Building A Closer U.S.-India Economic Partnership

President Obama made history earlier this year by becoming the first U.S. president to visit India twice while still in office. The trip, which came on the heels of Indian Prime Minister Narendra Modi’s visit to the United States last September, once again focused attention on the U.S.-India strategic partnership. Based upon a mutual convergence of interests and values, this partnership has witnessed cooperation between Washington and New Delhi advance in a host of diverse areas, ranging from security and defense, to science and technology.

But it is the economic relationship between the two democracies that constitutes a cornerstone of U.S.-India ties. Speaking at a business summit during his trip to New Delhi, President Obama observed that “in our globalized world, the fortunes of the United States and the fortunes of India are inextricably linked.”

Commercial ties with India are thriving, and cooperation in this sphere has never been deeper. But the true promise of what Washington and New Delhi can achieve together remains unfulfilled. The United States and India must develop a shared vision of what its economic relationship will encompass over the coming decade. By doing so, the two countries can shape a 21^st century that is prosperous, stable and secure.

Compared to the past, economic ties between the United States and India are flourishing. Trade between the two countries has more than quadrupled over the last fourteen years and is on track to cross $100 billion. Total direct investment in India was $2.4 billion in 2000. It has now skyrocketed past the $29 billion mark.

But this is not just a one-way street. Indian direct investment in the United States has grown from $200 million to $9 billion over a ten-year period. More promising still, U.S. exports to India have increased by 35%, supporting almost 170,000 high-paying American jobs. Over the past decade, exporters in all 50 states and the District of Columbia have sent exports to India. California reported exports worth more than $3.7 billion to India last year alone.

There are few countries with whom the United States has traveled as fast, or as far, than India. But the progress made so far has only just begun to scratch the surface of what is possible. Of all American exports worldwide, only 1% goes to India, while imports from India account for only 2% of the U.S. total.

The two states can do much better, particularly given India’s rapidly evolving economic landscape. The country’s economy is projected to become the world’s third largest by 2030, and is now growing faster than China’s by some estimates. India’s burgeoning middle class is one of the largest consumer markets globally.

Given this vast potential, how can the United States and India achieve a deeper economic relationship?

A natural starting point is the private sector links that have long formed the foundational pillar of U.S.-India bilateral ties. They should be encouraged to continue serving as vital wellsprings of innovation, entrepreneurship and ideas in this realm. These businesses—along with the vibrant 3 million-strong Indian-American Diaspora—are important wealth creators, serving as bridges between both countries and their economies.

New Delhi has also signaled that it plans to spend more than $1 trillion on infrastructure in the next five years, with more than a $130 billion on railway modernization alone. The government has also unveiled ambitious, multibillion-dollar spending targets in the defense and telecommunications sectors. American companies operating within these arenas have a major role to play in helping India achieve its aspirations.

For those shaping official policy, attention should focus on assisting New Delhi complete its economic recovery, which finally appears to be underway. Helping India modernize its armed forces, diversify its energy supply and overhaul its infrastructure all represent key priorities for the new Indian government. They provide ripe opportunities for the U.S. and India to partner together and create new jobs, investment opportunities and catalysts for long-term, sustainable economic growth in both nations.

Finally, the two countries should set a deadline to conclude a bilateral investment treaty. The agreement would go a long way toward cementing economic ties, creating more bilateral trade and investment opportunities, improving investor confidence and spurring growth in both nations. Finalizing an agreement would also help mitigate some of the irritants that have vexed the U.S.-India trade relationship in recent years.

Washington and New Delhi are witnessing an increasing convergence of their economic interests. Through closer collaboration, the world’s two biggest democracies can together unleash their full potential and build a closer U.S.-India economic partnership.