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Modi's American business

What Indian Prime Minister Narendra Modi does with the American business community during his visit to the United States may be more consequential over the longer term than his engagement with the political leadership in Washington. No wonder the Prime Minister has chosen to spend some quality time, both individually and collectively, with the leaders of American business in New York and Washington.

If the perception of India as a major business opportunity since reforms began a quarter of a century ago provided the basis for raising New Delhi’s diplomatic profile on the global stage, the economic drift over the past few years has inevitably constrained India’s room for foreign policy manoeuvre. Convincing American companies that India is back in business must be one of Modi’s most important political objectives in the United States.

As the most business-friendly prime minister India has ever had, Modi might be well placed to successfully pursue this task. Thanks to India’s first prime minister, Jawaharlal Nehru, a thinly veiled contempt for capital is very much part of Delhi’s political culture. Nehru, who kept India’s businessmen at arm’s length at home, made no secret of his distaste at having to deal with what he saw as excessive American materialism and a crass commercial culture during his first visit to the United States in 1949.

Modi is probably as non-Nehruvian as you could get in India, at least on the relationship between private business and national strategy. During his visit to Japan earlier this month, Modi told the captains of industry there that he was a member of the Gujarati ethnicity and commerce ran through his blood. Modi’s finance minister, Arun Jaitley, in turn, has often said that there is no contradiction in being “pro-poor” and “pro-business” at the same time.

Delhi’s current pro-business orientation marks a new stage in India’s appreciation of the role of international capital in the conduct of the nation’s foreign policy. For Nehru and Indira Gandhi, focused as they were on economic self-reliance, there was hardly any room for mixing international business and diplomacy. Rajiv Gandhi was the first prime minister who began to see the intrinsic connection between the two. But it was not easy changing the political culture of the Indian Foreign Service, which privileged political activity over the commercial.

After all, the Indian diplomatic corps emerged out of the Indian Political Service of the pre-independence period. Under the Raj, these officers proudly called themselves the “politicals” as they engaged in high politics with the princely states in the subcontinent and the principalities on the periphery.

At the dawn of the reform era, P.V. Narasimha Rao began to take business delegations along with him to foreign capitals. He made a special effort to reach out to the business communities, especially in the United States. In the early 1990s, for example, the Indian embassy in Washington encouraged the setting up of an “India Interest Group” with leading companies like GE. This group helped Delhi block the anti-Indian resolutions on Kashmir and Punjab that were routinely passed in the US Congress, thanks to the uncontested lobbying by groups backed by Pakistan. India’s political outreach in Washington was also reinforced by business associations like the CII and Ficci.

In the Manmohan Singh years, bilateral CEO forums became an important tool in India’s economic diplomacy. Soon, like everything else, its business diplomacy became an ineffective ritual. The slowdown in the country’s economic growth and Delhi’s policy paralysis over the last few years saw India lose credibility with the business leaders around the world.

As part of his effort to accelerate India’s economic growth, Modi has taken personal charge of India’s engagement with international business. In recognising the importance of US business in the shaping of Washington’s external policies, Modi is emulating China’s strategy in America over the last three decades. Strong ties with American big business helped Beijing fend off bursts of political hostility in Washington. The rapid expansion of American commercial interests in China and the growing economic interdependence between the two countries today acts as the biggest countervailing force to the unfolding geopolitical tensions between the world’s foremost powers.

On a smaller scale, India’s own recent experience underlines the importance of engaging American business in pursuing the country’s larger political goals in Washington. When then President George W. Bush and then Prime Minister Manmohan Singh unveiled the historic civil nuclear initiative, it was well understood that getting the approval of the US Congress would be an uphill task.

It needed the full mobilisation of American businesses with an interest in India to persuade Congress to support exempting Delhi from the long-standing domestic laws and international rules on nuclear non-proliferation. The US companies saw the civil nuclear initiative as the key to unlock a stronger strategic and economic partnership with India, from which they would benefit significantly.

Close to a decade later, the nuclear deal remains in limbo, with no prospect of India buying American power reactors in the near term. Although American arms sales to India have grown, it has not been easy for US companies to deal with the complex rules and procedures of the ministry of defence in Delhi.

Worse still, American business has turned from ally to adversary, asking Congress and the Obama administration to impose punitive measures on India by citing a range of Delhi policies, including those on intellectual property rights, trade, investment, and taxation.

For his part, Modi seems determined to reverse this negative turn in relations with American business, which has an important role to play in accelerating India’s economic growth and revitalising Delhi’s strategic partnership with Washington.

Whether he can overcome the widespread American skepticism about investing in India and suggest pragmatic pathways to address the many economic disputes with the United States are indeed the most interesting questions about Modi’s journey to America.


This post was originally published at the Indian Express