India, US and a paradigm shift in their relation

October 1, 2015

Prime Minister Narendra Modi’s visit to the United States has taken place at a moment of significant opportunity for India. This is the overall assessment of both Indian and American observers as they take stock of Prime Minister Narendra Modi’s second visit to the US, spanning the two coastlines to push India’s economic, commercial and strategic goals.

The five days had a punishing schedule – Mr. Modi met business moguls, dined with Silicon Valley entrepreneurs, exhorted world leaders on United Nations reforms, took photos with hundreds of Indian Americans, addressed two UN summits, inaugurated “IndiaUS StartUp Konnect”, visited Facebook, Google and Tesla, performed at a diaspora rally of thousands and topped it all with a meeting with President Barack Obama.

All this was happening on the backdrop of meltdown in the robust Chinese economy, which had seemed invincible, but faltered and is facing deep structural problems. In its comparison, India is poised to become the world’s best performing economy.

US companies cozying to India

American technology companies see India as the next big growth opportunity, given the difficulties in operating in China and the fast growth of the smartphone market and e-commerce in India. This was evident from the enthusiasm with which Mr. Modi was received in Silicon Valley by the chief executives of America’s best known technology companies, several of whom, like Satya Nadella and Sundar Pichai, hail from India.

India’s goal to harness the digital revolution to skill its people, improve infrastructure and delivery of goods and services opens up exciting possibilities. For India, the challenge is to leverage these opportunities to create employment for the millions who enter the job market each year, and develop domestic technical and manufacturing capabilities.

Unwarranted criticism from Congress

Mr. Modi’s visit was a wide and varied canvas befitting India’s wide and varied interests. But it was also about him – a leader increasingly under criticism at home for delay in delivering on major financial reforms but one who can command attention abroad.

In fact, Congress criticism of Prime Minister Modi’s successful second visit to the US should be seen as an indirect endorsement that he is on the right track. Among other things, Congress spokesperson Mr. Anand Sharma accused Mr. Modi of faking his poverty and insulting those related to him as a person including his mother.

Regardless of whether Mr. Sharma is right or wrong, he is actually acknowledging something that should be clear to everyone: Mr. Modi is the best brand ambassador and country salesman India has ever had. He is able to connect not only with the diaspora but also with powerful Americans like no other Indian Prime Minister could – not Nehru, not Indira Gandhi not even erudite Manmohan Singh. America probably sees Modi as more representative of India than any other Indian leader in the past barring possibly Mahatma Gandhi.

Sure, domestic critics will say Mr. Modi is doing nothing more than play to the domestic gallery by using the diaspora to appear popular in America. However, the fact is this makes a difference to how Americans perceive India. Indian Americans are some of the most successful businessmen and professionals in the US, and if they can be swayed by Modi, it is tantamount making to a power statement to America as well.

Warmth between the two nation heads

Giving each other a hug, it was the fifth time Our Prime Minister Modi and the US President Barak Obama have met in a year. Mr. Obama called him “my good friend,” and Mr. Modi said how deeply he valued the friendship and the India-US relationship. Unlike the Congress party, Mr. Modi has no qualms about embracing America – if it is in India’s interests. He is moving faster with the US even though the US-Pakistan and US-China equations make the strategic picture complex.

The remarks made by both of them after their meeting reflected their priorities. Mr. Obama was all about climate change – he wants progress in Paris as part of his legacy. Mr. Modi wants to protect India’s development space. He will go green but the Americans must help with technology and finance.

Development at diplomatic front & strategic affairs

The Indian Prime Minister listed what he wants from Mr. Obama – US support for India’s permanent membership in an expanded UN Security Council, India’s membership in various international export control regimes and membership in Asia-Pacific Economic Community. There is a clear attempt to make the narrative on Indo-US relations more balanced where it is not just the Americans listing their demands.

The Strategic and Commercial Dialogue, held two days before Mr. Modi’s arrival, took stock of the bilateral relations with three Indian ministers in attendance. US officials said the pace of reforms was slow, the business climate still muggy with regulations, a slow judicial system and tax uncertainties. India asked for a “totalisation agreement”, more market access and relief from all the noise around H-1B visas. They announced several new initiatives, including joint training of peacekeeping forces in Africa and a regular foreign secretary-level dialogue.

In the last years of the previous government, American investors had become wary of doing business in India on account of slow decision-making and the unpredictability of the regulatory environment. But the high expectations that the new government, with a solid majority in the Lok Sabha, would be able to smoothen out these tangles quickly and expedite reform have been moderated as several key initiatives like the land amendments and GST have been abandoned or failed to make progress. The unpredictability of the tax regime has been a major concern of foreign investors and this is still a work in progress. India needs to step up its game to create a conducive business environment.

It is the first time in the nearly 20-year long effort by the outsiders to get into the Security Council that UN members have something concrete in hand.

India’s endeavour to UNSC as permanent member

To bolster the effort, Modi participated in a G-4 summit with the leaders of Germany, Japan and Brazil – the three other aspirants for a Security Council seat. It was the first time in five years a summit-level meeting was held because the US had persuaded Japan to stay away. This time it is a different G-4 because at least three of the four leaders have strong mandates and loom large on the world stage.

Since every UN vote counts, Modi met the leaders of Guyana, St. Vincent and Grenadines, Egypt, Mexico, Jordan, Palestine, Cyprus and Sweden apart from Britain and France, the two permanent members who were more forthcoming in their support for India’s entry. China, Italy and Pakistan will do their bit to stymie the effort.

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