'Indian economy is part of the world's engine'

The first unofficial US-India Strategic Dialogue organised by The Brookings Institution and the Federation of Indian Chambers of Commerce in Washington, DC threw up some interesting facets on the bilateral ties, finds out Aziz Haniffa. The third in a five-part series.

Read part 1: India-US: After the euphoria, skepticism

Read part 2: 'China is sexy as far as America goes. India is, well, interesting'

India's exponential economic prowess has made Boeing covet that country like never before, said Thomas Pickering, former under secretary of state and former ambassador to India, who after he retired was a vice president with Boeing and who remains a consultant with the aviation giant.

"Boeing did not wake up to India until two things happened," said Pickering, who was the co-moderator and discussant in the panel on the 'Impact of New Economic Ties on the Overall US-India Strategic Relationship.' "One, India wanted to buy $100 billion worth of airplanes over three years, and, second, India is the locus of the world's largest fighter airplane sale, in my view, in the 21st century and maybe one of the last. Both of those awakened the eyes of an aerospace company which had tended to look on India as being on the backside of the commercial globe and a place where little could be done."

He added, "The amazing thing, of course, is that the Boeing company now understands that investment in India is more than just investment in good IT, or excellent work in many other fields that India can provide. It's a real investment in its future marketing, and it's a real investment in cutting its costs, all of which are very, very important."

Taking a swipe at the Obama administration, he added, none of this "tend to be immensely popular with the American labor unions or, indeed, with the present party in power, whose view is that foreign investment should create only jobs in America, which is not, in my view, a possible way to stretch the rubber band."

Arvind Panagariya, professor of economics, Columbia University, and non-resident senior fellow, Brookings, said, "China became important precisely because it became a big economic powerhouse, and India is becoming important precisely because of that as well." He acknowledged that while for India the US is "the largest single destination," particularly in terms of exports, "that's not true in the reverse. For the US, actually, only 2 percent or less than 2 percent of US exports go to India and less than 2 percent of US imports come from India."

He said, "Even if you take conservatively that in the next 15 years India would grow at something like 10 percent a year in real dollars, India becomes a $5 trillion economy. That puts it ahead of Germany, and it becomes the fourth largest economy in the world after the US, China, and Japan. So, that's really what we are looking at and that's what makes India important, both for the US and for the global economy as a whole."

Teresita C Schaffer, director, South Asia Program, Center for Strategic and International Studies, said, "The fact that India is coming out of a much shallower (economic) slump much more quickly than the US and other countries in the world is going to emphasize the fact that the Indian economy is part of the world's engine."

Eswar Prasad, senior fellow, Brookings, said it is unlikely that India is ready to take up a bigger role on the world stage.

"India's economy is one quarter of China's and size does convey with it certain elements of power, both soft and hard," Prasad said. "And India is not in an entirely secure position to go out and take the lead yet."

"Is there a benefit of India to taking the lead on these positions? Now, although you may not know it, India has in fact been taking a very powerful intellectual lead in the context of many G-2- issues. It was an Indian who was a co-chair of the working group on regulatory reform set up by the G-20 that initially set up the architecture for how we should think about regulatory reform — although of course, we have moved on from then."

Prasad continued: "There is a mutual assessment process that the G-20 has asked the IMF (International Monetary Fund) to put out… It is an Indian who is the co-chair of that group. How many of you know about that? Probably not a great number. And this is the issue: India is willing to provide the intellectual leadership, but not on the world stage."

He said, "To my mind, this is not the way we should be approaching it. To my mind, as an Indian, I think there is a strong case to be made to making intellectual leadership in a more visible way. Even if we don't have new positions to put forward, articulating the Indian position is going to be very important."

He said the concern if India doesn't do this "is essentially that the US and other countries sort of see India as a bulwark against China, and that is not a comfortable position to be in… And, perhaps, what we can achieve though this (US-India) bilateral relationship is some strengthening of the Indian hand, some allaying of the suspicion from the Indian side about what the US wants from India. Perhaps then India will finally take its place on the world stage."