Within the week of India Prime Minister Narendra Modi’s State Go to to the U.S., Tanvi Madan, senior fellow in Overseas Coverage and director of the India Challenge at Brookings, discusses the state of U.S.-India relations, a strategic expertise partnership between the 2 international locations, and the way world points just like the Russia-Ukraine struggle and China issue into the connection. Madan additionally seems to be forward to India’s aims when it hosts the subsequent G-20 Summit in September.
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DOLLAR: Hello, I’m David Greenback, host of the Brookings commerce podcast Greenback and Sense. At this time we’re going to speak about India and Prime Minister Modi’s state go to to america. My visitor is Tanvi Madan, senior fellow and director of the India Challenge at Brookings. So, welcome to the present, Tanvi.
MADAN: Thanks, David. It’s good to be on the podcast.
DOLLAR: So, let’s begin with the state go to for Prime Minister Modi. What does this imply for him? What’s he attempting to attain on this go to?
MADAN: I believe there are few completely different aims for Prime Minister Modi. For one, it’s actually to each a mirrored image of the state of the U.S.-India relationship, which is admittedly burdened beneath Prime Minister Modi. It’s not that he’s a serious departure from his predecessors for the final 20 years, 20 or 25 years, you’ve seen Indian governments deepen ties with the U.S. throughout the board. However you’ve gotten seen an uptick throughout just about each area throughout the course of the Modi authorities, which got here into energy in 2014. And so, I believe in some half it’s a mirrored image for him, and of the Biden administration, to form of acknowledge the position he himself has performed in deepening these ties.
For Prime Minister Modi, this is a chance to essentially consolidate ties with the nation that he has beforehand within the U.S. known as indispensable to India’s transformation. A former Indian nationwide safety advisor within the earlier authorities, our former colleague at Brookings, who was at Brookings India, Shivshankar Menon, had mentioned that the U.S. is the one nation that’s actually essential for just about each facet of Indian development, for safety, for expertise. And Prime Minister Modi’s insurance policies have mirrored that. So, it’s a extremely form of a consolidation of these ties. It’s served, this go to is serving as a little bit of an motion forcing occasion to get some main offers by way of. We’ve already heard some information on that.
After which lastly, for Prime Minister Modi, it’s additionally in some methods a political message. There’ll be some political messaging concerned. A part of the case he has made to the Indian public is that he’s promised to make India revered on the world stage. Now, some will say that India was revered on the world stage earlier than, however an Indian viewers has purchased this concept and there may be this sense, and also you hear this from commentators who go to India, come again to speak in regards to the optimism there. And a part of it’s the story of a form of being, as they put it, aspiring to be a number one energy on the world stage. And so, I believe this go to will probably be seen in that context.
And there’s an election due in 2024, and Prime Minister Modi, I believe, will even form of spotlight this go to maybe in his election marketing campaign.
DOLLAR: That’s an attention-grabbing theme that we are able to carry by way of to different components of the interview, that america may be helpful to India in assembly numerous aims. And a kind of vital aims is elevating the technological degree of the financial system and of the entire society. And I see that because the U.S. and India have deepened their relations, they’ve introduced a strategic partnership on essential and rising applied sciences. So, that sounds nice. However what substance is there? What does that actually imply?
MADAN: They’ve even provide you with an acronym, ICET. So, you recognize when there’s an acronym, it’s most likely going to stay round a bit. What that is, is it’s not one form of massive deal, one main deal in its personal proper. What it’s, it’s a framework, it’s a mechanism, it’s actually a mechanism to construct a strategic commerce and expertise partnership between the 2 international locations. Not that one didn’t exist, however there was this sense that, you recognize, there are quite a lot of these points that cross the protection, expertise, financial domains, innovation domains, and these have been interagency by nature, and that you simply actually did want form of a automobile to each concentrate on and attempt to push a few of these issues by way of.
So, what you’ve seen is that this was one thing that was mentioned final yr by the prime minister and President Biden. And earlier this yr, Nationwide Safety Advisor Jake Sullivan and India’s Nationwide Safety Advisor Ajit Doval launched this. And nationwide Safety Advisor Sullivan was simply in India for the subsequent stage of this. And the thought behind that is actually to concentrate on a number of completely different domains: is to deepen cooperation within the protection industrial house and the innovation house as properly; to attempt to work on semiconductor provide chains as each international locations attempt to diversify. There’s additionally a distinct form of dialogs and motion in house on the business aspect. Innovation throughout the board, significantly nurturing expertise and creating an innovation bridge between the 2 international locations, creating safer telecommunications community, as properly options.
Now, a few of that is being executed bilaterally. A few of that is additionally coming beneath coming beneath the Quad, which is the Australia-India-Japan-U.S. grouping, which has its personal essential and rising applied sciences dialogues. However actually what that is, is to attempt to get a few of these initiatives to maneuver ahead. So, they’re simply taking these, say just like the protection industrial cooperation aspect, drilling down on one or two offers and really attempting to push them by way of. So, the one which they’re targeted on proper now could be for GE to probably produce its 414 jet engine in India, co-produce it there, for the indigenously-developed Indian fighter plane, so, fight plane. So, that’s the form of factor that they’re attempting to attempting to develop.
And the folks like buzz phrases. And so I believe the buzzwords round these are issues like “safety and resilience,” “expertise and expertise.” And so that you’ve seen that is actually a nearly form of, you recognize, like folks say an motion forcing an occasion. That is form of an initiative that could be a forcing initiative. What’s attention-grabbing about it’s that is maybe the primary dialogue I can consider that’s led by the Nationwide Safety Councils in each international locations. There are different dialogs which have come out of it, together with a really new, simply met a few weeks in the past, the strategic commerce dialogue, which is mainly to drill down and establish obstacles and overcome them when it comes to export controls and people form of points.
So, you’re seeing quite a lot of issues popping out of it. However I believe that is one among these initiatives the place we received’t know for an additional ten years if it was actually profitable or not. We’ll see some bulletins when Prime Minister Modi is right here popping out of it. However I believe the true nature of it, as a result of if it really works, it will be a generational funding within the relationship and significantly the innovation aspect of it.
DOLLAR: For this type of technological cooperation between India and america, it appears to me that having this massive Indian diaspora within the U.S. needs to be a bonus. So, I assume they’re fairly proud of the best way relations are creating between the U.S. and India. Have they got any particular considerations?
MADAN: It is rather a lot on the core, actually, in some methods of ICET itself. However even on the societal, the people-to-people dimension aspect, when cupboard officers, cupboard ministers on each side speak about this relationship, particularly on the U.S. aspect, you’ve heard them mentioning the people-to-people dimension much more. There’s now a diaspora of over 4 million, and it’s nonetheless fairly small in comparison with different immigrant teams. However nonetheless, significantly … and I used to be simply operating the numbers and also you’ve seen 76% … there are nearly 200,000 Indian college students now within the U.S., and 76% of them are in STEM fields. The innovation aspect of that ICET that actually could be very a lot. And so it’s forming this pure bridge that even when folks return, or, it’s connecting the 2 industries.
I believe the diaspora is kind of supportive of and likes that U.S.-India ties have developed. One development that we we’ve seen form of lately shouldn’t be fissures within the diaspora, however you’re actually seeing the range of the diaspora the place our colleagues at Carnegie subsequent door have executed a research on Indian Individuals and the way they vote, and so they are inclined to form of vote on points that matter to them, not essentially on U.S.-India relations. However because of that, they largely vote Democratic. However they do have points that they’re involved about even inside the neighborhood. You’re seeing, whether or not on non secular strains, generally on even points like caste, that you’re seeing some divergences. In some methods, that’s pure. India’s a really various nation, and the Indian American diaspora, because it grows, is reflecting that.
Additionally, some variations between immigrants who’re current immigrants versus those that’ve been there for ages. However you actually do see and generally quite a lot of variety when it comes to the place in India they arrive from as properly.
DOLLAR: Yeah. So, this primarily migration you’re speaking about—many coming as college students, however you recognize, some staying, folks settling—I imply, that’s a extremely vital a part of globalization. And personally, I’m simply very excited to listen to the numbers you talked about. I believe it’s an actual energy of america system that we have now this constant immigration and the sending international locations, there’s quite a lot of analysis now indicating that there may be advantages in constructing these ties between completely different international locations. So, all that sounds fairly constructive.
MADAN: As a beneficiary of it myself, David, having come right here for graduate faculty and executed two graduate levels, I can’t however agree with you. And I believe throughout the board, I hope that is one thing that’s acknowledged that this the migration and it actually does join societies, economies, and is mutually helpful.
DOLLAR: And other people-to-people. , we get all the good Bollywood films.
MADAN: That’s proper. Yeah, that’s proper. Bollywood films. And also you’ve acquired Padma Lakshmi, too. So, for those who like cooking, you get that as properly.
DOLLAR: Up to now, the entire dialog has been a little bit of a love fest that, U.S. and India are creating their relations, quite a lot of constructive issues creating. If I may point out one thorn within the aspect of the connection, it’s the Russian invasion of Ukraine and India’s fairly robust relations with Russia. It’s rising imports of oil from Russia throughout this time. Is that this more likely to be an vital situation of dialogue or are the 2 sides simply going to just accept that that is one thing we disagree a bit on and simply transfer on to the opposite areas?
MADAN: I believe it’s going to be a little bit of each. I believe the U.S. and India, I don’t know in the event that they’ve agreed to disagree, however they’ve accepted or not less than tolerate the variations that exist. And so they’re doing that, you recognize, managing this and different variations partly as a result of there may be strategic convergence, as an example, on the Indo-Pacific. And each have been prioritizing that, that convergence, each when it comes to the objectives they share there and the considerations they’ve about China’s habits within the area.
However on Russia, you’ve seen, I believe additionally that during the last—you recognize, this might have been, significantly after the Russian invasion and when India was not voting to sentence Russia on the on the U.N.—it abstained—however nonetheless, that did create some quantity of friction, as did its imports of oil. However you’ve seen over time each side additionally slender the hole between one another. They’ve mentioned this at numerous ranges persistently. As a result of one factor India does shares, a number of of its pursuits have been adversely affected—financial, vitality, others, even geopolitical, by the Russian invasion. And whereas they may not name it that, they do name it the Russia-Ukraine struggle, however they do acknowledge the harm it’s executed. And probably to Russia itself, which they do see as a associate. And so, I believe you’ve seen the hole narrowed due to consultations, due to the period of the struggle and its persevering with impacts internationally.
I believe the opposite facet you’ve seen is to some extent, simply as Indian considerations have grown as, as an example, meals, gas, and fertilizer costs, there’s been strain on that. But in addition, as Russia is their largest provider of protection tools, and they’re unable to pay and Russia is unable to ship a few of that. So, concern about that offer chain as properly.
However you’ve additionally seen on the U.S. aspect some change the place earlier they might think about form of India’s oil imports an issue. And simply to present your viewers a way, India, at the start of 2021, for those who had regarded on the 2022, for those who regarded on the figures, about 2% of India’s oil imports got here from Russia. Now it’s form of over 1 / 4 of not between 1 / 4 and a 3rd. Earlier, you had the U.S. objecting to it, however then the U.S. acknowledged that, you recognize, you truly need I believe quite a lot of vitality consultants say you don’t wish to take this oil off the market. And so, simply put a worth caps to cut back Russia’s income and India has largely imported beneath that worth cap. So, I believe that situation has turn into much less thorny.
You’ve additionally seen India take barely completely different, not barely, however they suppose a considerably completely different stance than China. Prime Minister Modi simply met with President Zelensky. They’ve spoken a number of instances and performed a job on particular points like the protection of the Zaporizhzhia nuclear plant in addition to on urgent Russia when it was suspending the Black Sea grain initiative.
So, they’ve taken a barely completely different stance, which I believe can be eased, eased form of the variations. However I believe the explanation that they haven’t been extra form of filled with friction is due to that bigger strategic convergence, which provides each side an incentive to handle the variations. However this can be a distinction that may live on. Russia will stay for as a result of India sees it probably as a balancing energy perhaps 20 years from now vis-à-vis China; proper now they’re fearful about Russia-China relations.
But in addition it stays, if for no different motive, it’s nonetheless quite a lot of Indian frontline army tools depends on Russian spares, on Russian servicing, and continues to be of Russian or Soviet origin. And that’s going to be a generational effort for India to each diversify, which it’s been doing now for the final ten years, but additionally to indigenize. And that’s the opposite development we’re seeing.
DOLLAR: , I utterly agree with you, Tanvi, in regards to the results on the oil market. Pre-invasion, mainly, Russia was sending about 55% of their petroleum to Europe and about 20% went to China, India for those who mix them. And now it’s flipped. Greater than 50% of their oil goes to China and India, and Europe’s share is right down to about 20%. However Russia is exporting about the identical quantity. And I truly suppose that’s an advantageous scenario as a result of we dodged a giant oil worth shock. It went up at the start of the Ukraine struggle, however now the value of oil is definitely under the place it was pre-invasion, and that’s even earlier than you begin making use of any cap. So, I believe we have now dodged a giant oil shock.
After which then again, the sanctions are retaining Russia from importing quite a lot of stuff. So, I believe the sanctions are working very properly on the import aspect. And all of that creates a scenario the place the U.S. will most likely deliver this up with Prime Minister Modi, however it’s, as you say, it’s going to be small inside the context of the bigger strategic relationship.
MADAN: Yeah. And, you recognize, this time final yr, I don’t suppose Prime Minister Modi would have been invited for a state dinner, partly due to these variations. However I believe, for the explanations you’re saying—and I didn’t notice that these numbers have been the case—one of many issues that is stirring up into Russia-India case is that India now has this massive commerce deficit with Russia that I believe is just second to their commerce deficit with China, which can be large. And that is creating an issue. And the final time senior Indian officers met their Russian counterparts, they mentioned, Look, that is unsustainable, you recognize, we have to have extra balanced commerce. This didn’t actually was an issue in Russia-India relations.
And additionally it is an issue that this Russia-India commerce that has gone as much as near form of 30 or perhaps simply crossed $30 billion is kind of unnatural, as a result of earlier than that, for the final 10, 20 years, Russia and India have been attempting to extend non-defense commerce. It’s remained caught under $10 billion. So, now it’s gone up, however it’s depending on this very particular commodity. India doesn’t actually import that a lot, if any, I believe, fuel or very small portions of LNG from Russia, and a few coal. Nevertheless it’s largely this one commodity. And I’m certain the Russians are eager about the truth that simply as India elevated oil imports, it may simply as properly lower them over time and go elsewhere in the event that they get a greater deal. So, one questions for the Russians goes to be how lengthy are they going to supply these reductions that these international locations are demanding?
DOLLAR: Let’s swap gears a bit bit and speak in regards to the G-20, as a result of India for the primary time is the president, I assume they name it, of the G-20. And so, Prime Minister Modi will probably be internet hosting the opposite G-20 heads of state, I believe, in September, if I—
MADAN: —that’s proper, yeah—
DOLLAR: —if I keep in mind accurately. Yeah. So, what’s India attempting to do with the G-20? What are a number of the most important points and agenda gadgets?
MADAN: David, I’ll say to start out this isn’t the G-20 India had thought it will be as a result of a lot consideration is round, you recognize, whether or not each the Russian invasion of Ukraine and that affect, and for Prime Minister Modi eager about the Indians will invite President Putin—they don’t seem to be signatories to the Rome Statute. So, that query is not going to come up. Now, whether or not he goes or not is one other matter.
Maybe much more controversial in India goes to be the presence of Xi Jinping, as a result of the final time he was in India was earlier than the 2 international locations had the boundary disaster in 2020, and he was there in November 2019. The 2 leaders have probably not had a bilateral assembly since then, and Modi and Xi had met a file variety of instances previous to that, I take into consideration 18 instances in over six years.
However for the G-20 itself, I believe these are going to be the sideline points, which is who is definitely going to make it, this type of rigidity between the West and Russia and China. But in addition, I believe on the substantive situation, India has actually truly invested loads over this final yr into this course of—hosted plenty of ministerials, had working teams. And so they targeted largely, I’d say, you recognize, the one phrase I can put it’s “growth,” inclusive and resilient development is how they’re eager about it.
And this has acquired to many points. There’s the extra proactive delivering on the Sustainable Growth Objectives, eager about inexperienced development is one other emphasis. Girls’s empowerment and women-led initiatives has been one other facet of growth.
However you’ve additionally seen, I believe, India attempt to use the G-20 to showcase form of some digital expertise options, and significantly its digital public infrastructure, what they name the India stack, which they each use the G-20 conferences to showcase to these visiting, but additionally to attempt to form of say, look, this can be a extra open various to—and so they by no means use the phrase China—to people who our closed techniques are providing.
Now within the West, I believe folks have a distinct form of perhaps view of a few of these a number of the spots of infrastructure. However nonetheless, I believe what India is doing is extra broadly bringing focus to the thought of digital public infrastructure as one thing that may actually facilitate inclusivity and growth as properly. And that’s been the form of extra proactive aspect.
I believe the reactive aspect on the event has been actually to debate and cope with the fallout of the Russian invasion of Ukraine, of COVID as properly, and international locations form of nonetheless affected by that. And that’s been each when it comes to eager about meals, gas, fertilizer, safety, but additionally when it comes to the debt disaster that in some circumstances is looming, in some circumstances we’ve already seen in India’s neighborhood, each in Pakistan and Sri Lanka, actual form of financial setbacks, due to the form of debt crises that each have.
So, I believe there’s been each this proactive and reactive ingredient to India’s G-20. After which one other situation, which is form of throughout the board, each when it comes to world financial governance in addition to throughout different establishments, and India’s speaking about because it seems to be at G-20 as a multilateral establishment, the necessity to reform precise multilateral establishments, and never only for itself, however saying creating international locations want an even bigger position. It already has and it possible will forward of the G-20 summit host one thing like a Voice of World South Summit to say, look, that is a vital facet. Can’t simply be these 20 international locations.
So, the best way that the Modi authorities has portrayed it as, you recognize, we’re a bridge between the North and the South, the East and the West, and I believe they are going to attempt to replicate that.
After which lastly, I believe for an Indian goal, or reasonably the Modi authorities’s goal with the G-20 goes again to that facet that I discussed when it comes to the state go to, which is political, that once more, this matches into Prime Minister Modi’s showcasing India as on the excessive desk, so to talk, and that, you recognize, he’ll say he’s performed a job. A few of his critics say, properly, you recognize, it’s the G-20, it rotates. So, it’s not that it’s being held since you’re prime minister. However nonetheless, he’s showcasing it. And he’s made it a degree to host these conferences across the nation, so not simply in New Delhi. It’s most likely nicer for guests as properly that they get to go to Goa and the Andamans and never only a convention room in Delhi. However, this actually has been a part of has been for him a political instrument as properly.
DOLLAR: Final subject, Tanvi, is let’s simply speak a bit bit extra about India’s commerce and funding insurance policies. One of many enjoyable issues I acquired to do within the World Financial institution was go to fairly a number of factories in India. This could have been 20 years in the past, mainly, greater than 20 years in the past. And I keep in mind visiting some auto crops, truly making auto components, and all the things was a three way partnership. I’m not going to call corporations, however a three way partnership between an Indian firm and a giant worldwide, well-named firm. And these have been 50-50 joint ventures. There was quite a lot of tensions and issues and low productiveness, frankly. As I see it, India has actually opened up fairly a number of sectors, together with automotive, to 100% international funding. So, I haven’t had an opportunity to go to factories just lately, however from the info it looks like India is admittedly changing into extra open. Is that actual and is that more likely to proceed? And the way do Indian folks really feel about this?
MADAN: It’s fairly attention-grabbing. What you’ve gotten seen is a Modi authorities that originally after they got here in was one which actually moved backwards when it comes to … it did open up. Within the funding aspect that was true. They opened up plenty of sectors, together with to 100% FDI. However on the commerce aspect, they have been a bit bit extra protectionist. They mainly mentioned, We don’t wish to do bilateral funding treaties, we don’t wish to do free commerce agreements. Those that India had executed have been thought-about to haven’t been free and honest. And so, they actually had the perspective that these agreements weren’t good. They elevated import duties on a number of inputs, industrial inputs. And so, they have been seen as extra protectionist than earlier governments and maybe probably the most protectionist within the commerce house not less than since India began liberalizing within the Nineteen Nineties.
Now, there have been different reforms that they did undertake that additionally did assist when it comes to the enterprise atmosphere, together with within the banking sector, together with when it comes to now constructing infrastructure throughout the board. And so, that’s helped.
However what you’ve additionally seen concurrently is a Modi authorities shift lately on commerce. It’s not abruptly a free dealer on the entire, however it has turn into extra open to bilateral commerce agreements with what they name “trusted companions.” And so that you’ve seen India signal a commerce settlement, an preliminary commerce settlement, with Australia, with the UAE. They’re being negotiated with the UK, with Canada, the EU-India commerce negotiations have been revived as properly. At the moment the U.S., we’re not occupied with commerce offers, in any other case I’m certain they might have wished to speak about that. They did be a part of not less than three of the 4 pillars of IPEF, the Indo-Pacific Financial Framework. And so, you’re beginning to see them rethink this facet.
Now, one of many causes they’re doing it’s because simply as they’re attempting to form of scale back their publicity to China specifically—China’s their second largest buying and selling associate, but additionally is the primary supply of the Indian deficit; and likewise due to their border disaster, there’s only a extra intense competitors, India’s involved about its vulnerability within the financial house and this overdependence—and so, as they tried to cut back their very own publicity, they’ve been attempting to diversify their suppliers. And so, that’s helped them rethink commerce.
However on the identical time, they’re additionally attempting to reap the benefits of different international locations attempting to diversify. And so, on this house, each on the manufacturing and commerce aspect, you’ve seen, for instance, an Apple begin to say that we wish to produce in India, transfer some quantity of manufacturing and a few to Vietnam as properly. However you’ve additionally seen India then having to regulate the place one of many issues that an organization like that claims is, Look, we’re not going to maneuver our whole provide chain there. We nonetheless want to have the ability to import from China. And so, India’s regulate to that and is making exceptions.
So, you’ve gotten seen the federal government rethink this. They’ve acquired one thing known as a production-linked incentive scheme specifically sectors the place they’re attempting to diversify like electronics, like prescription drugs, like solar energy. And so, they’ve been extra open in that sense.
There may be additionally the sense, and so they’re fairly open about it, the place there may be this emphasis on what they name atmanirbhar Bharat—self-reliance. And I believe the place the tug is simply domestically within the debate is what does the self-reliance imply? Does it imply self-sufficiency on one finish of the spectrum, or does it imply resilience within the sense of getting some quantity of home manufacturing, but additionally diversifying form of a mix of friend-shoring and reshoring or on-shoring? And I believe this debate continues in India. The place do you … there’s a sense from some international corporations that India does put its thumb on its scale for home corporations. India argues that each one international locations do this. However I believe you’ve seen actually this push and pull. You see it continually within the Indian authorities’s strategy. And generally you may see that they do transfer on these points.
However actually to me that is the basic debate, not simply within the financial enviornment however throughout the board, is that this debate over how open to be to the world. Within the geopolitical house, how open to be to companions, how near get to companions; and within the financial house and expertise house how a lot to essentially work with others, like-minded international locations. And you’ve got some just like the exterior affairs ministers who’ve mentioned, Look, we have now to make selections as a result of globalization and expertise aren’t financial points, they’re strategic points. So, we have now to be open, however we have now to be open to simply extra trusted companions, or as they name them, trusted geographies. So, I believe, that’s the place you’re most likely seeing India come down.
DOLLAR: I’m David Greenback and I’ve been speaking to my colleague Tanvi Madan about India, fifth greatest financial system on this planet, quickest rising massive financial system. So, most likely going to maneuver as much as quantity three earlier than too lengthy and punching fairly strongly on this planet financial system each economically and politically. So, thanks for all these insights, Tanvi, as we await Prime Minister Modi’s go to to america.
MADAN: Thanks a lot, David.
DOLLAR: Thanks all for listening. We launch new episodes of Greenback and Sense each different week. So, for those who haven’t already, observe us wherever you get podcasts and keep tuned.
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