The sense of India as an opportunity still is very strong, says Mukesh Aghi, CEO and President of US-India Strategic Partnership Forum.
At a time when the corona pandemic is scaring again with the Delta variant running amok in the US, comes the Taliban takeover of Kabul and the new alliances of anti-democracy nations supporting the “terror outfit”. All this is resulting in more trouble for President Joe Biden, who is currently facing a backlash even as his global diplomacy is put to test at home. A state of flux, say diplomacy experts, where global economy and healthcare are prime targets.
Mukesh Aghi, CEO and President of US-India Strategic Partnership Forum (USISPF) spoke to The Sunday Guardian and said strong Indo-US strategic ties hold key to most of the diplomatic challenges. On fighting the pandemic to let economies survive, Aghi says, “until the whole world becomes vaccinated, you won’t see a smooth ride”. Excerpts:
Q: The corona pandemic has been jolting global economies for over 18 months now, including India and the US. Do you agree that we will sail through and get to normal business and economic stability soon?
A: First, you must realize that the pandemic is not something that’s just going to go away immediately. It will keep bouncing back and forth. The world will need to learn to live with the virus, just as it has lived with viruses all throughout history. It has had an impact on the economy. On a global basis, when you look at the Indian economy, it contracted almost 25% in 2020; but it is slated to grow more than 10% this year… The US economy, which is a nearly $23 trillion economy, will grow around 6-7.5% this year. So I think you will have bumps, but you’ll also have peaks. And until the whole world becomes vaccinated, you won’t see a smooth ride.
Q: The Delta variant virus is threatening to doom again. How serious is the Delta threat and how is the US battling it?
A: As of yesterday, the US had almost 150,000 new cases, but most of the cases are in states where the vaccination rate is not above 50%. So you have a lot of cases in southern states like Florida, Texas, Alabama and Louisiana. Unless vaccination picks up, the states are going to struggle. What we are seeing is, for the first time since July, vaccination numbers have again crept up to almost a million a day. So it will take some time. Unless you have 70-80% of population vaccinated, you will see the cases coming up and down.
Q: So that’s a real threat? What is causing that?
A: Well, it’s a disruption. I wouldn’t say it’s a threat. It’s a disruption. I think it’s the politics, which basically has some politicians not enforcing masking, not enforcing vaccination. Until we have a uniform agreement on vaccination, you will see these cases coming up.
Q: What’s your take on India’s economic “bounce back” claims made by the government? Is Atmanirbhar Bharat the right step or are there gaps to be plugged?
A: Well, I think if I understand the course of the economy in today’s environment and if the Covid situation in India is under control with vaccination, then there’s a sense of optimism of the economy going. But if the third wave comes in, then it will definitely have an impact on the economy. You know, you can’t deny that—but the first quarter numbers for merchandise exports, when you look at 85% year-on-year growth, are fantastic albeit on a lower base of 2020, clearly due to the pandemic outbreak; yet it is encouraging to note that it is 18% more than the pre-pandemic Q1 2019 level.
We’re seeing some of the highest export numbers (up 36%), India has shown in last month, that’s fantastic, again signalling a persistent recovery. The FDI was up by 27% in 2020, driven mainly by ICT investments; That’s very good. India seems to be on a long-term growth trajectory, and it has remained a viable destination for global investors despite multiple state lockdowns and recessionary trends due to the pandemic. So, I think, for now, things are moving in the right direction.
Q: So are these positive signals that you are receiving or are others also receiving in the US amidst the second wave India faced?
A: Yeah, you have to understand the risk factor. A lot of US companies have back offices in India, and they manage critical operations with these companies. So if they collapse, they collapse in the US also. On a positive side, the export is largest after seeing significant negative growths in the first two quarters.
Q: The Indian diaspora and organisations supporting India came in a big way to help India fight the pandemic, something seen as key to come to this safe situation. How is that diaspora diplomacy going to continue to further strengthen India-US relationship?
A: When the US was in trouble during its own Covid peak last year, India stepped up and gave a lot of critical medicines. And when India needed help, it was time for the US to step up. But I think more importantly, US companies and private sector stepped up. The Indian American CEOs stepped up and built the whole momentum, driving the aid to India. It was a combination of country to country, company to country and diaspora to the country itself, which had an impact.
Q: How has been the US investment scenario growing for India and has New Delhi delivered on US expectations? Is there a jump in companies coming to India to do business?
A: I think the sense of India as an opportunity still is very strong. And what’s happening with China is driving companies to reduce the manufacturing there. India becomes a potential natural choice for them to explore.
Q: But has India actually gained with China’s loss of markets and shrinking of its demand-supply chain? What sectors are key for India US investment, commerce and business diplomacy?
A: Some would say it has, but I think the bigger gainers are Vietnam, Cambodia, and those geographies, I would say, Thailand, and even Bangladesh. Indian business’ share going to others is a concern. …I think healthcare, technology and defence are sectors of big opportunities. Definitely pharma, that’s picking up and then information technology…there’s a lot to do in these sectors. We need to push these things and that’s why I’m here.
Q: What figure do you put on India-US investment of the business on both sides?
A: See, you have to look at this from a different perspective. For India to be a $5 trillion economy, it needs to grow about 12% annually for the next five years, backed by higher investments (say, $100 billion foreign investments every year).
We are seeing the numbers between 60 and 80 billion for the last three years. That has to go up. It’s going up, it used to be 40 in the first half of the last decade. Then 50s, the 60s and now 70s and 80s; there seems to be an upward trend. Total FDI inflows have grown at a 6% compound annual growth rate (CAGR) between 2015 and 20.
Q: Coming to the Taliban takeover and anarchy that follows. How should India and the US handle it together? Both seem to be having a different line of reaction to the crisis, one outright rejecting it, other waiting and watching?
A: I think there are a couple of things taking place. You have US domestic requirements saying this is not a war and we’re not in nation building. Why are we spending a billion dollar a day in Afghanistan? So it is, I call, a tactical retreat, not a strategic defeat. The reason I say tactical, is because after putting out Iraq and Afghanistan the US can put more energy into the Indo-Pacific region. That’s one, two is after cooling, and Biden is going to come under more pressure from the Balkans to raise the risk pressure point in China. And that pressure point comes more from a Quad perspective itself. And that’s where India and the US will play a much stronger role. Coordinating the strategy with one China,
Q: You mean to say that, for the time being, for both, it’s better to concentrate the entities somewhere else that is the area, which is the new building up?
A: Yeah, and you have to understand there’s another Quad taking the same place, which is China, Afghanistan, Pakistan, and Iran. And China will now go aggressively on the BRI projects in Afghanistan. So the question really becomes, what does India do vis-a-vis Iran? I think now India has to work out a deal with Iran. You have to understand the Taliban being Sunni fundamentalists and Iran having the Shia fundamentalists they don’t see eye to eye.
So, there will be conflict taking place, but China has a strategic interest in Iran and Afghanistan to try to make sure that the contiguous water controls.
Q: USISPF is entering its fifth year soon and you being the head of the top India-US forum for strategic and business partnership, what next level of relations DC think tanks are talking or envisaging between New Delhi and Washington DC?
A: So, as you know as a multilateral, you have security, but I see under the broad umbrella, more economic partnership coming in. And the reason I say that is if you look at the four Quad countries, the combined GDP is $33 trillion combined. What we’ve done there, is see how we can drive an economic agenda. There are three initiatives happening under the Quad agreement—secure supply chain, new technologies, vaccine diplomacy. The new technology is a very broad term. For example, how do you build a 5G solution that offers emerging new technologies. So I see that as being a priority and one area we’re pushing very much is our infrastructure…US can actually be new partners who can act and define. Look at Japan; it has so much capital lying idle. It can invest in India. The US can use its technology and the infrastructure—I see a lot of potential there.