True Driver of India-U.S. Partnership

June 23, 2010

Following the conclusion of the first India-US strategic dialogue,
commentators in the Indian press have nearly uniformly expressed
frustration with the lack of action under the Obama administration. To judge whether this dissatisfaction is grounded in reality, we must
first ask whether each country has enough reason to invest in a close
relationship with the other in the first place.

From the Indian perspective, there seem to be sufficient reasons for an affirmative answer. Accounting for almost a quarter of the world’s GDP, the United States is by far the largest economy in the world. It is also the only super power on the globe and likely to remain so in the foreseeable future. It is a democracy that values other democracies. And, finally, it is by far the largest single recipient of India exports of goods and services. If we seek rising economic prosperity and increasing voice in the world affairs, America is a good bet.

An affirmative answer seems less clear-cut from the US perspective, at least on the surface. True, India is by far the world’s largest democracy. But this cannot be a game changer by itself since it has been true for the last 60 years. At $1.25 trillion, Indian economy is just a little more than 2% of the world economy. Globally, it ranks a low 11th in terms of the economic size, ranking behind China and Brazil. Above all, India accounts for less than 2% of the US exports and imports.

Seen in this context, the puzzle is not why the Obama administration is not doing more to promote ties with India but how India has come to command so much attention on the global stage. The main explanation of this puzzle lies in where the United States sees India going in the next 15 to 20 years.

In the last seven years, India has grown 11-12 % per year in real dollars. Based on the current dynamism in the economy, high and rising savings rate, a young population that is expected to grow younger and the past experiences of countries such as South Korea, Taiwan and China, India can be reasonably expected to sustain a 10% growth in real dollars over the next 15 years. This would turn the country into a $5 trillion economy catapult it into the fourth, if not third, position worldwide, behind only the US, China and Japan. No forward-looking nation — least of all the US — would ignore an economy with such potential.

But this is not the only factor working in favour of a partnership with India. American perceptions of India are also shaped by the vast numbers of highly successful Indians — a large majority of them first-generation immigrants — that they see around them. While the presence of Indians in the US is not new, their phenomenal success is. In the last 15 years, their influence in the tech and finance industries and higher education has grown as that of no other single group. A year ago, when microprocessor giant Intel decided to put its employees in its TV commercials, the first person it chose was Ajay Bhatt, the inventor of the USB port who had received his first engineering degree in the Maharaja Sayajirao University of Baroda. And to ensure that his Indian origins are not lost upon the viewers, it replaced the real Bhatt by an even more Indian-looking moustached actor!

Complementing this feature is the presence of 100,000 students from India on the US campuses. The US leadership recognises that these are not any 100,000 students. Instead, they are among the brightest young men and women anywhere who would be among the movers and shakers of tomorrow around the globe. And this flow is likely to continue. Therefore, as a country that looks ahead, the US has plenty of good reasons to seek a longterm partnership with India.

Therefore, it is no surprise that during the first India-US strategic dialogue, the US took great pains to counteract the impression that it lacked enthusiasm for India in any way. The secretary of state Hillary Clinton warmly wrote in the Times of India about what this partnership meant to her and President Obama did the unusual by dropping in on the reception at the state department in honour of the visiting Indian external affairs minister S M Krishna.

How do we then explain the continuing frustration among the commentators in the Indian press? The answer perhaps is that outside of the highly complex security area, there is very little beyond the atmospherics that the governments can do to promote partnerships . Even commentators who deplore the US for failing to match its words with action and exhort it to move beyond symbolism do not offer a concrete set of actions they would like the latter to take. Demands for the removal of certain export controls and access to or extradition of David Headley, which find frequent mentions, do not make a coherent agenda.

While the governments can make some contribution in areas of mutual interest such as research in agriculture and clean energy, cooperation in science and technology and higher education and possibly dialogue on trade and climate change issues, the bulk of the long-term relationship will be built on business-to-business and individual-to-individual contacts outside of the government sector, as has been the case to-date. The outsourcing relationship between the two countries did not have its origins in any US government decision to promote it. Nor did the American investors in India or Indian investors in America end up in their respective destinations because their governments placed them there. While continuing dialogue has signalling value, the ultimate key to achieving a true partnership remains sustained rapid growth that turns India into a $5 trillion economy in no more than 15 years.