About the author: Brian P Klein is the founder of RidgePoint Global, a strategic consulting firm, and a former US diplomat.
Indian Prime Minister Narendra Modi’s visit to Washington this week marks the strongest sign in decades of a warming in bilateral ties, fueled by current geopolitical realities. However, courting comes with borders that have historically kept these two countries at a distance.
Any notion that democracies can or should agree on everything needs to be tempered with a dose of pragmatic realism. The US may believe that oil sales are helping to prop up Russian President Vladimir Putin’s regime and, by extension, his war against Ukraine. But Modi’s India is buying cheap Russian oil anyway. Trying to force India to choose sides will backfire.
Where the US can offer credible alternatives, New Delhi is likely to choose them. So is the country’s historical reliance on cheap Russian military equipment, which is now severely impacted by supply chain problems and bottlenecks. India is buying $3 billion worth of US drones in one of many new initiatives to strengthen military ties. The US-India Business Council of the US Chamber of Commerce also launched its first INDUS this week
India’s economic development also exhibits a strong socialist and sometimes xenophobic tendency, which has hampered private sector development. In turn, informal policies and overly bureaucratic hurdles have limited the participation of foreign companies in India’s growth. A coordinated, intergovernmental US approach will be required to effectively persuade India to open up traditionally restricted areas of its economy. Success will be achieved by demonstrating that greater openness to New Delhi is the most effective way to realize its broader ambitions of becoming a regional growth hub.
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Even some of the success stories of economic relations have a dark side. The rapid increase in generic drug production in India has helped drive down drug prices for American consumers. But serious quality problems in chemotherapy treatments and contaminated eye drops have led to drug shortages and endangered the health of patients.
India has been officially geopolitically non-aligned since gaining independence from British rule in 1947. That’s why New Delhi balks at any perceived treatment as an unequal partner, or at Western countries’ “guidelines” about what to do. This is particularly true on legitimate human rights issues, including mistreatment of Muslims, political repression and attacks on freedom of expression, which have become more common under Modi’s rule.
Washington’s attempts at intimidation will improve none of these conditions. Soft power’s influence through a greater presence in US society might be better than the widely perceived hypocrisy of Washington’s penchant for global moralizing. India is the fifth-largest source of inbound tourists to the US, but still only saw 430,000 visitors in 2021, just ahead of Ecuador and the Dominican Republic.
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With all these difficulties, common interests and a long, vibrant history of sharing can lay the foundation for that much-needed closer relationship.
Washington and New Delhi are already warming in a way rarely seen in non-treating countries. The reaction to China’s regional expansion is certainly one reason. India shares a long, hotly contested border with China. Beijing has also actively courted India’s neighbors, including Afghanistan, Pakistan, Nepal and Bangladesh, strengthening their access to the sea, expanding power transmission lines and investing heavily in regional infrastructure.
Modi does not want to be completely excluded from China’s strategic moves and needs support. The Biden government is happy to help. For this reason, in an unusual step in building regional ties, India has been included in the quad along with Japan and Australia. Cooperation within this framework covers “infrastructure, maritime security, public-private partnership, climate, health, critical and emerging technologies and space”.
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India is seen as the new global engine of growth without showing many of the ideological differences in US-China relations. The World Bank forecasts India to grow 6.9% in 2023. US exports to India more than doubled from 2016 to 2022, reaching $47 billion last year. This makes India the tenth largest market for US goods.
There are plenty of commercial opportunities, similar to China’s opening and reform phase, which has now ended. Investments in the billions flow to India. GE will build aircraft engines for the Indian military and Micron is planning a chip factory. Apple has finally opened its first retail stores in Mumbai and New Delhi, and analysts expect 25% of iPhones will be made there by 2025. Tesla plans to expand into India’s emerging electric vehicle market. US companies are also actively looking for alternatives to using China as a production location. The more they are squeezed out of this domestic market, the greater the opportunities for India’s sustained growth.
And bilateral trade tensions, which have long been a source of tension, are easing. The Office of the US Trade Representative announced on Thursday that six disputes with the World Trade Organization will be settled. India is also removing retaliatory tariffs on several US products, including some agricultural commodities. After the Senate finally confirmed Eric Garcetti as US ambassador to India in March, problems can now be handled more proactively.
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All of these apparent affinities don’t belie the significant hurdles that remain in this burgeoning new diplomatic romance. At the moment it should be primarily a purposeful relationship. But the South Lawn reception, White House dinner, address to the US Congress, and even a rare press event for Modi illustrate the importance of this newfound diplomatic partnership.
US companies will benefit by considering this background and the immense cultural diversity of a fast-growing India. Any difficulties that arise, and there will be many, are surmountable as long as Washington policymakers take a measured and pragmatic approach to forging stronger ties.
Opinions like this are written by writers outside of Barron’s and MarketWatch newsrooms. They reflect the perspective and opinion of the authors. Send suggested comments and other feedback to [email protected].