Modi’s US Gambit 2.0

 

Prime minister modi’s September visit to the US has to be assessed on the basis of the totality of our relationship. We have to build common ground with a country that remains the world’s foremost political, economic, technological and military power. The US is our biggest economic and technological partner; we have institutionalised dialogues with it without a parallel with any other country; our people-to-people ties are the deepest compared to any western country; our military ties and strategic convergences are expanding. 

 

However, all is not smooth sailing, which makes engagement even more necessary. The US still arms Pakistan; its soft treatment of Pakistan on terrorism and nuclear issues sharply contrasts with the draconian handling of Iran; it is willing to accommodate Pakistan’s strategic interests in Afghanistan by promoting the reconciliation process there under Pakistani auspices and with China’s participation, which, in turn, opens the doors of a stronger Chinese presence around us.

 

We are courting US investments, but US investors are waiting and watching. They are impressed by Modi’s ambitions and plans, but want faster implementation of promises, especially on the ease of doing business in India. The US has complaints about our trade, investment and IPR policies, especially in the pharmaceutical sector. From our side, we are concerned about the growing sentiment against outsourcing in the US, restrictions on movement of our professionals, visa issues, the long-pending totalisation agreement and so on.

 

 Modi’s second visit to the US was aimed at galvanising India-US ties. To further his ambitious plans —Make in India, Skill India, Digital India, Clean India, Start-Up India, Smart Cities, infrastructure development, indigenous defence manufacturing, cleaner energy and so on — engaging the US at the political, corporate and diaspora levels is important. The “hype and hoopla” surrounding his foreign visits because of his manner of engaging his interlocutors, the quality of his message, his oratory, his media-savviness, the attention he draws to himself, and the rock star treatment he gets from the diaspora, raises his domestic stature to the discomfiture of the opposition at home. This occasions the kind of criticism of his US visit that we have seen, that detracts from our larger national interest.

 

In New York, Modi met CEOs from the financial, manufacturing, infrastructure and media sectors, apart from a dinner meeting with 42 CEOs from Fortune 500 companies. No Indian PM has visited the Silicon Valley for 33 years, which is astonishing given the number of people of Indian origin working with great success there in the frontier areas of the knowledge economy. Modi’s meetings with Facebook, Google, Microsoft and Apple chiefs were unprecedented. 

 

The impact of this on the young, urban population and the Net users is bound to be considerable. The image of a modern-minded, tech-savvy, social media oriented Indian Prime Minister carries a positive message in itself, apart from bolstering Modi’s Digital India campaign for which he received some positive commitments of support. Of course, associated with these giants of Internet technology are serious issues of Net governance, security and law and order related matters involving the use of social media by terrorists et al, which require regulation but conflict with the principle of freedom of speech. The latest controversy in India over encryption of Internet communications has allegedly been fuelled by a US social media enterprise.

 

For all of Modi’s success in marketing India abroad, especially with the slowdown of the Chinese economy opening up opportunities for us, the real test of success will be at home. Most of what foreign investors seek, Indian investors want too. If doing business is made easy, our own investors could get fired up. If Indian investors start investing in India, foreign investors will automatically gain confidence and follow. The government’s difficulties with the land acquisition Bill and GST, the consequence of a lack of majority in the Rajya Sabha, has sent signals of uncertainty to would-be investors. These need addressing, and Modi’s meetings in the US offered an opportunity to do so.

 

US and foreign investors seek a predictable tax regime and are still concerned about retrospective application of our tax legislation; they want simplified procedures, less red tape, quicker decision making on tenders, more regulatory reform and faster infrastructure development. All these points were flagged by them to Modi, who must know that if the gap between promise and delivery is not bridged quickly, his pitch will begin to lose credibility, with costs both at home and abroad.

 

Modi’s US visit supplemented the results of the first ministerial-level India-US Strategic and Commercial Dialogue in Washington on September 23. That meeting agreed that US and Indian entrepreneurs could cooperate in a new innovation forum to be established in 2016. A joint work stream on the ease of doing business has been launched. Accelerating progress in infrastructure collaboration has been emphasised. It was agreed that a US Smart Cities Infrastructure Business Development Mission will go to India in February 2016 led by the Deputy Secretary of Commerce. The US affirmed its readiness to assist our goal of providing skills training to 400 million people over the next decade. An early signing of a new five-year MoU on energy security, clean energy and climate change is envisaged. On the strategic side, the important gain was the Joint Declaration on combating terrorism. All in all, Modi’s US visit was a success.