By Anjan Roy
In the intense summer of Delhi, ministers and other important persons find better work in cooler climes. Invariably come May-June, the VIPs fly out to attend other very important tasks in Europe and America. Sharad Pawar is in France, Anand Sharma in USA and Pranab Mukherjee is about to leave for the same destination next week. Many other smaller functionaries are all hovering around in western capitals. But India-US relations appear to be the season’s flavor. Next month, the India-US Strategic Dialogue will take place, this time however in New Delhi.
On the second track, business to business contacts between the two countries are also improving fast. But India-US economic relations depend critically on the state of the overall play-that is, on our political and diplomatic relations with the US. By contrast, our economic relations with China are somewhat independent of our diplomatic or political relations. Even though India and China are far apart on political issues and have strained diplomatic relations that has not stopped India’s trade with China sky-rocketing. But our trade and investment with USA is all set to rise as we move closer diplomatically.
Take for instance the fact that US now has the largest number of joint military exercises with India that it has with any other country. And, India-US defence trade is soaring with purchases of transporters and military hardware. Removal of Indian companies from US entities list has also paved the way for greater involvement of commercial organisations. The Indo-US contacts are by all means important and since the last visit by President Obama, these have made notable progress.
This week, for example, Mr Anand Sharma has got commitments from his US counterpart Ron Kirk that a bilateral investment treaty will be taken up for fast track for a quick agreement. This has been the demand from industry and business of both the countries and it might just as well help raise the mutual investments in each other. While India is seeking higher investments from the US, the fact is however that Indian firms are investing more in the US. They are creating jobs, in contrast to complaints that US outsourcing had cut down jobs in the US itself. Mr Sharma has also discussed enhancing India-US trade as well.
Mr Pranab Mukherjee is set to address some institutional investors in US next week apart from his many official engagements. He will surely sell the India growth story to US in course of his address and meetings. The same message was conveyed by Commerce minister, Anand Sharma as well. Hopefully the re-emphasis from India on attracting investments, the bilateral investment treaty and further liberalization of policies should open up the coffer strings of US investors.
The developments on the trade front are not however very happy and India-US trade is struggling at levels far lower than the potentials between two major economies. As such, trade has been hamstrung by various restrictions. Indian exports have so far proved to be sluggish at below $20-billion mark. Indian imports from the US are rising and set to spike much faster if the recent defence purchases are taken into account. President Obama had announced bilateral deals amounting to $10 billion in course of his visit which were mainly business contracts to US firms. Thereafter, India purchased large transport aircraft the bill running into $8 billion. Besides, numerous other defence equipment are being purchased from that country. After the civil nuclear deal and whittling down of restrictions on dual-use technology items from US to India, imports of high tech equipment is rising.
There are now a spate of reports that the US are proposing to countries part of the nuclear suppliers’ group for inclusion of India in the exclusive club. The Missile Technology Control Regime, Australia group and Wassenaar Arrangement, all important factions in the NSG who are opposed to India entry, have been prevailed over by the USA. Besides, US is also backing India’s candidature for a permanent seat in the UN Security Council. All this presumably because of the huge trade and economic interests US is developing in India, apart from India’s strategic importance in the emerging geo-political dispensation in the world.
Against its diplomatic support, US has asked for several economic concessions. There are of course some serious differences between the two countries which have remained unresolved. The offer of MMRCA -the technical name for the F16 fighter jets-has been part of US sales plan which was rejected by the defence ministry. Following the failure of this deal, the US ambassador to India had even resigned. As a sop, India of course placed its large order for the transporters. US has also expressed its disappointment neither insurance sector nor multi-brand retail has been opened up for foreign direct investment so far. These are areas of special interest for US business. Besides, US is sore that India has played hard ball at WTO and other international negotiations. India’s proposal for imposing restrictions on foreign take over of Indian drug firms -which have been happening with increasing frequency recently-has also annoyed powerful US drug industry.
If these are friction points in India-US relations currently, the underlying factors for integrations and greater co-operations are strong. These have given benefits to both countries. This has been best captured by US commerce secretary, Gary Locke earlier in the year while visiting India. He had observed: “We came to India for the costs, we stayed on for the quality and we’re now investing for innovation”. All three parts of the economic compulsion -namely, cost advantage, achievement of quality and science and technology development – are mutually beneficial and should play critical role in the increasingly knowledge based world of tomorrow. (IPA Service)