US and India must work on economic ties
4 min read . Updated: 08 Apr 2018, 11:09 PM IST
PremiumWithout jobs that benefit all segments of society, neither country will be able to support sustainable growth
Despite vastly different levels of economic development, India and the US increasingly face a number of similar economic challenges. Both countries need to rapidly create new jobs, move people into the middle class and keep them there, and take advantage of the opportunities that globalization can bring while mitigating its challenges to sustainable domestic growth and strong and equitable democratic societies. Contending with these challenges will first and foremost require effective domestic economic policies that address not just interest rates and investment, but also healthcare and education. But international economic partnerships will be a key part of the solution as well, and, working together, the US and India can advance shared prosperity.
The US-India economic relationship has a strong foundation. Bilateral trade has more than doubled since 2006, reaching $115 billion in 2016. The same year, there was $32.9 billion US foreign direct investment (FDI) in India, and in 2015 there was $12.1 billion Indian FDI in the US. By leveraging the ties that already exist, and through a coordinated strategy of investment and innovation, a smart US-India economic partnership can help each country improve the condition of its people.
Over the past year, we participated in a task force on US-India relations organized by the Center for American Progress and comprising experts from both countries, and, through our conversations, we identified three areas of bilateral cooperation in particular that we believe could boost economic growth that reaches all sectors of society in both countries.
First, the two countries must invest in infrastructure, especially as it is a perfect sector to explore means of cooperation. According to India’s finance minister, Arun Jaitley, India needs to invest $1.5 trillion over the next 10 years to meet its infrastructure needs, while the US department of transportation estimates that an additional $800 billion is needed in the US for bridges and roads alone. To this end, the US department of treasury has been providing technical assistance to help the Pune municipal corporation issue municipal bonds. By expanding this programme, more cities around India could fund their infrastructure needs. Similarly, large institutional investors, such as US public pension funds, have been increasingly focused on investing in global infrastructure since they need a diversity of quality investment options to help them meet the retirement security needs of their beneficiaries, who include public school teachers, firefighters, and police officers. In order to link up investors with ripe investment opportunities, both countries should hold institutional investor summits to facilitate private sector investment in each other’s infrastructure. This focus can boost long-term economic growth and job creation in both countries.
Second, both countries must develop new and innovative ways to contend with the changing landscape of employment. As the nature of work changes, creating jobs requires innovation in addition to investment. India and the US are home to tremendous human capital and research and development capabilities, and the two countries should bring these together in policy forums and research centres. By holding a bilateral dialogue focused on the future of work, policymakers, entrepreneurs, technology experts, and community leaders can address employment trends and community needs to refine policy solutions that leverage the changing nature of work to create stable, well-paying jobs and empower citizens. The two countries should also expand the United States-India Science Technology and Endowment Fund, which funds research on supporting healthy individuals or empowering citizens through technology conducted by US-Indian teams, with an emphasis on the marketability of the research outcomes. This research can be the basis of building the digital infrastructure necessary to help people find jobs and skills training.
Third, subnational cooperation is critical to economic growth in these two large, diverse federal democracies, where states and cities will be key actors as they craft solutions that meet their regions’ unique needs. While the Indian ministry of external affairs already has an office focused on subnational issues, the US department of state should re-establish and strengthen the office it once had focused on subnational cooperation. In addition, large states and cities should create their own offices of international affairs, and work with the foreign ministries to connect one another with technical training, capacity building, and best practices. This can also advance the existing cooperation on smart cities, in which the US government is providing technical assistance for three Indian cities—Ajmer, Allahabad, Visakhapatnam—identified by India for building modern infrastructure and renewable energy capacity.
A vibrant democracy functions best when all its citizens are empowered. Without jobs that benefit all segments of society, neither country will be able to support sustainable growth, and the backlash against trade will grow, harming economic opportunities and the openness of both societies. India and the US are often described as indispensable democratic partners. Delivering on the economic opportunity could play a major role in realizing the potential of this partnership.
Sadanand Dhume, Seema Hingorani and Varad Pande are, respectively, a resident fellow at the American Enterprise Institute, the founder and chief investment officer of SevenStep Capital LLC, and a partner at Dalberg Advisors.
This is adapted from a report of the Center for American Progress’ task force on US-India relations.
