It is often said the intensity and gravity of a relationship is measured more often when the dices are down. It is truer in the case of economic relations and engagement. When the pangs of meltdown started, there were predictions of a tumbling down of Indo-US economic relations on account of the havoc created by the sub prime crisis. Several months down the line after the incident, the economic relationship between the two largest democracies is as solid as before.

US as the largest trading partner

It is instructive to look into the nuts and bolts of the continuing bond between India and the US, despite the tumultuous developments. The US is the largest trading partner of most of the countries in the world irrespective of their size, league and level of development, be they in Southeast Asia, Europe, Africa or Gulf. This domination is partly explained by its technology leadership, domestic consumption pattern, policies that decide its external and internal investment polices. Let us take a few examples. Most of the countries in Europe have to depend on the bottomless domestic market of the US for exports, be they agricultural produces or light engineering tools. Japan and China though a contrast on account of the their size and administrative systems to a very large extent dependent on the US market for export of their mass productions items like textiles, cars and the like. Naturally, a slowdown in the US had affected these countries and is still leaving its marks.

India Story

But Indian story is different in its essence and content. India’s dependence on the US was variously estimated. The very fact that that the share of India’s external sector-import plus export-is not a significant percent of the GDP is well-known. To that extent, pangs of the slowdown of the world economy will be less felt in our part of geography, though a total insulation of the ill effects is not possible. Let us take economic segments after segments. I feel IT exports have the maximum exposure in the US. Close to 60 percent of India’s IT and ITeS exports are to US. That is only one side of the story.

Most of India’s IT platforms, be it satellites, software, training tools, computers etc are US centric. That would mean any slowdown in IT in India will also adversely impact the demand for these platforms in the US. In the case of technology, India is one of the largest acquirers from the US. That is true in the case of defense imports, education and the like. For instance, over a lakh students from India join US universities every year. At one point of time, total number of students in the US can be counted in terms of millions. They bring in large amount of resources into the US. The FIIs also rake in huge resources from the capital markets from India.

In short, the economic engagement between India and the US cannot be measured in terms of the quantum of trade and investments that are taking place between the two countries. It has to be measured in terms of the larger canvas in which the countries have to act and interact for their mutual advantage. To make the points clearer, let us take the nuclear energy deal. Obviously, India needs to augment its power supply to pave the way for greater industrialization and to meet the burgeoning domestic demand. Understandably, cooperation between India and the US for the civil use of nuclear energy will go a long way in meeting this demand in the medium and long term. But it is equally significant that the US will stand to gain from the deal when India indents its technological requirements from that country.

The same example holds goods in a variety of sectors such as entertainment, auto components, clinical trials etc. Indo-US partnership and engagement are mutually enriching and advantageous. On the top of it, such relationships are linearly poised in as much as beneficial flows are concerned. There is also a demographic dimension. India with higher percentage of people in the lower age bracket can act as a balancer to world population, where the number of graying population is estimated to be higher than the younger ones. Business process outsourcing is not alone an economic solution but also is triggered by demographic issues.

Infrastructure

Undoubtedly, there is a vast span of areas that can be tapped to make the Indo-US economic engagement more dynamic. Engagement in the infrastructure sector offers great opportunity for businesses of both countries to come together. India needs an investment over US$ 500 billion over a period of time to tone up its infrastructure sector. The US with its capabilities in a wide range of infrastructure sector, such as civil aviation, airports, sea-ports, highway construction can be a natural partner in this regard. Importantly, India has drawn up an action plan to invest one lakh crore over 3 months in the infrastructure sector.

Involvement in the infrastructure sector in a big way will help the US companies to get to know more intensely about the Indian market and to position themselves more effectively once the slowdown blues are blown over. It is widely expected that in the case of India that the last quarter of the financial year 2009-10 will witness a turnaround with the economy back in rail. That will also coincide with India’s first set of initiatives to put into action frame the civil use of nuclear energy, where there is a mind-boggling scope for joint action between the two countries be it in terms of acquisition of technology, know how or uranium. Importantly, the US is a laggard in the FMCG sector of India, where there is a large presence of Japan, China and South Korea. It is widely believed that lack of market knowledge and consumer preferences and tastes are a major reason that holds back US dominating presence in this sector. Involvement in the infrastructure sector will give a fillip to the US companies to more about FMCG sector in India and to position themselves effectively there.

Chamber’s Role

As a major stakeholder in the growing Indo-US economic engagement, Indo-American Chamber of Commerce (IACC) has been a rallying point for catalyzing and coordinating businesses and investments from both the countries. It has been instrumental in influencing polices governing trade, investment, technology transfer, movement of people etc between the two countries. Some of the big ticket programs like Indo-US Economic Summit, which is entering its fifth edition next year has had brought together policy makers, businesses, technology suppliers and acquirers etc from both countries to debate about the future course of action of economic engagement. This annual event has assumed significance in the Indo-US economic landscape. The Indo-US Economic Summit held in New Delhi in January 2009 drew up action plans for strategic tie-up for a number of areas including finance, aviation urban development and manufacturing sector.

Entertainment Industry

IACC is a contact point for Indian entertainment industry, which is looking globally for expanding its base and penetration. For the last two years IACC has been appointed exclusive partners by National Association of Broadcasters (NAB) for promoting NABShow in India. IACC delegation of 34 business people from the media & entertainment industry participated in the NABShow 2009 in Las Vegas held from April 17-23, 2009 with a India focus session on “India: Transitioning to a Digital Future” and a India Pavilion with Indian companies displaying products and services they offer.

IACC is organizing the “Summit for US-India Trade & Economics” (SUITE 2009) scheduled on September 10 & 11, 2009 in New York, USA. SUITE 2009 is a big ticket event of IACC and the carefully drawn up sessions and themes are designed to explore and leverage possible strategic alliances and business partnerships between the two countries.” It will bring together Indian and the US businesses to forge strategic alliances against the backdrop of a perceived phase of a global economic recovery.

Harbingers of Change

The U.S. Secretary of State Hillary Clinton’s recent India visit and the forthcoming visit of Ms. Linda Droker, Director of South Asia and Oceania, Department of Commerce, US Government are indicators of this changing paradigm. Since the installation of Obama Administration, IACC has been implementing some key programs to catalyse the range and tenor of bilateral cooperation between the two countries.

The New York office of IACC setup on April 2nd 2009 serves as a useful window for investors and businessmen from both the countries. IACC is working very closely with US state agencies to bring in delegations to India. We have several important delegations from the US visiting India by December 2009. A high level Washington State Trade Mission will be visiting New Delhi, Mumbai & Hyderabad in September. A twelve member delegation with interests in Aero Space will be visiting New Delhi, Bangalore & Hyderabad. Another delegation of companies and officials from the Energy sector are also scheduled to tour India for collaborations with US.

IACC’s mandate is to strengthen and support Indo-US investment and trade. IACC ensures that adequate support in terms of policies and market intelligence, are provided on a regular basis. We have begun a national level ‘Information Series’ to share knowledge from experts on industries and policies that impact those industries along with updated industry and economic study. IACC has also created nationwide focus groups, to strengthen business ties and derive benefits of the regional expertise.