President Obama’s recent visit to India added momentum to Indian-U.S. strategic ties, bolstering bilateral, geopolitical as well as commercial ties. The President visited India for a three-day trip as the Chief Guest for the Indian Republic Day Parade which coincided with India’s largest investment attraction show, Vibrant Gujarat, held in January.
While the U.S. economy has bounced back under the Obama administration, Prime Minister Narendra Modi’s newly instated government is improving investor sentiment and the overall forecast for the Indian economy.
Obama’s trip highlighted a number of upcoming developments, all of which present a myriad of commercial opportunities:
President Obama’s speech to the U.S.-India Business Council on India’s Republic Day touched on the current state of Indo-U.S. trade relations and how the world’s second most populous nation only accounts for 1% of American exports while China accounts for almost 8%. This signals the desire by the U.S. to diversify its exports away from China while looking to India as a major future trading partner and vice versa.
During the visit, America announced $1 billion worth of funding for ‘Made In USA’ exports to India over the next two years. To commence this trade and investment drive, two U.S. led trade missions focused on infrastructure will head to India to explore potential opportunities. Indian and American companies can mutually benefit from both the ‘Make in India’ and ‘Made in USA’ initiatives that will further deepen Indo-American ties.
Renewable energy and clean-tech focus:
The U.S. declared that US$2 billion in leveraged financing will be made available to U.S. companies looking to invest in the renewable energy sector in India through the U.S. Trade and Development Agency. As India’s government looks to improve its renewable power sector and environmental performance, American technologies and co-development partnerships can help Indian companies move up in the value chain while tackling the country’s power gaps and pollution issues.
Nuclear and defense sector breakthrough:
The deadlock that had prevailed since the Bush era on the Indo- US Civil Nuclear talks has been broken and progressive steps have been made to cement an agreement. This will allow Indian and other international companies to access the Indian nuclear power market. Furthermore, the emerging India-US cooperation will continue to bode well for defense players across the industry’s value chain. One of the primary initiatives is the finalization of the U.S.-India Defense Relationship Framework 2015, which will expand bilateral defence and strategic partnerships over the next ten years. This is also backed by the co-production and development of projects put forward by the US- India Defence Technology and Trade Initiative.
India is pushing to develop smart city corridors between major cities and building robust and sector specific industrial bases. According to the joint-statements of India and the U.S. (referenced from the Ministry of External Affairs of India), MoUs were signed to support smart cities. The U.S. Trade and Development Agency signed MoUs with the States of Uttar Pradesh, Andhra Pradesh, and Rajasthan on 25th January 2015 to develop Smart Cities initiatives in Allahabad, Visakhapatnam and Ajmer with the help of U.S. industries. As this is primarily a manufacturing and industrial flavored initiative, several projects across different sectors could be in the offing.
Ease of Doing Business:
PM Modi gave an open invitation to American companies and Indo-Americans looking to invest in India. Modi asserted that his government had removed some of the hurdles discouraging active investment and will continue enhancing the country’s overall ease of doing business. One of the well documented gripes of American and international companies has been the various administrative obstacles that plague smooth operations on a daily basis. He also mentioned that the country’s tax regime will evolve to become predictable and competitive while intellectual property rights’ regime will be made stronger. By focusing on infrastructure (power especially) and taking advantage of falling inflation and oil prices, the country’s leaders have a rare chance to re-ignite the Indian economy.
In addition to the areas of co-operation listed above there were other MoU’s and Agreements signed during Obama’s visit to India in 2015:
- Joint Declaration of Intent to advance implementation of the Digital India program and further bilateral commercial ICT cooperation.
- India-U.S. Investment Initiative in Washington on 12-15 January 2015 to jointly cooperate on facilitating and encouraging investments into different sectors in India.
- Infrastructure Collaboration Platform to support and enhance Indian infrastructure.
Udai Panicker is a senior analyst at Tractus in India.