It takes two to tango. In the context of India-US relations, increasing convergence in the strategic perspectives of India and the US, and a shared desire to provide global leadership on issues of shared interest are creating one of the most enduring symphonies in global partnership between the two key democracies.
Prime Minister Narendra Modi’s visit to the US has simply ensured that this relationship is ever-evolving and increasingly multifaceted. It is punched with long and deep engagement, and loaded with opportunities in the economic space.
Call it sheer politics or business as usual, the fact is that this tango swung by a sustained American outreach has become an imperative of sorts for the two democracies. A resurgent Indian economy riding on a strong track of economic reforms and liberalisation is strongly poised to be the new engine of global growth. The Modi government has approved up to 100 % foreign direct investment in defence and aviation and up to 74% in pharma.
Based on suggestions by Apple and other technology giants, the government has also paved way for Apple to open stores in the country by giving a three year exemption from local sourcing in single brand retail and a further five year relaxation for cutting edge technology. All this has enhanced the attraction of investing in a market like India which features rising household incomes and a burgeoning middle class that can hardly be overlooked. In addition to these positive factors, as a preferred destination for investors, India, as Modi put it, “Is the future human resource powerhouse of the world with a young hard-working population.”
All this can only be ignored at a cost, so as India responds to the surging demand for greater openness and collaboration in its economic equation with the US, it would be reciprocated with a positive spin-off on issues related to the immigration and tantalisation agreements and the India-US Bilateral Investment Treaty.
Further, the importance of the US as a strategic partner for India is reinforced by a robust flow of trade and investment. American capital and innovation are a critical element of the modernisation that a rapidly diversifying Indian economy needs. The explosive implications of its partnership with Indian human resource and entrepreneurship are known widely.
A case in point is American online retail giant Amazon’s plan to invest an additional $3 billion in India, taking the committed investment in the country to $5 billion. The investments would help startups in India and accelerate the country’s role as a hub for innovation and digital entrepreneurship. As India marches ahead on the path of development, the possibilities of collaborating with the American experience, in particular its’ technological advancement — from drugs to drones — are infinite. Looking ahead, I clearly see five catalysts enabling a more intense collaboration.
Renewal of the India-US civil nuclear energy cooperation — with India’s nuclear plant operator, NPCIL and US vendor Westinghouse set to begin preparing the groundwork for construction of six nuclear reactors in India, the stage is set for India’s ultimate integration into the global nuclear order. More importantly, the deal is happening at a time when India hopes to increase the share of electricity generated from nuclear sources from 4% to 25 % by 2050. These reactors would bring clean energy to India, contribute to India’s energy needs while reducing reliance on fossil fuels. The civil nuclear cooperation deal coupled with US support to India’s membership of the NSG and India’s entry into the Missile Technology Control Regime will give India access to high-end missile technology from across the world.
The formal declaration of India as a ‘Major Defence Partner’, could help launch a very consequential phase in the India-US strategic partnership. If all goes well with the Americans delivering on the promise of technology transfer, India could get the same level of access to defence technologies as America’s closest allies and partners. At the same time, opening up of India’s defence sector to 100% FDI and the government’s assurance that projects would not get unduly delayed compliments the development. What the industry can certainly look forward to is the US commitment of support for Make in India projects in the defence sector that will boost modernisation of India’s arms industry.
The Prime Minister’s resolve to strengthen the Make in India initiative across sectors that involves a broader plan to ensure that growth in manufacturing goes beyond catering to the domestic market and involves making world-class products for the whole globe. India’s rapid growth and steady slew of measures to ease business regulations reflects a commitment to provide a strong and secure investment base for foreign and domestic investors and represents an enormous opportunity to expand the US-India economic relationship in the manufacturing space. It is therefore an appropriate time for American businesses to come and invest in India and help make India a global hub for manufacturing.
India also has ambitious plans for growth of solar power. With Prime Minister Modi taking up the issue of clean energy to the global stage and announcing an international solar alliance, India’s solar energy sector has just opened up to exciting opportunities. While the US and India are cooperating on key issues to support India’s goal to deploy 175 gigawatts of renewable energy by 2022, most of the world’s solar technology is centred in the US. American cooperation in making new solar power technologies available as affordably as possible could help India greatly in meeting its ambitions.
Going forward, I see the fifth dynamic in the US-India Investment Initiative launched in January 2015 which has tremendous trans-formative value in India-US ties, especially in the area of infrastructure. Our governments have been working in collaboration with the private sector to identify specific policies, regulatory reforms, and technical collaboration aimed at mobilising capital from both domestic and foreign investors to build infrastructure and create jobs. As these come into fruition, joint effort is also underway to support India’s National Investment and Infrastructure Fund (NIIF) in order to increase financing options for India’s infrastructure growth.
The US-India Investment Initiative has tremendous potential to help the Indian and US governments to discuss and explore capital market reforms that could deepen India’s capital markets and spur long-term investment by domestic and foreign investors. There is also opportunity to develop new initiatives and policies that can develop a deeper and more liquid corporate debt market, and instruments to help sub-sovereign governments raise financing for development.
It is obvious that the collective economic strength of the two nations is not only good for both the countries, but will help steer the global economy during uncertain times. There are some great complementarities between the two economies — both the nations are favourably placed in terms of time and circumstances, and both have the desire to add immense value to mutual economic growth. Let’s expect the making of a defining India-US partnership.