Engaging Uncle Sam

Prime Minister Narendra Modi’s upcoming visit to the US comes at a time that nation has (since 2008-09) been displaced by China as India’s top trading partner. But India has a trade surplus with the US that amounted to nearly $17 billion in 2013-14, against a deficit of over $36 billion with China. Besides, the official bilateral trade figures cover only merchandise exports and imports. If exports of software services are included — these netted $67 billion last fiscal, of which almost two-thirds was accounted for by North America — India’s trade with the US would easily surpass that with China. Also, the US is a far more important source of capital flows: it is only lately, especially under Modi, that India has consciously been courting Chinese capital in the form of foreign direct investment. Add ‘people-to-people’ contacts — whether through the three million-strong Indian American community or the several thousand Indians studying in US universities — and Indo-US relations are clearly far deeper and broader.

Yet, it is undeniable that ties between the two countries have fallen from the heady days of the signing of the landmark Indo-US 123 Agreement eight years ago. For India, the apparent lack of American cooperation in investigating the 2008 Mumbai terror attacks — including not properly sharing information on one of its chief plotters, David Headley — and the controversial arrest of Indian diplomat, Devyani Khobragade, have been among the major contributors to a souring of relations. The US, on its part, hasn’t taken kindly to India issuing compulsory licences for domestic manufacture of patented drugs and allowing patents only on new chemical entities, as opposed to incremental innovations. India blocking the adoption of a trade facilitation agreement at the World Trade Organisation (WTO), aimed at simplification of customs procedures by member-countries, has only added to the mistrust.

This seeming state of drift in relations between the world’s two largest democracies is by no means desirable. Few perhaps are better placed to reset the strained ties than Modi. He should first and foremost address American businesses. They need to be convinced that India’s growth story is set to resume, the days of policy paralysis are over, and it is indeed worth putting their money here. No less important is the necessity to emphasise India’s commitment to the multilateral trading system under WTO auspices and also that the granting of compulsory licences would be an exceptional resort only in public health emergencies. Such genuine assuaging of American investor concerns will, in turn, strengthen India’s bargaining position — be it on a more liberal visa regime for its IT professionals, no caps on skilled foreign personnel employed by companies in the US or a ‘totalisation agreement’ exempting our workers from social security contributions on short-term overseas assignments. Diplomacy is ultimately about give-and-take and continuous engagement. It shouldn’t be different with the US.

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