8,748.75-43.45
Stock Analysis, IPO, Mutual Funds, Bonds & More

View: Trump’s trip showed India-US ties bet on long-term capital gain

Trump's visit shows that the India-US relationship is a bet on long-term capital gain.

ET CONTRIBUTORS|
Last Updated: Feb 29, 2020, 10.12 PM IST
0Comments
graphical
To remain globally competitive and to realise our aspirations for a $5 trillion or a $10 trillion economy, we will need to build partnerships.
By Arun K Singh

Prime Minister Narendra Modi has clearly made a bet on a likely second term for Donald Trump as US President. This was reflected in the manner in which he was feted in this last year of this current term, the large crowds assembled inside and outside the Motera stadium, the lavish references to him as a friend, also of India, the effort made to create an optic of concrete outcome through the finalisation of ongoing negotiations for the $3 billion purchase of military helicopters.

He reinforced the bet on a longer-term convergence with the US, elevating the relationship now to a Comprehensive Global Strategic Partnership.

He also raised the bar for economic interlinkages. In his joint press conference with President Trump, he said that instructions would be given to the two trade negotiators to finalise the legal language to capture agreements reached so far on a limited trade package, which could not be concluded before the visit despite months of sustained effort, and to begin discussions on a comprehensive bilateral trade agreement. He suggested that the focus should be on building a partnership for Industry 4.0, 21st century emerging technologies, innovation and enterprise.

This is clearly a more productive way forward. India’s trade surplus with the US, at $20 billion, pales in comparison with China’s $400 billion. India is also, unlike China, an overall trade deficit country. Yet, the Trump administration has pushed for concessions on market access from India to reduce this surplus through “fair and reciprocal trade”, focusing on current patterns involving agriculture, dairy, information and communications technology (ICT), and medical devices. It has not accepted the Indian argument of addressing the imbalance in a dynamic way, through new linkages, and factoring in instead India’s anticipated purchase of more oil, gas and civilian aircraft.

Reports suggested that a trade package of $10 billion was nearly ready before the visit. Trump probably felt that this figure did not really get him much political mileage back home in the US. In the meantime, the US continues to levy enhanced tariffs on steel and aluminum imports from India on national security grounds, despite articulating that the rise of India is in the US interest. It has withdrawn Generalized System of Preferences (GSP) benefits from India, and its classification as a developing country in unilateral US thresholds for countervailing trade and tariff measures.

It has been said that a ‘perfect storm’ in technology is coming through progress in 5G, AI, quantum computing, convergence of biology and digital. These will completely transform the way we live and work. To remain globally competitive and to realise our aspirations for a $5 trillion or a $10 trillion economy, we will need to build partnerships. It will make sense to work for a forward-looking comprehensive trade agreement that captures the emerging potential, rather than get bogged down in the here-and-now patterns of trade, where there are already established concerns and interests.

Going beyond the economic, there were some clear strategic convergences, and some current differences in positions, inevitable since countries take positions based on their own short and longer term interests. The joint statement denounced use of terrorist proxies, strongly condemned cross-border terrorism, and “called on Pakistan to ensure that no territory under its control is used to launch terrorist attacks”. Several of the Pakistan-based groups used against India were specifically named. However, in his public comments, Trump repeatedly referred to his good relations with Imran Khan, and the “cooperation US was getting from Pakistan to deal with terrorists on its border”. He dodged questions on how the US intended to deal with terrorism from Pakistan, and related Indian concerns, as the US was working on drawing down in Afghanistan following its planned deal with the Taliban.

When pressed, he said the US was 8,000 miles away, others can also tackle this, India and PM Modi were strong enough to handle it, India should take the lead in reducing tensions in South Asia. When pressed further, he fell back on his readiness to help both countries, to mediate, that “there were two sides to every story”. The message was clear. The US would look at Pakistan from the lens of its own interest, even as it sustained pressure through continued grey listing of Pakistan in the FATF.

As anticipated, the Indo-Pacific provided the convergence. The joint statement has a whole section, and five of 21 paragraphs devoted to this. The US conveyed its appreciation of “India’s role as a net provider of security, as well as developmental and humanitarian assistance in the Indian Ocean Region”. In a clear though unnamed message to China, both reemphasized their support for a rules-based order and sustainable debt and financing for infrastructure connectivity.

The India-US relationship is a bet on long-term capital gain. There will be fluctuations in stock value along the way, and occasional short selling in view of divergent short term concerns and interests. Investment has to be done keeping the long term in view. For this, the bipartisan support in the US for the India relationship will also need to be sustained, which is fraying somewhat at the moment, as reflected in critical comments from Senator Sanders and several other Democratic presidential candidates, and members of the US Congress.

(The author is a former Indian ambassador to the US)

(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
Comments
Add Your Comments
Commenting feature is disabled in your country/region.

Other useful Links


Copyright © 2020 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service