Am I the only India follower who is bored with Prime Minister Narendra Modi’s spectacle of a U.S. visit? The glitz is fun, but I am an economic policy wonk, and from my perspective, there is little to capture the imagination. The bilateral government-to-government agenda contains nothing particularly exciting. Rather, all the action in the U.S.-India economic relationship lies in the realm of the private sector, or purely domestic policy.
What kinds of items make for economic policy excitement? Trade deals are thrilling. Because they make everyone better off at the expense of special interests, they represent the triumph of economics over politics. Investor protection deals promote cross-border investment, which typically winds up benefiting both economies. Cooperation on tax cases and financial regulation can make a big difference in the ease of doing business, while curtailing cheating and unwanted risk. Tremendous opportunity exists to improve U.S.-Indian economic ties in all of these areas.
Loans are about as exciting as economic policy gets, because one government or the other is putting their money on the line. But that rarely happens in good circumstances unless the loan is to a third party. But joint projects (including loans) in third countries or with multilateral institutions – think about the new BRICS Bank – are generally good news for the bilateral relationship. Could we not find some common cause to champion at the WTO, IMF or climate negotiations that would help build a track record of cooperation?
None of those types of issues are expected out of Modi’s visit. The best that can be hoped is that Modi is planting the seeds for big moves in the future. Ashley Tellis of the Carnegie Endowment makes a good argument that this would be the most important outcome of the visit.
That may happen behind closed doors, but the visible economic agenda sticks to purely transactional issues related to industries with prickly problems. Intellectual property conflicts have cropped up in pharmaceuticals, for instance. Proposals to restart working-level trade facilitation dialogues might help iron out some of these wrinkles. Finding a way forward to resolve double tax questions will relieve businesses doing business in both countries. Fixing these irritants matters, but will not change the trajectory of economic ties.
Recent visits by Modi with leaders of Japan and China resulted in multi-billion-dollar investment commitments. But as Alyssa Ayres of the Council on Foreign Relations recently pointed out, the U.S. government does not have comparable tools to compel investment. Because of this, all the best action in the U.S.-India bilateral economic relationship right now happens in the private sector. High tech, energy, transportation and agriculture are all areas where trade and integration are expanding in an impressive manner.
The best way to make that economic integration expand faster has nothing to do with foreign economic policy (WTO excepted). Rather, domestic policy in India holds the key to more U.S. investment and to greater Indian exports to the U.S. Many U.S. companies would love to have a greater presence in India and even use India as a base to export goods and services back to the U.S. However, the difficulty of doing business in India, combined with ebbing economic growth, have meant as many exits as entries into the Indian economy.
This is not unique to U.S. firms, either. The greatest moves India can make improving its economic relations around the world are all domestic reforms. I have pointed out that India’s manufacturing sector — long the neglected stepchild relative to the exporting service sector — holds great potential with the right basket of policy changes.
But until then, we should be thankful for boredom. While great progress would be welcome, there is another antidote to boredom: conflict. The U.S.-China economic relationship displays many more fireworks. I do not wish for that flavor of politicized, tense relationship with India.
We are much more likely to stay on a course toward more boredom, which characterizes many of our most successful economic relationships. Why do we not have a U.S.-U.K. Strategic and Economic Dialogue, for instance? Because we do not need one. Sometimes a little boredom is just fine.
Russell A. Green, Ph.D., is the Will Clayton Fellow in International Economics at Rice University’s Baker Institute. Green’s engagement in India primarily focused on financial market development, India’s macroeconomy and illicit finance, but included diverse topics such as cross-border tax evasion and financing global climate change activities.