(This article was first published in The Economic Times.)
The impact of Donald Trump’s presidency will be felt beyond markets and investing. It will impact your child’s education and career plans and your family’s travel. And not for the best.
Added burden on the pocket
Trump plans to revive business sentiments in the US. During his campaign, he talked extensively about cutting corporate tax rates and reducing government regulations. He has also talked about imposing tax on imports, in order to help the country’s local businesses thrive. This is likely to check inflation and generate employment.
Besides, the US Federal Reserve is expected to further hike interest rates. All this is likely to lead to a stronger dollar, making US goods and services expensive for Indians. We will now have to pay more for every dollar we purchase. We will have to shell out more when we send our children to study in the US and on travelling to the country.
During 2016, the rupee had touched a low of 67.74 against the dollar. The year ended at a low of 67.90. In January 2017 itself, the exchange rate started to get close to 69. According to the The Economy Forecast Agency, rupee will touch a low of 72.41 by December 2017 and slide further to 75-76 levels in 2018. This means that your expenses on education and travel to the US will go up by 6.5% or more. However, according to Karan Anand, Head, Relationships, Cox & Kings, the fluctuating dollar hasn’t historically had a significant impact on Indians visiting the US. “We believe that the Trump presidency will build on the USA brand that promotes tourism from India. He has promised jobs to his citizens and tourism is a vehicle to create jobs,” he says. According to the US Department of Commerce, more than a million Indians visited the US in 2016. The travel industry believes that this number will only go up, even if travel becomes more expensive.
However, on the education front, the US could take a hit. Tanvi Joshi, Branch Director, Success Overseas, an education consultancy, says, “It is not just the rise in the dollar, but also the new policies that are making America stand out as an unwelcoming host. Only students with an ace academic background and firm goals should take the gamble.” The strengthening dollar will not only increase tuition fees of US universities, but also the fee for tests needed to be taken for admission into US universities —GRE, GMAT, TOEFL and IELTS. The payments made for these tests are made in dollars. Students and professionals who undertake specialisation courses online through websites like Coursera and Udacity will also have to shell out more for the same reason.
Jobs under fire
One of Trump’s popular slogans has been: Buy American, hire American. He wants American citizens to buy products that are manufactured locally and American companies to hire locals. The Indian IT and ITeS industries, which draw a major part of their earnings—60% and upwards—from the US market, will suffer if US companies reduce their outsourcing spends. It is too soon to say if people employed in this sector should be worried or not, but they definitely need to be watchful of how things progress.
The same applies to H1B visa seekers who wish to work in the US. Trump’s stance on immigration could lead to a change in H1B visa rules. Experts say the Trump administration is also planning to increase the wage limit to $100,000, to prevent low wage IT workers from India replacing American workers. It is not clear what the new rules will be, but the visa regulations are likely to become stricter. This will impact thousands of Indian workers and their families, who wish to make a living in the US.
The Indian IT and BPO industry’s trade association, Nasscom, has also lowered the industry’s growth projections for 2016-17 to 8-10% from its earlier projections of 10-12%. Nasscom also expects hiring in this sector to drop by 20% in 2017. Hirings in the sector have been on a downward trend since 2016. The biggest names in IT industry—Infosys, Tata Consultancy Services and Wipro—use the H1B programme extensively to send temporary workers to the US. People employed in this sector should be concerned because automation is already taking away their jobs, and Trump will only add to their woes.
In 2016, Infosys alone had axed over 9,000 employees. Earlier last year, Cisco had announced that it would layoff 14,000 employees starting 2017. IBM and Microsoft were also in the news in 2016 for similar reasons. Across the border, Oracle recently started to laying off employees in Beijing. While their official statement denies any link to Trump’s policies, the layoff does coincide with the new President’s inauguration. Since President Trump has insisted US companies employing US citizens, such layoffs in India canot be ruled out. Experts say it is best to avoid the US unless the opportunity is not available anywhere else in the world. It might be best to not go chasing the H1B visa for now, they say.