Taking India-US ties to a new level needs a bold Indian initiative
Taking India-US ties to a new level needs a bold Indian initiative

Taking India-US ties to a new level needs a bold Indian initiative

The general mood within the US has changed over the last few years, as reflected in the aggressive 'US first' stance of both candidates, argues a senior foreign policy expert. In this 'India Global Business' exclusive, he weighs up the steps India can take in the post-Obama landscape. Irrespective of who moves into the White House on November 8, the four key determinants, from the Indian perspective, of establishing robust and mutually beneficial Indo-US relations will remain unchanged. These determinants are:

  • securing greater access for Indian exports of goods and services in the US markets;
  • improving India's access to sophisticated, possibly dual use technologies for upgrading capabilities of domestic companies for production and export of strategic equipment;
  • addressing India′s security concerns, both in our immediate neighbourhood and more widely in Asia;
  • and US assistance in securing India′s position on the high table of global governance.
In the above context, India will surely like to push forward with the strengthening of bilateral economic and commercial relations, which despite the unprecedented rapport between Prime Minister Modi and President Obama, continue to remain well below their actual potential. While India would like to build greater momentum on economic, commercial and technological flows, for the US, it may be more important to first assure itself of a convergence with India on global geo-strategic issues. Global circumstances as well as the general mood within the US has changed over the last few years, as reflected in the aggressive 'US first' stance adopted by both Presidential candidates. In this context, the next President could insist on achieving geo-strategic convergence between the world's two largest democracies as a pre-condition for further bolstering of economic and technological ties. Prime Minister Modi would do well to assure the next US President of India's readiness to forge an effective strategic partnership with the US. This would provide the most powerful basis for boosting Indo-US economic and commercial ties, thereby achieving the significant potential that has hitherto remained unachieved.
It can hardly be assumed that the next President will automatically continue the surge in US interest in promoting Indo-US ties, as done by President Bush and largely sustained by the Obama administration. It can be argued that to sustain US interests in further strengthening the bilateral Indo-US relationship, India will have to demonstrate its willingness to actively identify areas of strategic convergence with the US and show readiness to work together with the US in achieving these convergent interests. This may imply a greater willingness on India′s part to accommodate US interests and not always insist on a “relationship at its own terms”. This necessitates a continued engagement between the two countries at the highest strategic levels and the understanding that a more nuanced approach is required to forge convergence where possible and persist with dialogue in other areas where present positions of the two may be somewhat divergent. Such a strategic approach will lift the relationship above the transactional space in which a strict quid-pro-quo becomes the norm and a defensive rather than a progressive stance comes to dominate the bilateral relationship. Given India′s relatively low share of 1.6 per cent in global exports, it is critical to achieve better access to the largest market in the world. The US has shown the smartest recovery amongst all OECD economies, in the post Lehman period. It had done relatively far better than the Euro area and Japan, which are both struggling to regain their growth momentum, with the former also now enmeshed in deepening social and political strife triggered by the growing migrant crisis. The US, which continues to account for a quarter of the global consumption is not only by far the largest single market in the world but is likely to remain relatively more open and accessible than the Europe, China and Japan. The common historical experience of nearly all successful Asian emerging economies like China, Korea and Taiwan has been their dependence on the US market for absorbing their rising exports, which have fuelled their GDP growth over decades. India also cannot hope to achieve the required employment intensive double digit rate of GDP growth without significantly expanding its exports of both goods and services to the US It is perhaps obvious that without the active support/pull of the US corporations who procure globally for the US market and are key to Indian companies being included in the global supply chains, directed to the US and European markets, a sustained upsurge in Indian exports of both goods and services, will be very difficult if not impossible. A comparison with China is revealing and has some important lessons for India. In 1985, Chinese exports to the US at $3.8 billion were marginally higher than Indian exports of $2.3 billion. By 2015, the difference between the two countries' exports to the US was of more than $400 with Chinese exports mounting to $483 billion while India's climbed to a mere $45 billion. The general understanding about the Chinese success in expanding its exports to the US by more than 150 times over 30 years has been that it was the US MNCs that imported from China and not Chinese firms that exported to the US. The critical difference between the two countries experience was China's amazing success in attracting export-oriented corporate investment from the US. Similarly, India will have to give up its remaining reservations against FDI and try its best to attract the US MNCs to invest in India. Indo-US trade relationship will necessarily be built upon an edifice of rising two-way investment flows between the two economies. It is therefore essential that the two countries work to finalise the Bilateral Investment Treaty that has been hanging since almost a decade. Prime Minister Modi should direct the Indian negotiators to complete this task as it will reassure US investors of receiving appropriate protection under Indian laws for their joint ventures in India. For reducing import dependence for strategic equipment and over time export such equipment to third countries, the Indian industry, both private and public sector, has to upgrade its technology and R&D capabilities virtually across the board. Some of this is already beginning to happen with the recent trend of rising defence imports and technology transfer from the US companies to Indian firms. This is a direct result of Prime Minister Modi's initiatives in jettisoning past mistrust and putting Indo-US relations on a qualitatively higher footing. While the importance of enhancing our domestic R&D capabilities can hardly be over emphasised, it is palpably evident that better access to high technology imports from the US can significantly contribute to India's efforts in this regard.
Following the signing of the Indo-US Civil Nuclear Agreement, the dual use technology denial regime has been substantially transformed and is likely to be applied differently to India. A more positive US stance on high-technology exports will also improve access to such technologies from other sources like Japan, Germany and Israel. A significant foreign policy thrust is needed at this stage, for India to be recognised, in as short a time as possible, as ′being on the same side′ by high technology producers in the US and its allied countries. India should take the lead in developing a symbiotic relationship with the US, that can grow over time to fulfil President Obama's promise of Indo-US relations being the defining relationship of the 21
century. To conclude, India should, in its larger and longer term national interests, offer relatively greater space for perceived US economic interests. Examples would be to allow FDI in multi-brand retail and further liberalise the financial sector. Such win-win actions, which also serve India′s own growth objectives should be expedited. The ongoing discussions on bilateral Indo-US investment treaty, which India has already signed with a number of other countries, should be concluded speedily. And bilateral trade negotiations, which have been meandering in recent years could be given a sharper focus and brought to some conclusion. India would do well to offer to negotiate a free trade in goods and services agreement with the US. With such an offer from India on her table, the incoming US President will find it much easier to convince her administration to make extra efforts for promoting Indo-US bilateral ties. The short but important point is that by offering greater economic space to the US, India would profitably serve both its economic and political interests.
Rajiv Kumar is Founder-Director of Pahle India Foundation and Senior Fellow at Centre for Policy Research, Delhi.
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