As the Obama Administration approaches the end of its second term, the relationship between the U.S. and India, especially on the economic front, has grown stronger during the past eight years. Some 15 years ago, trade in goods and services between the two countries was less than $20 billion a year; today, it has expanded five-fold to more than $100 billion a year. The U.S. and India are now exploring another five-fold increase to $500 billion, primarily through collaboration in digital industries.
Regardless of who wins the White House in November, bilateral ties between the two countries will continue in a “steep upward trajectory,” notes Arun K. Singh, India’s Ambassador to the U.S., in an interview with Knowledge at Wharton. Singh, who was a keynote speaker at the Wharton India Economic Forum (WIEF) on March 26 in Philadelphia, has been India’s ambassador to the U.S. since May 2015. Before that, he served as ambassador to France.
An edited version of the interview follows.
Knowledge at Wharton: Taking stock of India’s relationship with the U.S. at the end of the eight-year tenure of President Obama’s administration, where do you think it stands today?
Arun K. Singh: There has been significant progress during the tenure of President Obama. I’m happy to share with you that there is now broad bipartisan support in the U.S. for the relationship. I see that on the Hill. The new relationship was really started with President Clinton in 2000 when he visited India. And President Bush took it significantly forward, with the civil nuclear cooperation agreement with India. That was a seminal agreement because it transformed the approach to India. It transformed how technology partnerships would be done with India. As a result of that, not only are we able to explore cooperation in civil nuclear energy, but a whole range of other technology sectors also.
President Obama has been the first U.S. president to have visited India twice in his tenure. He is also the first U.S. president to have visited India on a national Republic day. In economic areas in terms of defense cooperation, in terms of technology partnerships, we have made significant progress. President Obama has also expressed support for India’s permanent membership of the U.N. Security Council. So there is a broad sense that there is convergence in our interests and we should work based on that. That is what we will do.
“We have identified six pathfinder projects. One deals with aircraft-carrier technology and another with jet-engine technology.”
Knowledge at Wharton: Looking at the economic dimension of the relationship, two-way trade in goods and services between India and the U.S. now exceeds $100 billion. But this is just around one-tenth of U.S.-China trade. Do you have a sense of how this could be increased further? I believe President Obama has mentioned a goal of $500 billion. How do we get there?
Singh: At one level, the U.S.-India trade is not significant if you see the trade volumes that the U.S. has overall or in relationship with other countries. But if you look at India’s trade patterns with other countries, it’s a significant figure. Our trade in goods and services makes the U.S. the largest partner for India. The second important dimension of this trade is that it is a broadly balanced relationship. [The total volume of trade] has increased five-fold in the past 15 years. So there has been significant progress.
When President Obama was visiting India, our two leaders (India’s Prime Minister Narendra Modi and Obama) declared that we now want to work on taking this trade to a level of about $500 billion. I think it is achievable if you look at what is happening in India. There is a huge effort in terms of making India a digital India, in terms of enhancing infrastructure.
If you look at the potential areas for partnership between India and the U.S., in September last year the prime minister of India had gone to Silicon Valley for discussions with people focusing on renewable energy and technology. Before the prime minister, I had visited several times to talk to people, to understand what would be the potential for future cooperation. Both in the initial discussions that I had had and when the prime minister himself visited, it was clear that the U.S. was the global leader in innovation, including in digital technology. But Indian companies, Indian-origin tech entrepreneurs, Indian-origin tech workers are an integral part of the U.S. global leadership in innovation in that space. That gives us strength.
Again, we have seen that a lot of cost-effective R&D is happening in India. Now, there’s huge energy in the startup space in India. In the past two years, more than $6 billion has flowed into startups in India. Entities based in Silicon Valley, both in terms of technology and finance, are involved with the processes happening there.
You may recall that in 2014 a U.S. space vehicle had gone to Mars. And within a week or so of that, an Indian space vehicle reached Mars at a fraction of the cost. And everybody recognizes that there is a lot of cost-effective R&D happening here. So I believe that partnership in R&D, partnership in innovation, partnership in digital technology will create new opportunities for the India-U.S. trade and economic relationship going ahead, which will enable us to take trade to $500 billion.
We want to see how we use digital technology and the spread of digital technology in India to enable us to do things differently so that we meet our needs, economize on the use of resources. And that is happening, if we look at the spread of the Internet in India, the spread of smartphones. We have about 1 billion mobile phone users in India. All of this is transforming the way people go about their lives, the way they go about their business. This will create new opportunities.
Knowledge at Wharton: When you spoke at the University of Michigan last October, you referred to the fact that defense agreements between India and the U.S. have gone from zero to $13 billion in the past decade. Can you give us some examples of what has driven this growth and where you see this trend going?
Singh: The fact that in the past five or six years we have placed or contracted about $13 billion to $14 billion worth of defense supplies from the U.S. is a reflection of the new confidence and the new trend in the relationship. Some of these have been significant. For example, now we have 10 C17 aircraft, which are major transportation aircraft. With this purchase the largest number of C17 aircraft outside the U.S. is now in India. It has enabled us to do very effective work, for instance, when humanitarian relief was required after a disaster, or evacuation of people.
A partnership in this kind of technology enabled us to meet our needs in a more effective way. And the two governments, based on enhanced confidence, have now decided to move away from just a buyer-seller relationship to co-development of technology and co-production.
We have identified six pathfinder projects that we are working on. Two of those, if we are able to make progress, would again transform the nature of this partnership. One deals with aircraft-carrier technology and the other with jet-engine technology. These will be significant as co-development and subsequently co-production opportunities for both India and the U.S. in defense.
“Ultimately, we have to adopt the pace of reforms that works in the Indian context.”
Knowledge at Wharton: Some time ago a report by a task force of the Council on Foreign Relations said that, if India were to maintain its current rate of GDP growth, the country could potentially become a $10 trillion economy. Do you agree with that assessment? And what role could India-U.S. relations play in India getting there?
Singh: Our growth rate has been 7% to 7.5% over the past two years. India is the fastest-growing economy in the world, despite all the headwinds that you have from the global economy. Although this is good, it’s not sufficient for our needs because we still have a large number of people living in poverty. More than 300 million people in India still do not have access to commercial energy. So we have a long way to go.
Our aim is to try and sustain a rate of growth of 7% to 10% so that we are able to meet the backlog that we have in terms of development needs, address the requirements of those living in poverty, address the requirements of those who need energy, not only for production but also for health care, for education, which will be critical.
I think in all these areas, the U.S. will be an important partner. I’ll give you one example. One of the areas we are focusing on is renewable energy. Although India has not contributed to the problem of global warming, because even today our emissions are less than two tons per capita, way below that for developed countries. But we’re aware of the global challenges emerging from global warming and climate change. It has had an impact on us.
If we’re going ahead to the extent possible, we want to do it on the basis of renewable energy. We have projected that by 2022 we will try and have 175 gigawatt of renewable energy, out of which there will be 100 gigawatt of solar. Today we are at about 5 gigawatt of solar. There’s huge expansion happening in India. The cost of solar power per unit has now come down significantly by almost three times in the past two to three years. This is an area where the U.S. can be a very important partner.
Knowledge at Wharton: We are at the Wharton India Economic Forum in Philadelphia. Some of the speakers have said there are challenges that need to be worked out in terms of how India pushes forward with economic reforms. What do you see as some of the principal obstacles to economic reform that could exist, either political or otherwise? And how could they be addressed so that they don’t impede the pace of growth that you’ve been describing?
Singh: Ultimately, we have to adopt the pace of reforms that works in the Indian context. If you see what has happened since May 2014 when the new government came, they have taken a whole series of steps in terms of ease of doing business, in terms of regulations, in terms of online filing. You may have seen just the other day that there was an indication from our department of industrial policy and promotion that they’re looking at enabling a 24-hour registration for new enterprises. These are the directions in which we are working.
“I’m confident that whatever be the administration starting next year, the support will continue because there are objective reasons for it.”
If one really looks at the totality, a lot of changes have happened. I’ve been talking to CEOs of companies here who are partnering in India, and they say they would of course like some more to happen, but they recognize that significant transformational change is happening. That is reflected in the fact that we have a high rate of growth. That is reflected in the fact that fund inflow into India over the past two years has increased by more than 50%. The facts and figures speak for themselves. There is tremendous new opportunity and we should all work to seize that.
Knowledge at Wharton: How might the India-U.S. relationship, especially on the economic front, look like under a Clinton presidency or potentially a Trump presidency?
Singh: As a foreign diplomat, we cannot get involved in the domestic processes of the U.S.; that is not our role. But, as I mentioned earlier, there is now broad bipartisan support for the India-U.S. relationship. I’m confident that whatever be the administration starting next year, the support will continue because there are objective reasons for it.
I’ll mention another figure. In the past two years, from end-2013 to end-2015, U.S. corporate equity investment in India has gone up from $7 billion to $12 billion, which is a reflection of the U.S. corporate assessment of the trends and the opportunities in India. I’m confident that all of this will continue. Another fact that I should mention which gives a very important foundation to the relationship is that we have a very strong people-to-people dimension to that relationship. There are about 3.5 million Indian-origin people in the U.S. We have more than 110,000 Indian-origin doctors serving in remote parts of the country. We have a strong presence in the hospitality industry, generating I’m told almost $13 billion of revenue contributing huge amounts to taxes and social security.
They have a deep understanding of the U.S. They have understanding of India. And they will also be in a position to contribute to the development of the relationship. I’m here at Wharton and I should also refer to the Indian students in U.S. universities. The number now is 150,000. We are paying directly about $4.5 billion as tuition fees. And this is just tuition fees.
With all of this, I am confident that the relationship between India and the U.S. will continue in a very steep upward trajectory.