But India needs to diversify in its business sectors to maximise potential.
President-elect Joe Biden’s new administration clearly shows the will to continue with the strong Indo-US strategic partnership narrative, something reflected in the dozen-odd Indian Americans taking up top positions in the new Biden administration. The two democracies are not only continuing the fight against terrorism or sharing a strong defence and security partnership as the recent defence deals this week indicate, but a big initiative to promote the Gandhi-Luther legacy confirms the convergence to promote common goals.
In fact, the Indian American diaspora, which had invested heavily to build the strong stakes of Indian and Indian Americans in the US policies on the Capitol Hill with the heavy political funding and high-voltage campaigning, are keen to upscale the business partnership. The strong band of techies, entrepreneurs and investors feel the time is ripe for both democracies to kick-start an “intense economic diplomacy” in Biden’s term, which coincides with Prime Minister Narendra Modi till 2024. Admitting that India and America have done a economic partnership till now, but they also mince no words saying, “the real potential is yet to be achieved and India must look beyond technology and venture into sectors, which can actually make New Delhi’s realise goal to be among the “three top global economies”.
It is time to look beyond the existing business template, but that will surely call for “change in India’s way of doing business, including making it less-bureaucratic and free of permit raj to save time and a well-oiled, pro-business regulatory administration,” say top business leaders of Indian origin.
California-based Sandeep Johri, CEO of software testing firm Tricentis, says: “Joe Biden’s administration is going to have a less isolationist agenda and is expected to be more collaborative with allies and global institutions. So with that it should create better opportunities for US-India collaborations on investments. Also, the new administration is expected to continue to keep the pressure on China (that seems to have bi-partisan support) which should also bode well for US-India trade.”
Are these strong signals India must encash on? Yes indeed, says Vab Goel, who is a top investor, entrepreneur and a business expert in Silicon Valley. “Over the last two decades, regardless of who was in power, the economic and strategic alignment between the US and India has grown exponentially. I expect the same trajectory to continue with this new US administration and new sectors can be opened for strong business relations, suiting both economies.”
In fact, India has done a brisk trade and a commendable business with the US, according to Mukesh Aghi, President and CEO of US India Strategic Partnership Forum (USISPF), which has pumped in US$50 billion worth investments in the last four years of the PM Modi-President Trump friendship era. Aghi sees a positive business scenario for investment and trade in the Biden-Modi era. The actual investments are going up more and more research is coming into India, leveraging the innovative talent of India. Today, trade between the two countries is about $160 billion and is expected to go up further.
But India needs to diversify in its business sectors to maximise potential. Johri says, “The US is in a competitive battle to maintain its leadership in technology and this is an area where India’s significant competitive advantage and therefore India should continue to push aggressively in that. The US will need allies in its quest for global leadership and India is best positioned to be that trade ally in this sector….Another sector that is expected to continue to see a lot of growth is the medical/health sciences sector and here again, India has a very mature and credible position. This could be the second area.”
Added Goel: “Technology has always been a strong component of trade between India and the U.S. Historically, India’s role in the technology sector was primarily powering the behind-the-scenes infrastructure of large corporations serving all kinds of industries. The time has come for India to step into the foreground and build global software and technology companies serving the US and other global markets.”
Goel, who is a founding partner in global investment firm NTTVC, says: “International investments in startups in India have been increasing, which has helped fuel entrepreneurship. To continue this trend, India needs to focus on open and predictable regulations. Policy plays a huge role in international investment strategy and the volatility of regulation changes can cause some hesitation by investors.”
Artificial Intelligence (AI) is an important segment for India to collaborate with the US. Large algorithms are being built in the US, and India has the necessary database to run those powerful algorithms. AI can be utilised in sectors like newer treatment, predictive forecasting models for preventive treatments, weather, crop forecasting, and pollution.
And the opportunity to expand the scope of business between the two nations is out of a common trigger—China. Johri says, “With the trade tensions with China, most US companies are looking for alternative sourcing for manufacturing. This is an area where India has structural advantages (large low-cost labour pool). India is not viewed as a very friendly and attractive country for low cost manufacturing, but with some reforms India could position as a reliable second source and generate employment opportunities.”
India’s current business template does not permit efficiency and speed. A lot is required to do in infrastructure building to attract investment in that sector. Additionally, areas like chemical, space, and defence are potential for strong business partnership.
But all this requires a change in “business culture from India side to lure in investors”. Johri said: “India needs a radical change in its ease of doing business. This is the number one concern I hear from businesses considering expanding their investment in India. India is still viewed as very difficult to do business with. There is huge uncertainty that every business faces in getting going in India. The uncertainty and risk from a time perspective is a huge impediment to increased investments. This needs radical reform and should be taken very seriously because it could have as significant an effect as the liberalization of the economy in 1991.”
The Modi government has made some progress in bureaucratic controls, foreign ownership but not nearly enough, says Johri, adding: “As the point made above, India needs to view the ‘ease of doing business’ as a fundamental barrier to increased investments…There are concerns about regulations and foreign ownership, but have been able to simplify the approval process. India should learn from China, Vietnam, Thailand, Indonesia, Malaysia, etc., all of whom have managed to simplify the bureaucratic controls and the results are very evident. The program to make it easier to do business should be driven as a national program such that it is viewed as a national strategic agenda. Gaining global economic strength is the best way to ‘Make India Great’.”