A Shared Partnership

BY the time she is 75, she will be helping to shape the destiny of the world in the 21^st century. She could be the most competitive of nations. By that time if “right partnership” between the two great democracies can be structured and built up “ I can see, 15 years from now, an India which has taken its relationship with the US to a whole new level, which has created something special and enduring to the great advantage of both nations. It will be relationship that is not buffeted by the ill winds of change, one that is not vulnerable to changes of government, that is a still point as other alliances and partnerships turn around. A partnership based on business links, on education and on a shared future.” Indra Nooyi, PepsiCo’s first lady chairman and CEO has many a reason to dream so. It’s a happening thing.

During his recently concluded State visit to the US, Indian Prime Minister Manmohan Singh told the members of the US India Business Council (USIBC) that "American business has been part of India's economic transformation. Most of the large American corporations are now present in India as foreign direct investors. Many are engaged in high technology work, with their Indian operations forming part of their global supply chains. US business in India has also groomed managerial and technical talent which they have liberally used for their global operations. A number of companies have located their research facilities in India attracted by the availability of high quality scientific talent at relatively competitive costs." 

India today is the second largest of the dynamic emerging economies. Like other emerging market economies, India has also been affected by the crisis of 2008. Country's growth rate has decelerated to 6.7 percent in 2008-09 and will remain at around 6.5 percent in the current fiscal year. "We expect to accelerate from this level and get back to a growth of around 9 per cent  per annum within two years", the Prime Minister said.

Attaching high importance to the role of the private sector The US President Barack Obama and Indian Prime Minister have  reconstituted the Indo-US CEOs' Forum, with David Cote and Ratan Tata as co-chairs. The forum will provide a platform where representatives of private sectors in both US and India can submit joint recommendations to the two governments on ways of enhancing private sector cooperation between the countries.

Referring to massive investments in infrastructure-related sectors like energy, transport and urban infrastructure Indian Prime Minister has invited American business and also Indian Americans to to look at the large number of public private partnership projects in infrastructure being promoted by the Central Government and individual State governments in our country. The government would welcome innovative ideas to finance such public private partnerships.

During her first visit to India (June 17-20, 2009) as the US Secretary of State Hillary Rodham Clinton asserted on the commitment "to building a stronger partnership between India and the United States, a partnership based on common interests, shared values and mutual respect. President Obama and I share this commitment.."  It is reflected also in the Joint Statement issued by both the countries after the meeting India's External Affairs minister S.M. Krishna and the US Secretary of State. Both of them, the statement says, have agreed "to strengthen the existing bilateral relationships and mechanisms for cooperation between the Government of Republic of India and the Government of the United States of America, while leveraging the strong foundation of economic and social linkages between our respective people, private sectors, and institutions. Recognizing the new heights achieved in the India - U.S. relationship over the last two Indian and U.S. Administrations, they committed to pursuing a third and transformative phase of the relationship that will enhance global prosperity and stability in the 21st century."  

India's increasing importance in global perspective is also reflected in what Congressional Co-chair on India Caucus, Jim McDermott stated. In an interview he said: "South Asia is as important as Europe and our foreign policy must reflect that by truly being global. There is no doubt in my mind that India is an important geopolitical and economic power and my recommendation reflects that. It also shows our support for democracy and the rule of law." Echoing what the first lady chairman of the US India Business Council (USIBC) Nooyi expressed in her maiden speech at the council, McDermott said that to create incentives for US investments in India a bilateral investment treaty would be an important way and these investments can boost trade flows. This treaty would basically provide a way in which investors know that they would be treated fairly in India (by creating an independent dispute settlement panel where investors and the government can settle investment disputes resulting from expropriation). At the same, he asserted, "United States should ensure that our markets are open to Indian imports "

In an interview Sanjay Puri, Chairman of the Alliance for US-India Business (AUSB) said India has to recognize that China has taken steps to make it a more attractive investment destination, and also been able to provide the requisite infrastructure. "India will get there, but the responsibility to scale up India’s participation in global markets, is shared by India and its trading partners such as the US," said Puri who is also the Chairman of the US India Political Action Committee (USINPAC), a strong platform for the Indian Americans.

Nooyi’s forthright assertion on Indo-US relationship reflects what the rest in industry, business and possibly the policy makers in both the countries too when she as the first lady chairman of US India Business Council (USIBC) says: “The door for relationships in business is now ajar. We need to keep pushing it open. We need to ensure that US companies are aware of the opportunities from infrastructure investment in India. We must then support a bilateral investment treaty with India, on which I understand that discussions are going well. We must also accelerate technology transfer and collaboration in many fields including agriculture.” Experts' pre-global melt down projections put Indo-US trade at $ 100 billion by 2011-13.

The Indo-US merchandised trade in calender year stood at US$ 37.63 billion compared with US$ 44.42 billion. The decline is attributed to the global melt down since 2008.

According to Department of Industrial Policy & Promotion of the federal ministry of Commerce and Industry, Government of India, the FDI equity inflows from the US into India during the first seven month's of India's fiscal year 2008-09 stood at $ 1258 million. Since fiscal 2000-01 to October, 2008 total FDI equity inflow from the US stood at $ 5791 million. The top attracting sectors is are led by Services (Financial and non-financial) with 22 percent of total FDI equity inflows into the country followed by Computer Software & Hardware (12 percent); Telecommunications (8 percent); Construction (6 percent); Housing & Real Estate (6 percent); Automobile and Power ( 4 percent each); Petroleum, natural gas; Chemicals; and Metallurgical Industries ( 3 percent each).

India has been seeking and trying to end the nuclear apartheid that the world has sought to impose on the country. With the signing of the Civilian Nuclear Cooperation Agreement on October 10, 2008 with the US, India is recognized as nuclear weapons state. The nuclear empowerment recognition by the Nuke club of 45 countries has unlocked immense potential of India in the field of nuclear energy and other related sectors. The nuke pact has removed the hurdle to trade in nuclear technology and equipment. The US-India nuke deal India would facilitate India to spend about $27 billion on 18-20 nuclear facilities in the next 15 years or so, the industry experts feel. This has at the same time opened up the door of India's nuclear power sector which offers immense potential to be explored and exploited by the reputed reputed internal nuclear power equipment suppliers. The US-India Business Council estimates that nuclear trade with India could be worth up to $ 150 billion over the next 30 years. Along with France and Russia, the leading US manufacturers have also joined the race for bagging NPCIL orders. NPCIL's nuclear power generation capacity is estimated at 4,000 megawatts.

In Defence also India has already signed the largest ever acquisition of military equipment from the US signing $ 2.1 billion deal with Boeing to buy eight long-range maritime reconnaissance aircraft.

In their joint statement on November 24, 2009 both the leaders (the US President and Indian Prime Minister) pledged to bolster and deepen cooperation on economic, trade and agricultural issues, including working bilaterally and with multilateral trade organizations to foster increased trade. Both leaders welcomed the potential for further expanding trade and investment between their countries, including in sectors such as infrastructure, information and communication technologies, healthcare services, education services, energy and environmentally friendly technologies. 

In his address at the Council of Foreign Relations (November 23, 2009) the Indian Prime Minister who sees the future of the India-US partnership with confidence and optimism said: "There is a growing convergence in our national interests, both within the bilateral framework and on regional and global issues. The changes in the global economic and political structures and the growing interdependence among nations today offer us a unique opportunity to look beyond our bilateral engagement to establish a strategic partnership of global dimensions. If we are to effectively tackle the multiple challenges that confront the world, India and the United States, as two leading democracies, must work together."

The United States is India's largest trading partner. Bilateral merchandise trade in 2008 was $44.42 billion. Till September 2009 the Indo-US merchandize trade stood at $ 28.14 billion. Principal U.S. exports are diagnostic or lab reagents, aircraft and parts, advanced machinery, cotton, fertilizers, ferrous waste/scrap metal, and computer hardware. Major U.S. imports from India include textiles and ready-made garments, Internet-enabled services, agricultural and related products, gems and jewelry, leather products, and chemicals.

One finds a perceptible change in product-mix of India's export basket for US. Today items which are getting better response and account for almost three-fourths of India's exports to the US include gem and jewellery / woven apparel; knitted apparel; Misc. textile articles; and machinery. There has been substantial change in import profile as well. India's imports from the US mainly include optical and medical instruments; chemicals and fertilisers; machinery; aircraft. But in last few years Information Technology has also emerged as one of the major foreign exchange earners. North America, the US in particular, is expected to continue as the largest market for Indian software exports. The unshackling of country’s regulated economy in 1991 by Mr. Manmohan Singh, then Finance minister and now Prime Minister and his government has made India today a major IT power, said  Harris Miller, President of the IT Association of America (ITAA) in an interview with IndiaOneStop.com..

About outsourcing, Miller maintained, the moot question is “where do you do it? You can do it in the country where you are operating or you do it ten thousand miles away. That’s the challenge for Indian companies--to convince customers in the US, Japan and Europe. The reality is that over time, more and more of these functions will get outsourced. Whether they will go offshore or not is really the interesting part, and that’s the challenge Indian companies are going to face. More and more US companies are there, more and more Chinese companies are there, more and more Russian companies are there to compete for outsourcing opportunities.”

Indian IT industry is making significant contribution to country's foreign exchange kitty and the US is still the largest market for the Indian IT industry, the BPO segment in particular. To what extent Indian industry would be able weather the current global financial meltdown would substantially depend on what measures the new US President Barack Obama takes to stem the rot the world has never seen since the Great Depression of 1929. The US recovery will lead the recovery of rest of the world.

February 2010