Times of India
Editorial by Arun M. Kumar
Prime Minister Modi goes to Washington next week at the midpoint of his term and at the start of President Trump’s. The challenge facing Prime Minister Modi, as President Trump starts shaping his view of US-India bilateral ties, is to build on the gains of the past three years.
The Obama Administration saw the election of Prime Minister Modi as an inflection point in the India-US relationship. When Modi came to power in May 2014, US-India bilateral relationship was perceived to be losing momentum. Over the first eighteen months of Modi’s prime ministership, the Indo-US relationship reached a high point with President Obama’s visit to India in January 2015 and the establishment of the Strategic & Commercial Dialogue (S&CD), covering a wide swath of political and economic issues.
The S&CD recognized the centrality of business and commerce to the relationship and established a constructive climate for mutual progress along with the Trade Policy Forum that focused on specific policy issues. It helped rejuvenate the India US-CEO Forum, allowing the recommendations of leading CEOs to be directly conveyed to leaders of the two governments.
The last three years saw many successes, including the overall increase in mutual trade, from $97 billion in 2013 to $115 billion in 2016. Global businesses lauded specific improvements in the ease of doing business such as the reduction in backlog of transfer pricing tax cases and the passage of a bankruptcy code. There were substantial transactions (locomotive manufacturing facility in Bihar by GE; Mahindra’s expansion of an agriculture facility in Houston) and investments that led to job creation in both countries.
The Trump Administration will want to put its own stamp on the relationship. The Administration is focused on large deal announcements on the one hand and trade deficits on the other. At the same time, Indian leadership is traditionally averse to be transactional and is intentional about distancing the announcements of deals from leadership visits.
The trade deficit with India has remained flat over the last three years even as total trade grew. China runs a trade deficit with the US that is ten times higher than India’s; even Ireland and Vietnam run larger deficits than India. A recognition that India-US trade is marked by a diminishing deficit as a percentage of total trade will be a good starting point to constructively address the deficit and thus the way forward for India-US trade.
President Trump has been vocal in his opposition to establishment-centered (Washington DC) approaches to policy and governance. In India, Prime Minister Modi has championed the devolution of economic decision making to India’s states and the concept of competitive federalism.
Both governments will gain by fostering engagement at the level of each countries’ states. The real action for economic development, business and commerce will be at the level of specific states in India. In the US, the states have been laboratories for innovation and industry and in India we see examples of states, with dynamic leadership, attain double digit rates of growth. For businesses, the nitty-gritty of business operations occur at the state level. US states are looking to help their businesses expand and Indian states are looking for investment and further its growth.
For the US and India, it would be productive to have the leaders of the major states in each country, along with their business leaders, meet once a year in a structured setting to advance business and other mutual interests. As a new initiative added by the two governments, the S&CD could be augmented to embrace interested states. A “Governors-Chief Ministers Business Conclave” for State Governors, Chief Ministers, and CEOs/senior business leaders could see participation from American states like California, New Jersey, Texas, Illinois, Michigan, and Utah based on interests in trade as well as diaspora links. From India, initial participating states could include Gujarat, Maharashtra, Andhra Pradesh, Telangana, Rajasthan, and Madhya Pradesh. The goals of the conclave would be to promote investments and trade in both directions and create jobs in the states involved.
While the governments of both countries would be facilitators, the organization of the conclave could be managed by industry associations.
Prime Minister Modi has been fostering the concept of competitive federalism in India, a mode of working that is pervasive in the US. Encouraging greater connections and collaboration at the level of the respective countries’ states would create a multitude of touchpoints between the two countries that can potentially take this inherently vibrant relationship to the next level.