The results of the US mid-term elections held on November 8 are not fully out, but there are several takeaways already. The most significant among them is that the electorate has given Donald Trump, Joe Biden’s vitriolic predecessor who is forever peddling politics of the fringe, a thumbs-down. The Republicans are all set to get a majority in the 435-member House of Representatives, while in the 100-member Senate, the Democrats might just scrape through. It is not unusual for the mid-terms to go the way of the Opposition. What is surprising this time is that the Democrats have escaped the drubbing most observers expected. This is despite inflation ruling at decadal highs (although down from 9.1 per cent in June to 7.7 per cent in October). It is possible that the inflation edge was blunted by high job growth (unemployment rates are down from over 8 per cent in 2020, the height of Covid, to 3.7 per cent in October). But what seems to have helped the Democrats’ cause is Trump’s declining popularity. He had sought to use these polls as a platform to vault himself into the presidential race for 2024, but his handpicked candidates fared poorly even as mainstream Republicans were rewarded. Finally, it appears that America is tiring of Trump and his dangerous campaign against the electoral system. But a Republican-dominated Congress is likely to trip the Biden administration on several counts, which could include opening probes against actions of the President.

The Republicans are likely to contest President Biden’s plans to raise corporate and individual income tax rates, while his infrastructure and social security spending proposals too will come under scrutiny, in line with their belief in balancing the budget from the expenditure side. However, the budget deficit is down from 12.3 per cent of GDP in FY21 (ending September 30, 2021) to 5.5 per cent in FY22, which along with the falling rate of inflation, gives the government room for manoeuvre. Biden’s spending on the Ukraine war will be closely watched, even as it stands at about $80 billion or about a tenth of the Defense budget. Republicans too are divided on whether it is a war worth pursuing. With the Fed’s aggressive rate hikes likely to hurt demand, the government will be growth-oriented. Policy stability may prevail, unless Ukraine gets out of hand. Alongside this, if the Fed turns less hawkish, it spells good news for global markets.

In foreign policy, there is a bipartisan consensus on being aggressive with China (but not Russia), with the Biden administration going one-up on its predecessor in squeezing semi-conductor trade and, possibly, investment later. A Republican Congress spells generally good news for India, which has been on a better wicket with the Republicans than the Democrats. The US’ moves to squeeze Indian interests in key areas such as H-1B visas could come under some check. Overall, the world and India have reasons to welcome the poll results.