PM Modi and President Trump will be spending five hours together over initially at one- on -one meeting and later with official delegations over cocktail and working dinner at the White House. There is marked bonhomie when Trump called Prime Minister Modi a true friend. Coming close on the heels of unsavory remarks about Paris Accord about India and China, the US Administration is creating a ground for a fruitful strategic dialogue and conveys a signal that Paris issue is a one off event and should be kept in the backburner.
Yet, India’s negotiating strategy should be calibrated, realistic and should take into account the ground realities with a focus on the following:
Low Hanging Fruits The US will be happy to hear from the Indian Prime Minster how the two countries can cooperate in three areas viz. defense and aerospace, energy and terrorism. The US approval for supply of 22 unarmed Guardian drones for the Indian Navy will be a major takeaway of the visit. The deal will bring in 2-3 billion dollars to the US exchequer at a time, when it is embarking “ Buy American”. That will also help in creating more jobs in the US, an important election plank of the Trump Administration. The US now has emerged as the biggest arms supplier to India. The latest is that the US is pressing India to buy 100 unmanned drones, which can be used both for military, civil purpose and anti-terrorism activities.
President Trump is also likely to stress upon strengthening the energy cooperation between the two countries against the backdrop that a number of Indian energy companies have signed billions worth LPG gas contracts with the US. India imports close to 12% of its LPG requirements from the US, Saudi Arabia contributing to the lion’s share of 65%. Another area that will come for sharp focus will be India sourcing solar energy equipment from the US. The value of imported solar cells and modules tripled to $2.34 billion in 2015-16, with China accounting for 83 per cent ( $1.9 billion) of it. The only other country which significantly exports to India is Malaysia. India imported solar cells and modules worth $189 million from the country in 2015-16, up from $83 million in the previous year. The US-headquartered thin film cells/modules manufacturer, First Solar, which is one of the largest suppliers to Indian solar sector, has a plant in Malaysia.
President Trump also is likely to bring the issue of Hardly Davidson, which he on record that India’s import duty structure is so steep that it is impossible to export to India, whereas there is a huge demand for the high end product. It is a moot point how the duty structure will be impacted by the introduction of GST.
What India should Press onA direct flagging of the H1-B visa may not be desirable. Instead, the prime Minister in all likelihood will underscore the jobs created in the US for US citizens by the Indian IT companies. It is also important to bring to the notice of the US administration that the job loss in the US is not driven by large scale employment of people from countries like India but because of the large scale automation, robotics and steady deployment of innovative technologies that replace jobs.
Even now Indian IT companies have relevance in the US, particularly in developing software for automation, robotics and in creating an ecosystem for manning such operations. President Trump is on record that highly qualified and talented people are still welcome in the US.
Outsourcing can be overarchingTo limit the concept of outsourcing only to IT and ITeS is not the right approach. Outsourcing can be there in manufacturing. Prime Minister had met the CEOs of the important American corporations today and believed to have discussed with them the scope for them investing in India not only for manufacturing end products but also intermediates and components. He might have explained to them about how the e-commerce segment has been opened up in India and would have sought their opinion what more can be done in this regard, particularly in the B2C segment.
Irritants that may crop upProtection of Intellectual Property Rights, particularly in the pharmaceutical sector is a grey area that the US pharma companies may point out. The Indian side should be vocal about Indian IPR rules on trademarks and copy rights. The high prices charged by the US companies for items like stent etc. is a case in point for a developing country like India can ill-afford. There should a give and take policy between the two countries while negotiating on these contentious issues.
Important takeaways from the Modi-Trump meeting
1. Ice that has gathered around bilateral relations in the after math of the US withdrawing from the Paris accord on climate change is seemingly melting down. That is good sign to initiate a new chapter in partnership dialogue.
2. Incidentally he US is holding the energy week now. The reported breakthroughs in contracting LPG from the US and solar energy equipment augur well.
3. The US executives called on the Prime Minister yesterday have voiced their concerns about impediments in investments and trade, higher tariff walls, bureaucratic delays, particularly at the state levels etc. Prime Minister reported to have explained to them 7000 pieces of reform measures taken by his government since coming to power including the roll out of GST. This seems to have convinced the corporate honchos, who will look forward to early implementation of the assurances.
4. The Prime Minister seems to have convinced the US administration that India’s growth will benefit the US more than any other country. What he seems to have conveyed is to have faith in India and himself and the reform is a continuous process and all their genuine concerns will be addressed.