My belief and experience is that the U.S. and India have a great deal in common, both as people and as nations. Some of these commonalities are rather obvious such as the democracies in the two countries, and the multi-racial, multi-cultural and multi-religious societies. People in both nations cherish their diversity. Both nations have taken practical steps to build institutional safeguards to protect the freedoms of minorities. They are welcoming of immigrants such that the U.S. is even recognized as the land of immigrants. Maybe very few people know though that India has been for centuries the land of immigrants.
As the world gets more complex, both nations are discovering that they have a similar view towards major geo-strategic issues facing the world. Both view China as their major economic partner and a potential adversary. India and the U.S are interested in a stable Afghanistan with strong institutions even if not fully democratic one. Both nations have tremendous stake in protecting maritime links and freedom of navigation. Both are victims of Islamic terrorism and face the prospects of constant terrorist attacks.
These factors make India and the U.S. natural allies in today’s world. There is therefore also a bipartisan support for President Obama’s initiatives for a broader India-U.S. interaction and partnership.
However, one area has escaped attention, and could very well be the most relevant area of U.S.-India congruence. It is a shared view of economic and monetary policy. The United States is an open economy, an economy that has invited companies from other countries to export their goods and services to America. This posture of the United States has benefited the U.S. consumer by bringing goods to them at a lower price, and it has benefited the exporting countries by increasing their prosperity. Threatened by neo-mercantile countries, America has begun to feel that it is the only country with such an open-minded posture.
At this time, it is important to note that India shares this American vision. India is increasingly open to trade and to foreign companies exporting their goods and services to India. A quick visit to India confirms this. American and European companies are increasing their presence in India and, unlike in China, these companies are making money.
Both the U.S and India are principally domestic consumption economies. This may not be obvious to many. India is now anchored in people’s minds as a technology outsourcing economy and the global success of U.S. brands makes America appear intent on dominating the world. But under this imagery lies the reality of domestic consumption as the principal driver of American and Indian economies. Both countries have physically large and deep markets with the capacity to absorb foreign goods and foreign capital. Perhaps because of this, both the U.S. and India have large current account deficits and trade deficits. These two countries are also dependent on foreign capital to sustain their growth.
This makes the U.S.-India pair relatively unique in the G-20. China, Germany, Japan and Brazil are export dynamos. Most of the Asian countries are semi-mercantile exporting economies. They depend on weak currencies to make their products less expensive. They have gathered a huge hoard of foreign exchange reserves in the past 10 years. These forex reserves are now approaching $6 trillion and have grown ten-fold in the past 10 years. The principal beneficiary is, of course, China that has accumulated about $2.5 trillion in reserves, almost 50% of the total growth in the past decade.
These neo-mercantile countries are engaged in exporting their capital to domestic consumption countries like America and India in addition to their products. They need domestic consumption countries to increase spending and consumption, increase imports and maintain strong currency levels.
This is where the global battle lines are being drawn today. The U.S. and India find themselves on the same side & as partners in this battle. This is why Prime Minister Singh seconded President Obama’s strong partnership mantra and said, “A strong, robust, fast-growing United States is in the interests of the world.”