency
  • As Donald Trump assumes office as the 47th President of the United States, Indian markets are taking a cautious stance.
  • While Trump’s election in November spurred a Sensex rally of over 900 points, market participants are now adopting a “wait and watch” approach, given uncertainty around his policy announcements.
• Potential Drivers and Market Impacts
  • Tax Cuts as a Catalyst: The forthcoming Budget and potential tax rate reductions are expected to play a pivotal role in market movements.
  • Trump’s Tariff Policies: While Trump has hinted at raising tariffs, the extent remains unclear. Policies impacting China negatively could benefit Indian markets indirectly.
  • Dollar and Rupee Trends: The weakening dollar and rupee-dollar trade dynamics are key factors to watch.
• India's Strategic Autonomy and Challenges
  • While India benefits from U.S. support, it will also seek to maintain strategic autonomy, balancing regional security concerns with its diplomatic partnerships, including with Russia.
  • India is likely to resist excessive alignment with the U.S., seeking continuity in initiatives like the Quad while managing the cost-benefit expectations of Trump’s administration.

Conclusion

Indian markets remain cautious as Trump’s policies and their implications unfold. For now, the Budget, tax cuts, and currency trends are likely to be the main market drivers, while Trump’s agenda will be assessed as clarity emerges.