Indo US Relations

This blog has been viewing the Indo US relationship of the Obama – Man Mohan Singh era through the prism of  Af-Pak policy of the US and various machinations spurning out of it. There is, however, a need to widen the scope of this discussion to a  range of issues to include economic cooperation between the two countries and its related manifestations. It is evident that alliances in the 21st Century will be formed with or against US militarily. But that’s not the only way forward. Economics has a big role to play here.

Recent developments in the U.S.-China relationship including the effective exit of Google from the Chinese market and threats of a retaliatory action by the U.S. Congress on the exchange rate issue should calm down Indian fears that the Obama administration is keener on China than India. Symmetrically, from the U.S. perspective, the current Indian leadership is well inclined towards continuing to build U.S.-India relations. This exercise will also allay fears that Pakistan was favoured by US to pursue its South Asian policies.

The recent visit of the US treasury secretary Geithner was possibly to development in this arena. The official agenda agreed between the two sides was to focus on macroeconomic, financial sector and infrastructure issues.Within these three areas, the subject with the greatest potential is infrastructure. India is on the cusp of launching a massive build up of its infrastructure including power, railways, roads, ports, airports, telecommunications and urban housing and transport. The current estimates are that India will need to invest $1 trillion on infrastructure over the next ten years. However, given the current financial position of India, it is expected that there would be huge deficits in mobilising resources for infrastructure. US can fill the voids to the advantage of both countries.

A second important potential area of cooperation between the U.S. and India is higher education. The Foreign Universities Bill, which the Indian Cabinet recently approved to be tabled in the Parliament, will finally end a regulation that currently forbids foreign universities from awarding degrees in India. India produces a large number of extremely talented students while the United States has a large number of world-class universities. Once the barrier to the entry of foreign universities is removed, the two countries stand to mutually benefit big from cooperation in this area. As many as 70,000 Indian graduate students currently study in the U.S. and could be hired as faculty members on Indian campuses of the U.S. universities. Investments in the primary and secondary education could also be opened up to increase the reach of the basic education. Whether Indian government opens up these sectors is a key issue.

The next issue is the financial sector.  Symmetrically, India has perhaps shown greater prudence in regulating its banks and financial institutions, which helped it largely escape the recent global financial crisis. There may be lessons for the United States to learn from India in this area.

Trade between the two countries is a contentious issue. Post Doha, there is a need for both sides to visit their stated stands and show flexibility to each others concerns. There may also be scope for liberalization in agriculture by India outside of the Doha negotiations. But this will require a quid pro quo from the United States in areas such as temporary worker visas for which the latter may not be ready.

Indo US relations do not have to be subjugated to  Af Pak or US – China relationship. The fastest growing democracy can find convergence on a range of issues with US. Detractors may point out US defence expenditure and assistance to Pakistan as a stumbling block to Indo – US economic partnership. India and US, though, need to charter a course for future relations based on sound economic principles.

Militarily, India’s  objectives of modernisation of its armed forces, with US help offer a scope for much wider opportunities in trade and training. Here both sides need to adopt flexible approach in making economic sense of their military engagement.

Both the Obama administration and the Indian government need to see this clearly and decouple this relationship from the shackles of Af Pak.