Time to scale up India – USA business ties

Date: April 26, 2016 Publisher: The Financial Express

In 2001, as the Internet Bubble was collapsing and the stock market was imploding, Goldman Sachs predicted that four countries would dominate global economic activity in the 21st century—Brazil, Russia, India and China (BRIC). This acronym caught on and became a major alternate global grouping, referred to now as the BRICS (with South Africa added on). Similarly, Professor Doggett of the McCombs School of Business of University of Texas at Austin in 2010 coined a new acronym—the new CIA: China, India and America. At that time it didn’t gain much traction but, in 2015, this grouping suddenly seems to be gaining relevance. Not only do we see some of the economies in the BRICS grouping in some difficulty (Russia, Brazil and South Africa), we also see Europe with a continuing downtrend; Africa, Gulf and Latin America with their own set of difficulties; and the global economy itself not so robust.

The new CIA
It is now being openly stated that if the last century was known as the ‘American Century’, the current century would be the ‘Asian Century’, with China and India being the key players. It is in this context that the triad of CIA can be seen as the emerging core of world’s economic power. Together, the three countries account for around 37% of the world’s GDP and are home to over 41% of global population. In fact, the three countries are projected to constitute 42% of GDP by 2030.
The triad of CIA can be seen as the emerging core of world’s economic power
The sheer size of the economy and huge population gives these three nations the power to transform the global economy. Economic prosperity of these nations has a spillover effect on the world at large. The global economic recovery currently under way can be primarily attributed to the improved growth prospects in US, with its growth estimated at 2.4% in 2014 and projected at 3.2% in 2015—one of the best performances amongst all advanced countries. Although China is going through a slowdown, it is still expected to grow at a robust 7% per annum according to World Bank’s latest growth forecasts. India, which has once again embarked the path of economic reforms, is set to advance towards 7-8% growth over the next few years.

Better growth prospects in the three countries will provide greater opportunities for enhancing mutual trade, investment and economic cooperation. In line with the changing global economic landscape, there has been a significant thrust on enhancing India’s relationship with both the US and China. This is evident from the series of two-way international engagements of respective leaders, be it President Obama’s upcoming visit to India, Prime Minister Modi’s visit to the US in September last year, President Xi Jinping’s visit to India last year and the likely visit of Prime Minister Modi to China later this year.

India and the Unites States
The most awaited engagement is Obama’s visit to India as the Chief Guest for Republic Day. There are expectations for a fruitful bilateral engagement that will take Indo-US partnership to higher levels. The strategic partnership between the two countries raised a new dimension when Modi visited the US last year. For the first time ever, leaders of two countries utilised the media platform (through a joint editorial) to present their common vision for Indo-US strategic partnership. The two leaders discussed strengthening of cooperation in a number of areas including defence, energy, infrastructure, counter-terrorism, space exploration and science & technology.

Bilateral relationship between India and the US has gained strength on the back of shared values of democracy and freedom and a collective stand with regard to major political issues of the world. Complementing this is the trade and economic relationship between the two countries, which has scaled new heights with every passing year. Total bilateral trade touched $100 billion in 2013 and both sides are keen to take this to $500 billion. At the same time, cross-border investments are growing and Indian firms have created close to 100,000 jobs in the US. There is a huge potential still to be tapped, and while this requires strengthening existing frameworks, there is a need to explore new avenues of growth and collaboration. In his recent visit to India, the US Secretary of State, John Kerry, said, “We can do more together, and we must do more together, and we have to do it faster.”
India and USA keen to take bilateral trade to $500 billion Clearly, Obama’s visit will accelerate the pace of two-way dialogues on resolving critical issues, strengthening existing collaborations as well as initiating new cooperation areas.

Given that India currently has a stable government with a strong commitment towards initiating reforms and taking forward the growth agenda, there are abundant opportunities for American investors. These encompass a wide gamut of sectors, right from agriculture and food processing, to education, health, sanitation, infrastructure, energy, environment, cyber security and defence. With huge thrust on improving governance and ease of doing business, India is creating conducive environment for businesses and setting ground for higher foreign investments.

During Kerry’s visit, the two countries reaffirmed their commitment towards the Bilateral Investment Treaty (BIT). The US and China have already held several rounds of talks on BIT and are close to sealing the deal. It is time that India and the US also take the leap forward. This treaty is crucial for fostering real transformation of economic engagement between the two. By providing adequate protection to investors on both sides, the treaty will facilitate greater bilateral investments. Likewise, initiating a Totalisation Agreement between India and the US will be a great boost to several thousands of Indians who have worked for short periods in America but have not been able to take any benefit of social security payments made during that tenure.
The fundamental strength of India has again come to the fore and the country is rightly placed to position itself amongst the global economic powers. The time is ripe to strengthen our international relationships and reap the benefit though participative engagements with the leading global community.
(Article originally appeared in The Financial Express, April 2016)