By: Mukesh Aghi
When Prime Minister Modi visited Washington DC in September 2014, his mandate to govern could not have been stronger, having won the largest electoral victory in India since the early 1980s. Remarkably, two years into his administration, he has amplified his profile at home while expanding his influence among international leaders, the Indian diaspora community and his social media followers. During the upcoming visit to Washington DC, Prime Minister Modi will address a joint meeting of the United States Congress. With this, Prime Minister Modi will join a league of eminent global leaders who have addressed the U.S. Congress in the past such as Winston Churchill, Shimon Peres, Angela Merkel and A.B. Vajpayee. This is also the first joint meeting by an Indian leader in a decade and the first in Paul D. Ryan’s speakership—a clarion call that relations between the world’s oldest democracy and the world’s largest democracy are stronger, more significant and more critical for the global economy than ever before.
Since the Obama and Modi administrations signed a Joint Statement during President Obama’s visit to New Delhi in January 2015, numerous bilateral activities have occurred with an emphasis on cybersecurity, climate change and defense cooperation. In fact, the United States holds more official dialogues with India than with any other country—a sign of the potential attached to India.
Running on a pro-development platform, Prime Minister Modi was tasked with implementing economic reforms since the day he assumed office. Investors faced trepidation and uncertainty as they entered the Indian market because of the lack of consistency in implementation of policy frameworks. While different governments have carried on the reform agenda since 1991, Prime Minister Modi’s systematic approach to dismantling state control of the economy has become a force to reckon with. NITI Aayog’s commitment to removing more than 1000 archaic laws that have traditionally impeded growth could power India to a $10 trillion economy, according to the Government of India’s policy entity.
Today, industry remains hopeful for the passage of some of the headline grabbing, big-bang reforms such as the Goods and Services Tax (GST), land and labor reforms. The Council is buoyed by passage of the Bankruptcy bill through the Upper House, where the BJP does not have majority and where opposition parties have historically prevented other major economic reforms from being enacted.
Given these legislative challenges, Prime Minister Modi’s administration has incrementally worked on the much-needed micro-level reforms to boost investor confidence. Despite the electoral defeat in Bihar, the Prime Minister did not stall the reform process and instead raised the Foreign Direct Investment (FDI) norms across 15 major sectors.
The problem fraught infrastructure and logistics have been longstanding concerns for investors. However, the rate at which long-term projects in roads and railways are now being implemented has dramatically improved. Projects such as the Delhi-Mumbai and Amritsar-Kolkata dedicated freight corridors are predicted to reduce the time taken to transport goods cross country— from 14 days to mere 14 hours. There are diverse investment opportunities to modernize the Indian railways through assistance from multilateral agencies and joint ventures with states.In a major step toward offering a policy environment that is transparent, predictable and consistent, the Governments of India and the United States reached an agreement to resolve more than 100 pending transfer pricing cases.
On U.S.-India defense ties, there is a clear growth trajectory as defense trade has grown from a mere $200 million in 2000 to nearly $14 billion today. India and the United States are more aligned than ever before on matters of defense cooperation, homeland security, joint training and cybersecurity. The recent introduction of the U.S.-India Defense Cooperation in the U.S. Senate and its companion bill in the U.S. House of Representatives elevates India as an important partner that can uphold security in Asia and around the world. The reason behind these developments is clear— Prime Minister Modi’s political platform tilts toward the United States as a natural partner in the context of defense and security in a way that previous governments have not. He has made Make in India a centerpiece of his policy agenda, and building India’s defense industrial base is central to this effort. India will need greater and higher investment to update its military and American defense firms are especially well-suited to this task.
The results of all these efforts are already visible. Recently, India substituted China as the world’s top destination for capital investments (an estimated $63 billion) with a number of projects announced across sectors such as oil, natural gas and renewable energy. In 2016-17, the U.S.-India Business Council expects an additional inflow of $27 billion by at least 52 U.S. companies. This uptick comes at a time when FDI is on a downward slide globally. FDI from India to the United States is also expected to grow in the future. There is solid interest by Indian investors in the power, steel, pharmaceutical and knowledge industries. This inflow of capital will expand the U.S. economy across a wide variety of fields, creating jobs and bolstering economic growth in both countries.
The Prime Minister will likely use the Joint Meeting to address issues that have not been ironed out—and at times—could not been resolved by the Obama Administration, with promoting the free movement of professionals—a critical issue for India’s iconic $150 billion IT industry. In his meetings with business leaders, a few topics will likely be at the front and center— the Make in India campaign, doubling the rate at which jobs can be created for India’s young demographic dividend and the promise of sustained focus on economic reforms.
As the business community and the U.S. Congress prepare to greet Prime Minister Modi, there is unprecedented bipartisan support that will give the Prime Minister the ability to deepen U.S.-India relations in a way that will reverberate around the world. While all eyes will be fixed on the promise that this relationship has forever held, we must remind ourselves that not all issues, whether trade-related or strategic, are easily resolved in democracies. But those who are vested in the relationship agree that the countries are closer than they have ever been to realizing their mutual goals of creating a safe, prosperous world for our citizens.
Mukesh Aghi is the President of the U.S.-India Business Council.
This piece appeared in the Hindustan Times, on May 18, 2016 and can be found here.