We Indians love to be flattered. So when the world’s most powerful person says all the things we want to hear, we get delirious with joy. American President Barack Obama is no George Bush Junior. He is smart, articulate and young. But after the hoopla and hype, the warm shaking of hands, the raising of toasts, it is time for a reality check. Did Obama the Salesman prevail over Obama the Statesman?
We know what the US got — deals worth at least $10 billion that would create 50,000 American jobs, including many in economically backward parts of that country such as South Carolina. But what did India get besides platitudes and praise? We were told that the technologies and equipment that would come from the US would develop our creaking infrastructure, generate electricity (General Electric engines for Reliance Power) and fly the upper and middle classes (Boeing aircraft for Spicejet) — all of which would create employment opportunities. India’s leaders were hard-pressed to quantify the new jobs that would be created.
Our Prime Minister was assertive when he said that we were not in the business of stealing jobs from the US and that our information technology professionals — receiving salaries that are five times lower than their American counterparts — had helped improve productivity in US industry. Still, no mention was made of the need to reduce fees for work visas for companies that employ more than half non-American citizens (that are ostensibly meant to raise funds to secure the US border with Mexico) or a relaxation of restrictions on the issuance of H1B visas in a country that shouts loudly about the virtues of free enterprise capitalism. Only goody-goody statements were made about how protectionism was a terrible thing.
High on the unwritten agenda of the heads of the two largest democracies on the planet were the implications of an increasingly powerful and assertive China. Both the US and India have to simultaneously compete and collaborate with China. If Beijing decides to pull out the dollars it has stashed in the US Federal Reserve, the American greenback would weaken faster than it already has, thereby hastening a double-dip recession and perhaps even jeopardizing a ‘W’ shaped recovery. The dollar-versus-yuan conflagration is yet to play itself out and could be potentially bruising not just for the US but other parts of the world as well.
Americans believe the Chinese have deliberately undervalued their currency to ensure their exports remain competitive and to stymie an export-led recovery in the US. China, having overtaken Japan as the second largest economy in the world, seems to be in no mood to oblige Uncle Sam by appreciating the yuan vis-à-vis the dollar. As for India, China is not just our neighbour. Over the last three years, China has become India’s largest trading partner relegating the US to third position after the United Arab Emirates. Though the ‘C’ word was not mentioned, everybody and his brother knew the countries Manmohan Singh was referring to when he talked of the need to re-balance the functioning of ‘surplus’ and ‘deficit’ economies.
Clearly the US-India partnership has considerable potential. After all, as President Obama himself pointed out, India imports barely 2 per cent of total American exports while the US is the destination of just about 10 per cent of this country’s total merchandise exports. The problem in doubling bilateral trade over the next five years is the uncertainty in the international economic environment. In 2009, global trade shrunk for the first time in seven decades — by 12 per cent, according to the World Trade Organization and by 15 per cent, according to the United Nations Conference on Trade and Development — and the recovery has been fragile, gradual and uneven.
President Obama has told us that we are no longer an emerging economy, a rising power or a developing country. He said we have emerged, risen and developed. A day before he arrived in Mumbai, on Diwali, the UN Human Development Index ranked India in the 116th position among 169 countries and territories, way below China (in the 89th position) or even Sri Lanka (rank: 91). So which India are you living in?
This article was originally published on December 17, 2010.
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