India-US Relations: Sustaining the New High Achieved by Narendra Modi

Prime Minster Narendra Modi and United States President Joe Biden addressed a press conference following bilateral talks and addressed issues of human rights, press freedom, discrimination and democracy.

(Photo: Altered by The Quint)

It is always instructive to see the evolution of any bilateral relationship in its historical perspective. The India-US relationship has been a bit of a rollercoaster in the past. On an upswing during the fifties and sixties, when the US agencies and finances helped with land reforms, community development, PL 480, and the green revolution, and on a huge downswing over the seventies and eighties.

Again, on a minor upside in the early part of the nineties when India liberalised and then the deep trough characterised by stiff US sanctions after Pokhara II in 1998. So, it is heartening to note that the present upswing that started with Indo-US nuclear deal has remained unabated at least on an even keel until 2016 when Prime Minister Modi during his state visit called for overcoming past hesitancies and changing track.

This took the relationship to new highs, which it seems has reached new heights in this unprecedented second State visit of the Prime Minister.

Primary Focus on Technology 

With the highest possible level of protocol, form, and content, both President Biden and PM Modi have indicated that they would like the current upswing in Indo-US bilateral relations to continue and intensify over the coming years or even decades. The two see the bilateral relationship as being pivotal for global welfare in this century. The combined techno-economic strengths of the world’s two largest democracies with their rich and vast pool of human talent and positive demographics will this relationship emerge as the principal driver of the global economic phenomenon in the coming decades.

If one goes by estimates put out by Goldman Sachs, which look to be conservative for India, in 2050, the two economies will weigh in with a combined nominal GDP of nearly USD 58 trillion, about 29% of the global output. The economic heft of the two economies combined with their strengths across multiple dimensions, represent a massive potential for building synergies and taking path-breaking technological collaborations. These are today essential for the global community to meet its twin objective of optimizing human welfare while safe-guarding the environment.

It is, therefore, most promising to note that seriously hi-tech and frontier technologies are the predominant focus of the 58-paragraph-long joint communiqué. The communiqué makes it clear that the hi-tech push will be truly collaborative, and not a one-way flow.

This is evidenced by the creation of a joint task force for Open RAN and R&D in 6G technologies (para 6) and a joint mechanism for coordinating the efforts on quantum computing (para 7) and the inclusion of an in-kind contribution of USD 170 million by India’s Department of Atomic Energy to the collaborative development of the largest frontline international research facility in the US.

The US welcomes India’s decision to co-lead the Hydrogen Breakthrough Agenda; its willingness to set up a payment mechanism for the production of 10,000 EV commercial vehicles; the ambitious INDUS-X Ecosystem for collaborative R&D in defense technology and innovation; are all examples of how the two leaders, while pulling the relationship out of past hesitancies have boldly outlined the vision for the future. A vision in which India will immensely benefit from harnessing emerging technologies that will help it to pole-vault over its enormous challenges as it attempts to meet its growth targets while minimizing its carbon footprint and generating large-scale employment despite AI.

Change in Bilateral Relations

The two leaders have not allowed any ideological baggage to come in the way of pushing forward their cooperation. Thus, both sides have recognized the importance of ‘industrial policies’ in pushing their agenda of maximizing domestic industrial growth and upgrading technology. This is enshrined in the US Inflation Reduction Act and in India’s Production Linked Incentive schemes. This will hopefully convince the ‘free market wallahs’ based in US universities to change their prescriptions.

The joint commitment to a rule-based multilateral trading and economic order shows the present US administration’s willingness to reverse the disastrous approach of the Trump administration. Their efficient and effective operations are a sine qua non for emerging economies like India for achieving their development aspirations.

The US has unabashedly shown its intention of converting India from a ‘partner’ to an ‘ally’, given its own geostrategic objectives that are increasingly challenged by a China that is openly challenging the hegemon.  Witness, therefore, the US agreement to withdraw the long-standing seven disputes against India in the WTO.

The long description of bilateral collaboration in areas of drug and pharmaceuticals ignores the past objections of the US pharma giants. The lifting of export restrictions on advanced defense technologies required for both the collaborative production of F414 fighter aircraft engines and MRO for US naval ships is also further proof of the US going all out and removing the irritants that had forever characterized the B2B relations between the two countries.

How should India respond to these grand gestures on the part of the US, which are surely in its perceived national interests? India’s continued participation in the BRICS and SCO; its refusal to criticize Russia for the Ukraine mess; and its call for a greater voice of the Global South on global platforms have unambiguously laid out its consistent stand for strategic autonomy. This visit confirms that the US is okay with it.

Expansion of Exports to the US

Therefore, the Indian establishment’s policy attention must now turn to maximizing the techno-economic benefits from this latest upswing in bilateral relations. Yes, our bilateral trade has doubled from 2014 to USD 192 billion with India’s goods exports at USD 91 billion in 2022. Let’s note, however, that Indo-US trade is not substantially higher than our bilateral trade with China at USD 140 billion, which has increased from a mere USD 2.3 billion in 2000-01. Also let us further note that the US imports from China, despite all the current belligerent rhetoric stands today at USD 564 billion!

So, there is humungous potential for expanding our exports to the US and for attracting far more FDI from US corporates. India’s FDI from the US was USD 6 billion in fiscal 2023, down from USD 10 billion in 2022. China attracted USD 118 billion worth of US FDI in 2021. Thus, we have to take a very focused approach towards expanding our exports to the US. Concentrate on the one hand, on reinforcing India’s competitive advantage in sectors in which it is already established and to widen the export base by moving further up the technological value chain both in our goods and services exports.

The Biden administration’s focus on expanding domestic high value manufacturing capacities provides a major opportunity for Indian firms, especially start-ups, to become an integral part of their global supply chains. A task force with the specific mandate of quadrupling our total (goods plus services) exports, in nominal dollar terms, to the US over the next ten years should be set up immediately for achieving could the full potential offered by the largest middle-class market,  which is now ready to reduce its dependence on China.

Moreover, the efficient execution of all the initiatives outlined in the joint communique will require a concerted, consistent, and coordinated effort from multiple departments and agencies across different levels of the Government in India. Over the last four decades, I have witnessed many a splendid initiative flounder and simply disappear under the deadening burden of compliances and regulations, seen as necessary by the bureaucratic establishment. Will it be useful for GOI to establish a high-level, adequately empowered mechanism to dispassionately track, monitor and ensure the implementation of at least the technology and economic aspects of the joint communiqué (paras 6-10 and 37-46).

Both aggressively pushing our export expansion (with or without the GSP) into the largest market in the world and ensuring the implementation of the rich techno-economic content of the joint communiqué, will be the true test of India’s preparedness to take the fullest advantage of its newly found leverage vis a vis the US. Such an opportunity has to be seized with both hands. The ball now is firmly in the court of the Indian executive establishment. 

(The author is the Chairman of Pahle India Foundation and former Vice Chairman of NITI Aayog. This is an opinion piece and the views expressed are the author’s own. The Quint neither endorses nor is responsible for them.)