In light of Indian Prime Minister Narendra Modi’s recent visit to the United States, the Georgetown Journal of International Affairs sat down with Maroof Raza, Strategic Affairs Consulting Editor for Times Now, a leading English television channel in India, and Milan Vaishnav, an associate with the South Asia Program for the Carnegie Endowment for International Peace, to discuss the implications of the trip for the two nations’ economic, security, political, and cultural relationship.
In what ways has Prime Minister Modi’s recent visit to the United States signaled that India is “open for business”?
MV: The prime minister’s primary objective was to make the pitch that India is once again a hospitable environment for investment. He met with a number of private sector leaders, ranging from prominent Indian-American businessmen to CEOs of Fortune 500 companies, in an effort to signal three things. First, that he is committed to a sound and credible macroeconomic environment, and that he is focused on augmenting growth, managing inflation, minimizing corruption, and improving the quality of governance. Second, that he aims to make the investment climate more attractive. India does very poorly on the World Bank’s Doing Business Index. Out of 189 countries, it ranks 134th. By reducing the bureaucratic red tape that plagues foreign firms, Prime Minister Modi believes that he can mitigate what has been the number one complaint from businesses hoping to enter the Indian market. Finally, Modi aims to signal that he is going to include foreign capital in his developmental plans for the country. He has already raised limits on foreign direct investment in defense and in railways. Although there are very few public details on prospects for other sectors, he has reaffirmed that what he has done in the past is only just the beginning.
What uncertainties remain about Modi’s economic vision for India, and how has this uncertainty affected his efforts to make economic and diplomatic overtures abroad?
MV: The prime minister is still developing his plan about how best to include the foreign private sector in India’s future. First and foremost, this is evident in his halfhearted efforts to amend the previous government’s policies regarding foreign direct investment (FDI). By failing to do so, he has left quite a bit of uncertainty about the future of many sectors of the economy. He has also maintained that state owned enterprises are going to continue playing a leading role in many critical sectors of the economy. This seems counterintuitive given his aggressive economic vision.
How has the past defense relationship between the United States and India affected the two nations’ efforts to seek greater economic ties? How might an increased defense relationship affect India’s ongoing dispute with China over the region of Kashmir and its relations with Pakistan, as well as the United States’ focus on nuclear nonproliferation?
MR: Over the past decade, America has become India’s largest defense supplier. This is a huge achievement considering that, about five or six years ago, America was not able to sell a single weapons system to India. Prime Minister Modi is clearly looking to continue this arrangement. India recently renewed the DTII and its defense pacts for the next ten years. Officials have stated that India expects to import close to 100 billion dollars’ worth of weapons systems, of which the United States would provide a great portion.
Another aspect of this relationship is the fact that the United States now has a good understanding of India’s respect for nonproliferation. Since the 2008 ratification of the India-United States Civil Nuclear Arrangement, which was passed despite much international opposition, the United States has regarded India as a responsible country with which to do nuclear commerce. Previously, the United States considered India to be contrary to its stance on nonproliferation because of India’s 1974 nuclear tests. India has always had its own security concerns, however. The country saw the Non-Proliferation Treaty and the Nuclear Suppliers Group as exclusive clubs run by nuclear powers that did not want other countries to become nuclear-capable. After amending this view, both sides have worked towards finding common ground on the nonproliferation issue.
Finally, regarding Kashmir, Pakistan, and China: the U.S. government since Bill Clinton’s presidency has made it very clear that it expects India and Pakistan to bilaterally address the issue of Kashmir and come to a mutually agreeable arrangement. More recently, the United States has come to regard India as a country crucial to its future engagement with China and other countries in Asia. A reaffirmation of this understanding was one of the outcomes of Prime Minister Modi and President Obama’s recent meeting.
In what areas do you foresee the greatest mutual benefit from a partnership between India and the United States?
MR: The social ties between the two nations have always been good because India, like the United States, is an idea. The people of India, at least the younger generations, are much more inclined to the American way. Young and affluent Indians are more exposed to American culture. From Hollywood films to American industries, the United States has become a presence in Indian national consciousness. In terms of defensive ties, there are two elements at play: weapons exports from America as well as joint cooperation and training between the two countries. Both are currently taking place, and to a much greater degree in the last 5 or 7 years than over the past 60. Clearly there is a huge upward trend in the defensive realm. In terms of political ties, the fact that both nations are democracies provides both a further connection and a caveat. As democracies, neither government is necessarily obligated to dance with the other in perpetuity because there are so many shades of opinion that influence policy. India guards its independence—both in foreign policy and in domestic issues—quite zealously. Although it is willing to go along with the United States on most issues, it is not going to give in to everything on America’s wish list.
MV: The people-to-people ties between the two nations will also remain strong. This is a function of the fact that a diaspora of more than three million Indian-Americans lives in the United States. This diaspora has helped bring the United States and India closer over the past decade. Additionally, the private sector ties will continue—and possibly even strengthen—depending on whether or not Prime Minister Modi is able to make the changes to India’s investment climate that many expect of him. The big challenge will be the government-to-government partnership. There are three mutual priorities that have a good chance of bearing fruit. One, as Mr. Raza has mentioned, is defense. This is clearly an area where the United States and India have worked much more closely together of late. They now have the potential to move that relationship to a stage where the two countries are engaged in the co-production and co-development of new defense technologies. This is the currently only rhetoric, which will hopefully soon become the reality. Second, America’s role as an energy exporter has also emerged as an area for greater cooperation. The United States is now exporting shale gas and, given India’s energy challenges and its dependence on foreign resources, an increased relationship could be of great benefit to both parties. In my opinion, the third and final area of cooperation should be higher education. One of the things this prime minister has spoken about is a desire to improve higher education opportunities for aspirational Indians, especially for the middle and emerging classes. Education is an area in which the United States is in some ways the envy of the world. U.S. higher educational institutes, vocational training programs, and community colleges educate young people to an unparalleled degree when measured against most of the world. If India manages to make certain changes to its regulatory environment, there could be a flood of interest in Indian students from U.S. universities, colleges, and schools.