President Donald Trump is arriving in India on the 24th of February for a 2-day state visit and is set to attend several blockbuster events like “Namaste Trump” alongside PM Modi. But underneath the spectacle of his visit, what is the real state of US-India relations?
Since 1947, the United States has always valued India as a strategic ally and wanted to prop it as a geopolitical counterweight against Communist China. Fresh from the colonial nightmare, India’s response to this alliance was lukewarm, as under Jawaharlal Nehru it spearheaded the global Non-Aligned Movement. But at the same time as the end of the cold war, the Indian economy liberalized under Narasimha Rao and Vajpayee which prompted the two countries to develop stronger economic and diplomatic ties. This warm relationship, despite its ups and downs, has been furthered under PM Modi who has established a strong personal relationship with both President Obama and now President Trump. However, the relationship between the two countries has recently been in testy waters as both leaders pursue nationalistic and protectionist rhetoric and approach to policy.
In August, the government revoked the special status of Jammu and Kashmir and imposed a communication lockdown on the region which was termed a “form of collective punishment” by UN human rights experts. More recently, it has introduced the National Citizenship Review, forcing primarily Muslim immigrants to prove that they are of Indian descent, which is expected to be an implementation nightmare and would render millions ‘stateless’. This policy has sparked nationwide protests and was characterized by a group of bipartisan US Senators as “a threat to the rights of certain religious minorities and the secular character of the state.” While such moves would have been appalling to previous administrations, the Trump Administration, which itself has undertaken policies like a travel ban on Muslim-majority countries, has been more muted in its response. The Administration, as a part of its implicit rally against legal immigration, has increased restrictions on and reduced the number of H1B visas and Green Cards issued which the Indian Government has protested. Both governments envision domestic homogeneity and a pragmatic approach to this alliance which prioritize their shared economic interests over their historical commitment to foster pluralism.
But even on the trade front, the relationship between the two countries seems to be faltering. Both Modi and Trump have instituted protectionist policies which have set off tit-for-tat escalations, placing the relationship at a tipping point. The most apparent cause for such conflict has been President Trump’s obsession with trade deficits and his imposition of tariffs on a whole host of goods, chiefly steel and aluminium. The US has also removed India from its GSP Program, special trade treatment for developing countries, imposing duties on over $6.3 billion worth of Indian exports.
For its part, India has for decades maintained tariff and non-tariff barriers that make investing in India cumbersome and sometimes unprofitable. It has put in place price caps for high-cost medical devices like heart stents and knee implants which according to US suppliers, forces them to “sell their products at a loss for over eighteen months”. The Indian market is also closed to US dairy imports, citing religious and cultural opposition to the non-vegetarian diet for US cows, which the International Dairy Foods association calls “scientifically unwarranted”. In recent months, New Delhi has imposed new regulations on E-Commerce firms like Amazon making it harder for them to compete in the already low-margin Indian market and also mandated expensive Data-Localization (Payment Data has to be stored domestically) on international payment firms like PayPal. Despite the personal ‘bromance’ between the two leaders, these developments have antagonized the Trump Administration which is considering harsher retaliatory measures.
But on the eve of President Trump’s visit, there is hope. India has recently cut corporate taxes below the global average attracting foreign investment and is easing investment regulations as a part of its Make in India program. India must further reform FDI rules to capture the diversion of investment flows of manufacturers from China. A defence deal between the two countries can reduce the deficit that President Trump seems to be so obsessed with and also help India improve its defence infrastructure. With the landslide victory in the General Elections last year, the Modi government has accumulated significant political capital which it must utilize to strike a trade deal and increase international investment, to help India bounce back from its current slowdown. This, however, must not compromise consumer rights and benefits as India must retain at least a reduced version of its price support for medical devices to support the common man. Finally, the United States can also leverage graduated readmission of India into GSP contingent on the restructuring of Indian trade policy. However, White House officials and Mr. Trump have indicated they are sceptical about the prospects of a trade agreements citing that India is “giving them a hard deal”. Let us hope, although unlikely, that both nations can come to an agreement to forge a stronger strategic partnership based on compromise and shared values.
About the Author:
The author is a student of 11th grade at Greenwood High International School, Bangalore. He is also an SAT and Economics Tutor for an Online Organisation called Kara Tutoring.
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