As Indian businesses increasingly look to the U.S. market for expansion opportunities and U.S. companies consider more investments in India, the two countries are pulling together “in a big way,” said Richard Rossow, an India analyst at the Center for Strategic and International Studies, a policy research group.
Indian companies as diverse as the conglomerate UB Group, the pharmaceutical Dr. Reddy’s Laboratories Ltd., outsourcers Tata Consultancy Services and Infosys Ltd., and software developer Mindtree have invested in U.S. operations in recent years.
U.S. companies have ambitious plans for Indian ventures. Just before Indian Prime Minister Modi’s visit to Washington in September 2014, member companies of the U.S.-India Business Council estimated they could invest up to $40 billion by 2017 in India, according to a council survey. Investments in manufacturing, energy, medical, information technology and other industries considered by U.S. businesses would not only create thousands of jobs, but also help improve quality of life in India.
U.S.-India economic relations are getting an energetic push from the Obama administration too. The White House aims to develop “a defining partnership of the 21st century” with India. The trips by numerous senior administration officials, including Secretary of State John Kerry as well as President Obama’s January 26 visit are steps toward that partnership.
India’s new trajectory
Many business experts believe that the big win by Modi’s party in India’s April–May 2014 general election created new opportunities to elevate bilateral economic relations.
The prime minister promised to turn the Indian economy into a global powerhouse after a dramatic slowdown in recent years. He has envisioned India as a global manufacturing hub with improved infrastructure and cities that offer modern and efficient services.
Some of Modi’s ambitious goals will require an influx of foreign direct investment and expertise to allow India’s industrial sector to grow and become more competitive. India’s new “Make in India” campaign is seeking to cut red-tape and attract investment to India. Other reforms that are underway, to include an increase in foreign equity caps in key sectors, improvements in supply chain connectivity, and an emphasis on creating a market environment that will foster trade and innovation, are all steps toward achieving Modi’s economic and development goals.
Major U.S. companies such as General Electric Company and Microsoft Corporation run large research and development centers in India to advance modern products, services and industrial practices.
But foreign investment, whether from the U.S. or other countries, will require some economic reforms in India, according to Rossow.
Some minor business obstacles already have been removed, and Modi’s government is “pushing an envelope on bigger reforms,” Rossow said. U.S. corporations and other foreign businesses are looking forward, in particular, to simplified tax, labor and land-acquisition laws as well as lower, or no, caps on foreign direct investment in several sectors and more effective protection of intellectual property rights.
U.S.-India bilateral trade expanded fivefold between 2000 and 2013 to near $100 billion. And Obama and Modi share a long-term goal of increasing bilateral trade another fivefold. “This is a relationship … where we believe very deeply that we could turn sustainable economic growth opportunities into a prosperity we have never seen before,” Kerry told an investment summit in Gujarat on January 11.