India-US: A relationship that overcomes speed bumps

Persis Khambatta is a senior director with business consultancy BowerGroupAsia and is also an adjunct fellow with the Wadhwani Chair in US-India Policy at the Center for Strategic and International Studies. She gives 'India Global Business' her insights into the India-US relationship, from the hurdles to the smooth-sailing aspects. How would you trace the trajectory of India-US ties over the years Bilateral economic ties have been on an upward trend over the past decade, and even more so if you go back to 2000.

When trade relations gained momentum after 2000, it was due overwhelmingly to US companies looking to enter the Indian market. Fifteen years later, the US is one of the largest sources of foreign direct investment (FDI) into India and India is the fourth fastest growing source of FDI into the US, with $11 billion invested as of 2013. While economic relations over the past few years have hit some speed bumps, the overall sentiment is still bullish. Over the past year, the Modi government has made strides to increase the ease of doing business, undertaking a number of administrative and procedural reforms in order to boost investor confidence. Results from these reforms will likely begin to show in increased investment in the near term, though further structural reforms are still required over the long term. As China and Brazil's economies slow down, Indonesia enacts protectionist policies and political uncertainty increases in other Asian markets, India has a window of opportunity to push further economic reforms and position itself as an even more attractive investment destination. What are some of the key sectors of potential in bilateral ties There are so many areas of potential between the two economies, so I'll focus on just a few. The Modi government has clearly emphasised its intention to enhance energy security by increasing the use of clean and renewable sources, so this can be seen as a key opportunity for further trade and cooperation. India currently generates 60 per cent of its electricity from coal, and delivery of electricity to rural areas is particularly difficult. In order to address the needs of rural Indians, it is vital to develop solar, wind and other forms of renewable energy that can boost the country's long- term energy security and balance the demands of growth against the potentially heavy impact on the environment. Electronics manufacturing is another area ripe for potential cooperation - India wants to decrease its volume of electronics imports, which is projected to grow nearly ten times by 2020. American firms have significant manufacturing expertise to share and can provide high technology equipment, components and technology in order to strengthen India's domestic manufacturing capability. American expertise could also be deployed to provide skills training to thousands of young workers looking for better careers. However, uncertainty with regard to security and safety testing requirements remains an impediment to reaching the real potential in this field. The current Indian government's emphasis on designing and building Smart Cities is another area that presents various avenues for cooperation. American companies have significant expertise in and can partner with local Indian firms to develop smart grid solutions, sanitation management systems, smart buildings and technology for secure mass transit systems. Together, American and Indian companies and entrepreneurs can also develop innovations specific to the local context in which they operate. What are some of the issues that still hold things back There are a number of thorny economic and trade disputes between the US and India, not unusual in any growing bilateral relationship. Both countries would like to see progress on different sets of issues - for India's part, much attention has been spent on signing a totalisation agreement and addressing restrictions on mobility. Meanwhile, American firms remain concerned about the country's uncertain tax environment (both the central and state levels), progress on land acquisition and labor reforms, a lack of regulatory predictability and the safeguarding of intellectual property. Both governments must create an enabling environment so that companies and talented entrepreneurs can add value and investments to both economies, in turn driving bilateral trade towards the stated goal of $500 billion by 2020. Multinational companies are ready to invest in India over the long term, but India's willingness to deepen its participation in global supply chains and trade agreements is crucial to the ability of companies to make substantial investments. Have Indian companies fully exploited the US market In short, no. Indian firms have only just begun to participate in the US economy fully.Most Indian multinational company names are still foreign to Americans, even though a number of them have acquired diverse assets in the US in recent years. There is much more scope for their involvement in the US market.