Indian and U.S. Must Grab this Chance to Reset their Relations

Context: Unprecedented uncertainty, fuelled by a global economic crisis, and assertive China seems an opportune moment to strengthen US-India bilateral ties.

Implications of Pandemic Induced Economic Crisis on Developing Countries: Hard facts for India to consider for promoting bilateral ties with the US.

• Unprecedented growth contractions: in large developing countries like India that in turn attenuate already low state capacity to deal with the fallout of Covid.
• Reduced support for globalization: as a result of inequitable development can translate to confusion in policy and threatens to encourage a politics of unreserved protectionism.
• Loss of jobs: Workers in their 20s account for 80% of India's total job losses so far this fiscal year, and women 52%, according to Centre for Monitoring Indian Economy data.

Key Issues in Indo-US Economic Relationship: Rift between Geostrategy and Economics

• US's lip service to economic collaboration: Recently declassified 'Strategic Framework for the Indo-Pacific' is bereft of meaning in today's context.
• It suggests that the US should "work with India towards domestic economic reform" and on "regional connectivity".
• US pension funds have much lower overseas allocations compared to European ones, and negligible exposure to Indian markets.
• India's policy of protectionism: in e-commerce, investment and digital markets can be stated through the following examples-
• India hasn't signed the Osaka Declaration on the Digital Economy, crafted by Japan in 2019.
• Imposed a tax on digital services, which a US has claimed as discriminatory against its firms. 
• Contemplating a data governance framework that could dilute intellectual property rights, in turn, hurts US model of private enterprise. 

India's Efforts in Integrating Geostrategy with Economics

• Established a division in its foreign ministry to look at "new and emerging strategic technologies".
• Issued a national security directive to identify trusted vendors for telecom and reduce risk in the global supply chain.
• Reliance on international trade principles: to negotiate favourable terms for its companies. 

Way Forward: To align the geopolitical and economic interests of India and USA

• USA must recast its 'Pivot to Asia' policy through following measures-
• Build technology infrastructure through public-private partnerships with India as the Soviet Union did in areas like energy and metals.
• Diversify geographical spread of large financial institutions, public and private investments.
• Enhance flows of technology and capital to create jobs, boost domestic productivity.
• Provide technical assistance to build regulatory/supervisory capacity to manage such investments
• Partnership in Technology: Set up a whole-of-government mechanism to develop technology industries and avoid fragmentation of policy objectives (similar to the US Trade Representative).