Why mid-term election results in US matters for India, and why it doesn't

In a major setback to US President Donald Trumps’ political agenda and economic policies, both domestic and foreign, early results of the country’s midterm elections seems to point to the Democrats, Trump’s political opponents, securing majority representation in both chambers of the US Congress – the House of Representatives and the Senate.

Once the newly elected legislators take office in January 2027, Trump’s policies are likely to face greater scrutiny, with his decisions increasingly questioned and challenged by the US lawmakers, during the remaining years of his Presidency.

Any political reset that leads to changes in existing policies or even policy reversals by the US Administration could have global implications, including for India-US economic engagements and strategic partnerships.

Trump’s policies have played a significant role in the escalation of geopolitical conflicts in the West Asia, the disruptions to international cargo movement in the Strait of Hormuz, and the consequent surge in global oil prices. Any sustained easing of crude oil prices – a trend that seems to have already begun – could be amongst the earliest indicators of how the US mid-term election results might affect the rest of the world.

The coming days, stock markets across major emerging economies including India could respond positively to the prospect of increased foreign equity inflows and a more predictable global trading environment, free from frequent and unexpected tariff threats and trade sanctions by the Trump Administration. As a major oil importer, India would be among the countries most directly affected by a major correction in crude oil prices. At a macroeconomic level, lower oil prices will help tame India’s inflation, narrow the current account deficit, and strengthen overall macroeconomic stability. These are direct benefits for India.

However, the shift in the balance of power in the US politics is unlikely to have any impact on India’s ongoing economic partnership initiatives with the US. The comprehensive Bilateral Trade Agreement, currently in the final stages of negotiation, is likely to progress as planned. With both Democrats and Republicans more or less favouring economic nationalism and domestic manufacturing, the US is unlikely to fundamentally change its position in the ongoing trade negotiations. The concern that a trade deal may not stop the US from imposing additional tariffs on Indian imports citing one reason or another, still holds.

Changes in the Trump Administration’s broader policy direction, particularly on immigration and job visas for software professionals, may also have a limited impact on India. More than policy shifts, it is artificial intelligence (AI) that is currently driving the most significant disruption in India’s US- centric IT services industry.

Overall, the sentiment generated by US mid-term election results is positive for India. However, dramatic shift in bilateral economic relations or major policy surprises are unlikely.