India, US in it for the long haul

As the US-India bilateral relationship progressed to what President Obama termed “one of the most defining partnerships of the 21st century”, the two countries have widened their canvas of collaboration. But with greater engagements have come greater impediments.

The past few months have seen more challenges emerge on the surface of the relationship, while the positive stories stride silently in the shadows. But whether you are looking at the sun or the shadows, what’s clear is this: the relationship is not one of “quick benefits”, but it certainly is and will continue to be, a strong, fruitful, and enduring partnership.

From the strategic lens, the US “pivot to Asia” bodes well as the US looks to India as a “regional economic anchor”, re-enforcing the former’s commitment to strengthening the relationship.

The commercial relationship is flush with activity as two-way trade in goods and services is set to cross the $100 billion mark.

In the last couple of years, India has signed defence contracts with the US worth over $8 billion and is ready to ink more deals amounting to almost $5 billion.

It comes as no surprise that the next trade target is ambitiously set by the private sector — $500 billion — within this decade!

Bilateral investments are also on the rise. It is remarkable that India has recently emerged among the top 10 fastest growing source of FDI in the US and that the US features among India’s top five preferred FDI destinations. Given the growing presence of Indian companies in the US, it is also imperative to recognise their contributions to the US economy and society — another positive story that often goes unacknowledged.

Big investments

A recent CII survey of 68 Indian companies in the US revealed that they have collectively invested close to $17 billion in the US, and created over 81,000 jobs.

One-third of the companies present in the US engage in R&D activity, and have spent more than $340 million towards spurring innovation.

From this perspective, the upswing in the US economy is certainly a welcome sign — not only for Indian companies keen to invest in the US market, but also for Indian exports that are picking up with the economy back on track.

On the policy side in India, too, silver linings appear, for instance, with the Government of India’s recent initiatives such as opening up FDI in several sectors including multi-brand retail and, in a significant legislation, allowing foreign universities to set up campuses and operate independently in India.

This is not to say that challenges don’t exist. Most certainly, they do — whether it is market access, intellectual property, land acquisition, labour mobility and immigration reform, challenges surround us.

But, as in any relationship, both sides have to keep working together, patiently and persistently, to understand each other’s position, give-some-take-some, and eventually improve mutual stakes. Imagine, if we managed to clear the hurdles in this obstacle run, how far and how fast our bilateral economic relationship could progress!

BUILDING THE FUTURE

Much needs to be done, and will take concerted effort on the part of all stakeholders. First and foremost, the lack of investor confidence on both sides needs to be addressed.

India and the US must re-energise the negotiations towards a bilateral investment treaty. Secondly, to accelerate the momentum in US-India trade, discussions on a free trade agreement (FTA) must also be pursued, especially considering the slew of recent trade agreements signed by India with other countries (Singapore, Malaysia, Korea, and Japan, among others).

The institutionalised bilateral dialogues, including the very crucial Trade Policy Forum, High Technology Cooperation Group and Commercial Dialogue, have held extremely constructive dialogues with the private sector in the past and we need to actively, regularly re-engage in holding candid discussions, generating innovative ideas and making concrete recommendations.

It is these platforms of interaction and exchange that serve as “collaboration labs” of the future.

Also fundamental to the exchange of ideas and propagation of innovation is labour mobility, which must be eased and facilitated every step of the way. In this context, there is a need to explore a possible global entry partnership programme between the US and India, which would enable expedited entry at airports for “trusted travellers”, thereby promoting business and signifying closer security and economic cooperation. In the spirit of exploration, state-level engagements have picked up significantly in the last few years, with the objective of attracting investments and exploring collaborative business opportunities.

Delving deeper into the American heartland and exploring emerging Tier2 and Tier 3 cities in India will open up unprecedented opportunities in terms of commercial collaboration across various sectors.

Manufacturing hub

Another area where the two countries can cooperate is manufacturing. India is emerging as a hub of cost-effective and innovative manufacturing.

US companies could explore making India the central manufacturing hub to reach out to the broader Asian market.

India’s recent manufacturing policy has generated some interest and debate in the US and it may be useful to address some of the concerns therein.

Taking manufacturing prowess one step further, industry could also focus on sustainable manufacturing practices, waste disposal and recycling measures to take into account environmental factors.

Other areas that can derive tremendous benefit from sector-focused cooperation include agriculture and retail, education and skills development, renewable energy and clean technologies, infrastructure development, defence co-production, and more so, through engaging small and medium enterprises (SMEs). The call of the hour is collaboration across the public and private sector in spurring economic development and job creation in both countries.

The two countries must continue to work together to ensure that short-term economic challenges do not take away from the long-term potential of business cooperation and economic growth.

(The author is Director-General, CII.)