Prime Minister Modi (pronounced Mo-thee) is going to visit Washington DC on Monday to meet President Trump. It is an important visit for India but not necessarily for America.
The latter conclusion stems from the reality that India is simply not that important to America, at least not at this time. India is always deemed important to any analysis about the intermediate term and that is why American Presidents get focused on India in the sixth year of their presidential cycle – 1998, 2006 & 2014.
On the other hand, a new American President is by necessity focused on the near term. Look at the agenda for President Trump – North Korea-China, ISIS & Syria, Iran – Saudi Arabia & GCC and connecting all this is Russia. Each one of these has the potential of characterizing the Trump presidency. What is the relevance of India to any of these hot priorities? Zero.
Yes, India is getting more & more important to American corporations. Most American CEOs will tell you that and the entire Indian Business-Govt establishment will tell you that. But the Indian establishment is so insular & arrogant that they have not bothered to understand the big transformation of the American electorate that drove the political success of both Donald Trump & Bernie Sanders – the American corporation is increasingly viewed as an adversary of the American worker. The American electoral map now runs through the industrial Midwest and the electorate in those states doesn’t even know India exists except as a distant land of old.
Look at the wallet & home of the median American, What points of touch can you find that relate to India? Hardly anything except the occasional phone call to tech support that reaches India or Philippines. In contrast, every American buys & owns stuff that is made in China, Japan or South Korea. The situation is absolutely reverse in India, at least urban India. The lives of median urban Indians are touched at many points by America – from dreams of higher education & aspirations of jobs in US multinationals to every day necessities like smart phones, email & social media and now online shopping.
That makes India very important to Social media & technology companies in America. Where are these companies based? Mainly in California, a state with no electoral relevance to the Trump Administration. So the success of Google, Facebook, even Amazon in India doesn’t get India any chips in the Trump Administration. Actually, India has virtually no control over the penetration of Google & Facebook in India. If the Modi Government tries to close down or restrict Facebook or Google in India, they would face the wrath of urban Indians. So India gets no bargaining chips at all from the success of American corporations in India.
We have seen the similarity in thinking, approach & goals between Prime Minister Modi & President Trump for about two years. But we never discussed it as a virtue or a positive factor because this similarity is one of the unspoken problems in US-India relations. At the very basic level, Make in India drive of PM Modi & Buy American – Hire American drive of President Trump are conflicting goals not cooperative goals.
While this “conflict” is a new factor, the reality is that that critical & core business interests of America and India are naturally and fundamentally adversarial as we wrote on August 3, 2013. The first & simpler conflict is that America is one of the largest producers of Intellectual Property (IP) and and India is one of the largest consumers of IP. Indian politics is driven by the poor and so the Indian Government needs to deliver cheaper health care products to Indians while US Drug companies are powerful in the American legislatures.
The second & bigger conflict is that India is an exporter of services that require free movement of people while America is an exporter of products. This People vs. Products is almost an existential conflict for India not just with America but with Europe & the entire Middle East as well. In fact, this has been a big stumbling block in getting a free trade agreement between EU & India.
This may not be an intermediate term problem for America because the American economy is already running out of skilled labor even at today’s 2-2.5% GDP growth. If growth does accelerate to 3-3.5%, then America will have no choice but to import labor or outsource services on a sizable scale. But the near term is problematic because the US economy is slowing down & growth may slip to a sub-2% level in early 2018, a critical election year.
That brings us to Defense, an area where American & Indian minds are on the same wavelength and where American products & Indian needs fit together. But here too is an inherent & deep seated conflict – speed of decision-making. Look at the mother of all defense contracts launched by India with fanfare in 2006-2007 for over 100 fighter planes. Fighters under that contract should have been delivered in full by now. Yeah, right! India has not even signed a contract with a defense supplier for these fighters that were needed five years ago to replace the ancient MIG-21 squadrons that still form the backbone of the Indian Air Force.
Look at the 2014-2016 period. President Obama was very positive towards India and Defense Secretary Carter was determined to make India a major defense partner. What did India get from America in this best of all possible environments? No major long term commitment. Pathetic, right!
Indians don’t seem to get that what works in the last two years of a eight-year Presidential cycle does not work in the first two years of a new President. And now you have a major cultural conflict between America & India – a decisive General Mattis as Secretary of Defense dealing with a bureaucratic Indian Defense Minister who knows nothing about military matters & relies entirely on a ponderous bureaucracy of CYA-focused career civil servants. Frankly, we don’t see Secretary Mattis spending a lot of time trying to deal with the Indian Defense Ministry.
Having said all of the above, we do think both sides understand the importance of working together in an increasingly unstable world. So we expect appearances to be maintained and we are also hopeful of a meeting of minds between President Trump and Prime Minister Modi. Actually, an understated business like Trump-Modi meeting may actually prove more useful. At least so we hope.
Send your feedback to [email protected] Or @MacroViewpoints on Twitter