In India-US ties, the long distance relationship has got underway
By Mukesh Aghi

The India–US Delhi Declaration of Friendship, which was upgraded from a bilateral strategic dialogue to a strategic and commercial dialogue, has provided a renewed sense of optimism to the business community in the US. If the first year of the NDA government was about the formation of this alliance and setting the tone of the friendship, the second year will focus on bringing ideas to fruition. Undoubtedly, this journey will be one that takes a U-turn from past trends and it requires political manoeuvrings and skilful negotiations.

Much like US President Barack Obama, Prime Minister Narendra Modi too acquired a troubled economy, desperately in need of a facelift and new direction. During Modi’s first year in office, the economic and strategic partnership between the US and India has gone forward in a sure-footed manner. Businesses in the US have been encouraged by the government’s commitment to ‘ease of doing business’. A survey conducted by Forbes India-BMR Advisors shows a positive affirmation for Modi’s ‘minimum government and maximum governance’ agenda. He has led by example — cutting down red tape and bureaucracy in his own office.

The cornerstone of Modi’s campaign and reforms agenda has been trade and investment relations — the passage of the significant coal mines Bill, mines and mineral amendment Bill, and raising FDI in insurance and pension have sent powerful signals to investors that the PM is serious about getting the economy back on track.

Government-led initiatives like Make in India, Digital India, Smart Cities, Swachh Bharat Abhiyan and Jan Dhan Yojna will be Modi’s calling card in the next year. But the key to breathing life into these initiatives rests on the overarching theme of ‘ease of doing business’ at both the central and state levels. The Centre should fund states based on whether they have implemented ‘ease of doing business’ policies. Flexible environmental clearances, increasing single-window clearance for FDI proposals to attract new investments, increased budgetary allocation to infrastructure, railways, power and urban development will be the recipe for long-term success for this government. In a nutshell, what Modi did in Gujarat needs to be replicated for retooling the economy and opportunities to the people of India.
However, in thriving democracies like the US and India, consensus building is an uphill task. Modi’s government will be tested this year as it tries to pass critical legislation such as the Land Acquisition Bill and Goods and Services Tax (GST) Bill. Bilateral trade between the US and India currently stands at $100 billion. Increasing that number five-fold is achievable if the countries work as partners and avoid protectionist tendencies. The next chapter of Make in India will be reliant on ensuring that all these policies are translated into action, where states and local municipal authorities have a shared vision with the government.
An important step in further strengthening the partnership will be US defence secretary Ashton B Carter’s ongoing visit. Carter has been widely credited for ‘upgrading’ the US-India defence relationship through the formation of the iconic Defence Technology & Trade Initiative (DTTI). His first visit as defence secretary promises a framework for defining the scope of an upgraded defence relationship with India — one that has seen explosive growth in bilateral defence trade and an increase in the number of joint exercises and intelligence sharing. As we embark on the next chapter of bilateral defence ties, US companies will seek close collaboration with India’s defence industry to co-produce and co-develop defence capabilities that serve common interests and mutual benefit. A time-bound commitment to procurement, more transparent and decisive offset policy and regime, and closer consultation with industry will serve to advance the bilateral defence relationship.
The key to attracting much needed investment in the country is predictability and transparency in areas like tax and intellectual property. When these principles are consistently applied, business will boom for both the US and India as investors will have the certainty they need to proceed in projects that require long-term commitment. Laws, rules and policies have to be framed in a manner that eliminates ambiguity, whimsical discretion, and interpretation.
Innovation is an intrinsic part of India’s DNA. But innovation too needs to be backed by appropriate policy measures. Young start-up companies and India’s vibrant informal sector will gain from uniform tax standards. Their success will place India on a firm growth trajectory.
The speediness of economic reforms and avoidance of politically driven distractions will determine the success of the government. Few political leaders have been so closely watched in their first year of assuming office as Modi. The close scrutiny has been for obvious reasons — the expectations of 1.25 billion people who gave him the mandate to lead the nation to economic prosperity rest on his shoulders. Further private sector investment in areas of skill development and early education can fast track India’s growth story. The time is ripe to tap into the skills and enthusiasm of the youth population and prepare them for better opportunities.
Hope, optimism and working with a strategy — all these lie before the nation and the PM in this next phase.
(This article first appeared in the Hindustan Times on June 3, 2015 and can be viewed here).