Relations between the United States and India are at a “potentially transformative moment,” with a new Indian government that presents new opportunities, U.S. Secretary of State John Kerry said.
Speaking Monday to the Center for American Progress, a liberal think tank, Kerry said the overwhelming election victory of Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) presents new possibilities to broaden and improve rocky U.S.-India ties.
"India’s new government has won a historic mandate to deliver change and reform,” Kerry said, “and, together, we have a singular opportunity to help India meet that challenge to boost two-way trade, to drive South Asia’s connectivity, to develop cleaner energy, to deepen our security partnership in the Asia-Pacific and beyond.”
Kerry, who on Thursday will co-chair the fifth U.S.-India Strategic Dialogue, said the two countries “can, and should be, indispensable partners for the 21st century.”
A catalyst for economic growth
The top U.S. diplomat said the United States endorses India’s new plan, "Together with all, development for all." American private sector wants to be a catalyst for India’s economic revitalization, Kerry said.
"American companies lead in exactly in the key sectors where India wants to grow in high-end manufacturing, in infrastructure and health care, information technology – all of them vital to sort of leapfrogging stages of development so you can provide more, faster, to more people."
Kerry said Washington cannot direct U.S. companies to invest in India and urged New Delhi to open its economy even more to foreign investment.
"If India’s government delivers on its plans to support greater space for private initiative, if it creates greater openness for capital flows, if it limits subsidies that stifle competition, if it provides strong intellectual property rights, believe me, even more American companies will come to India,” he said. “They may even race to India."
The two countries should aim to boost bilateral trade from the current $100 billion to $500 billion, Kerry said. He also called for an Indo-Pacific trade corridor to put, in his words, "India at the heart of a more prosperous and connected Asian region."
Urges easing trade restrictions
But, Kerry also indirectly criticized India for opposing an international agreement on easing trade regulations. New Delhi says the effort to promote global trade should be linked to food security. The World Trade Organization’s deadline for reaching agreement on the Bali trade facilitation agreement is Thursday.
Jonah Blank, a RAND Corp. South Asia analyst, said it would take many bilateral meetings to overcome a “legacy of distrust between the U.S. and India that has been in place for a number of years but has gotten a lot worst in the past eight or nine months."
Cultural mistrust goes back to the Cold War and India’s leadership role in the non-aligned movement, Blank said. He noted that relations took a nosedive last December when India’s deputy consul general, Devyani Khobragade, was arrested and strip-searched in New York. She was indicted on charges of lying about a visa application and underpaying a domestic house worker.
However, Blank said Modi’s parliamentary majority gives him space to strike bold deals with countries such as the United States without having to worry about his coalition partners. And, he said Kerry’s trip is showing New Delhi the respect it believes it deserves.
New government, new opportunities
Modi’s government is showing its willingness to open its market to outside investors, said Rajiv Biswas, chief economist for IHS Global Insight, an information company based in Colorado. He noted that its first budget lifted “the caps on investment in insurance and in defense up to 49 percent. It still doesn’t allow majority ownership in those areas, but at least it’s a step in the right direction."
Biswas said he expects India to liberalize the process by which foreign investments are approved. For foreign businesses, he said, India represents an enormous market potential, with current consumer spending of $1 trillion this year exploding to $4 trillion in 20 years.