“Prime Minister Modi has made repeated statements about undertaking economic reforms…. However, the rhetoric has far outpaced the reforms,” Senator Bob Corker, powerful Republican Chairman of the U.S Senate Foreign Relations Committee, and a prospective Vice-Presidential candidate, said recently.
What rhetoric is the Senator referring to? Mr. Modi has created some rhetoric on reforms and economic growth; and then, there are others who interpreted Mr. Modi, creating another layer of rhetoric. Purveyors of Mr. Modi’s politics have oversold him as an over-the-counter delivery point for all that the U.S businesses ever wished from successive Indian governments. Many of them now accuse him of not delivering on reforms; some have also suddenly discovered his alleged communal agenda.
What they thought and what he said
Before making the distinction between what many commentators thought Mr. Modi said about reforms and what he actually did say about reforms, we must look at what is the current state of play in India-U.S. ties. Mr. Modi reaches Washington on Monday on a three-day visit, the fourth since he became PM in May 2014, to review the progress in ties with President Barack Obama, and to address a joint a session of the U.S Congress.
Strategic issues, commercial ties
Many commentators in the U.S lament that there is convergence between India and the U.S on strategic issues, but the same it not true when it comes to commercial relations. In India, most people who are desirous of better relations between the countries lament that the strategic convergence on the east, with regard to China is going perfect, but on the west, U.S’s continuing indulgence towards Pakistan, even in the face of protests from India makes for a contradiction. India constantly whines about U.S’s Pakistan-Afghanistan policy, while the U.S keeps crying foul about India’s trade/commerce policies.
What are the long-standing American complaints and demands with regard to trade and commerce? India’s intellectual property protection regime is not good enough, its emphasis on localisation of manufacturing is bad; bureaucracy is troublesome, dispute resolution is protracted, FDI caps are restrictive, public sector units must be dismantled, labour laws should be flexible, land acquisition must be instantaneous.
Mr. Modi’s critics on the left said he would do all this to please the Americans; ironically, his overenthusiastic supporters also said the same thing, in order to woo investors. The images of Mr. Modi that his opponents and supporters created converged on the question of what he would do to get investment to India.
Modi on Modi
But how exactly does Mr. Modi think of himself on this account? At least on two occasions in the last three years, Mr. Modi has defined himself.
“People want to know who is the real Modi — Hindu nationalist leader or pro-business Chief Minister?” he was asked in an interview in 2013. “I’m nationalist. I’m patriotic. Nothing is wrong. I’m a born Hindu. Nothing is wrong. So, I’m a Hindu nationalist so yes, you can say I’m a Hindu nationalist because I’m a born Hindu. I’m patriotic so nothing is wrong in it. As far as progressive, development-oriented, workaholic, whatever they say, this is what they are saying. So there’s no contradiction between the two. It's one and the same image.”
Mr. Modi defined himself again when he travelled to Japan, three months after he took over as PM in 2014. “We took many such decisions one after another. …It is my impression that we are taking decisions fast since being a Gujarati, trade and commerce is in my veins. Hence I understand these things well. I don’t think businessmen need more concessions.”
Therefore, Mr. Modi -- according to him -– is a nationalist, a Hindu nationalist, a patriot, development oriented, trader who understands where his interests lie.
He said nothing on these issues
Mr. Modi did promise an environment that is conducive for businesses. He never promised or indicated that he would dismantle the existing IPR regime in India, or abolish compulsory licensing, dilute localization of manufacturing, dismantle PSUs, or allow hire and fire of workers. These were what others said he would. He never corrected them, because it suited him to a great extent.
Making it smooth for investors
In the last two years, the Modi’s government’s focus has been on smoothening the interface between the investors and the state.
Several administrative measures have been taken in that direction, to make investors feel welcome in India. There is difference between that and letting the investors dictate terms.
In all this, the PM’s focus has been -- as it was for his predecessor Manmohan Singh -- to create jobs in India.
It is all for creating jobs
Mr. Modi would happily have Apple set shop in India, but won’t allow it to import used and refurbished phones into India. Because he has to give people jobs, not cell phones. Mr. Modi and his Ministers who traveled to the U.S. in the last two years have repeatedly sought to convince American investors that a rule-driven and predictable ecosystem for business is being put in place. At least that has been the attempt.
New polarisation in South Asia
Now, on the question of strategic convergence between the U.S. and India. On the first anniversary of the Modi government, South Asia scholar Bruce Riedel observed the emergence of a new polarisation in South Asia, echoing a sentiment commonplace among a lot of well-meaning friends of India.“….the bipolar alliance system in South Asia has hardened. While the alliance system remains completely informal, the U.S. and India have come closer to each other, and China and Pakistan have come much closer together.
The current alliance structure has its origins in events dating back to 1962, but it has accelerated dramatically in the last year.”
Against Obama’s pro-Pakistan tilt
But in its second year, the Modi government spent considerable time protesting the Obama administration’s generous policies towards Pakistan and dealing with constant American “encouragement” to restart talks with Islamabad.
Partly owing to his political upbringing and self-image, and partly as result of the experience of two years in office, Mr. Modi perhaps thinks it is time to reiterate some elementary facts about his strategic policy. First came an explanation from Indian Ambassador to the U.S. Arun K. Singh a few weeks ago, talking to an elite audience in Washington.
‘Strategic autonomy with India’
“Since we [India and the U.S.] are getting closer and do a lot of things together…People are asking us, what kind of a relationship is this?……There is tremendous assertion in India that in any partnership that we build, we maintain the strategic autonomy in our decision making.”
More shock was in store for those who thought Mr. Modi had banished the concept of strategic autonomy. Specifically addressing an American audience through an interview to the Wall Street Journal last week, the PM said, for him, ‘reforms’ is what benefits people, he considered PSUs strategically significant, ‘hire and fire’ labour policy was unsuitable for India, and lo and behold, “there is no reason to change India’s non-alignment policy that is a legacy and has been in place.” All this, while affirming his commitment to enhancing India’s relations with the U.S.
‘ Brutal assessment of India-U.S. ties’
Senator Corker has called for a “brutal and honest assessment” of India-U.S. relations, charging that “trade and investment remain principally transactional for the Indians rather than serving as indispensable tools to establishing a genuinely free-market economy.” India could plead guilty as charged. To be fair, his submission was that let there be less hype and “more sober and pragmatic approach” to bilateral ties.
That sober approach is already taking place in considerable measure in the U.S. “We have a lot of similar interest and a lot of independent interests. We have gone from a burst of an enormous friendship to an ongoing, mature relationship,” Senator Mark Warner observed recently.
U.S. businesses laud Indian positions
Informed and authoritative representatives of the U.S. businesses have told his writer that they are increasingly appreciative of the Indian positions and are recalibrating their approach and expectations accordingly. India makes good business sense for them. For one, India has ordered 14 billion worth of arms from U.S companies. In 2013 end, U.S. equity investment in India was 7 billion dollars; by 2015 end it was 12 billion dollars. GM has announced two billion and Ford has announced one billion in investments in India.
While the U.S. must understand India’s economic priority is not about adhering to some textbook notions of free market but to overcome poverty and seek development, India could begin to appreciate that U.S has a Pakistan-Afghanistan policy guided by multiple factors, and cannot change it only to please India. Mr. Modi’s belief in free-market could be in an ‘Indian’ free-market. If Manmohan Singh was an internationalist, Modi is a nationalist.