Economic
Highlights
New Delhi, 30 January 2015
Obama-Modi Talks
MAY CHANGE WORLD DYNAMICS
By
Shivaji Sarkar
The 2015 Republic Day parade was a global
event. Rarely an event or a visit to India draws such attention of the
western media. Prime Minister Narendra Modi and US President Barack Obama made it
to the headlines all over. It promises to the recession-hit world – not just
the two countries – a change.
Possibly the only other visit that
had drawn such mileage was the visit of Soviet Prime Minister Alexei Kosygin at
the 1968 Republic Day. It was three years before the historic 25-year treaty
with the Soviet Union and the war for liberation of Bangladesh in 1971. Kosygin visit
was a media event in the US
and Europe, as it came shortly after the 1965 Indo-Pak war that saw the triumph
of Soviet system owned by India
over state of the art US Patton tanks deployed by Pakistan.
The other supposedly significant Republic
Day visits of UK Queen Elizabeth II in 1963, UK Prime Minister John Major in
1993, South African President Nelson Mandela in 1995, Russian President
Vladimir Putin 2007 and Shinzo Abe in 2014 had caused some ripples but mostly
in localized terms. Putin certainly reminded the days of Kosygin but it did not
raise waves that Kosygin visit had caused.
Kosygin visit changed the
geo-politic. Will Obama visit also change the course of the world? The US and the UK media expect a lot. India might change the fortune of the US energy and nuclear industry, create jobs and
even may bring good luck to the sinking UK economy, the western media hopes.
That is the change apparently Prime Minister
Narendra Modi has brought. The mighty US (yes, it remains so till now) and
fledgling UK have started
viewing India
as almost equal. They see a rising India as insurance
for their progress despite significant difference in the level of wealth they
possess through control of the global system.
They are hopeful that $4 billion
investment promised by Obama to pep up solar, nuclear, defence and allied
industries would generate more jobs in the US. Their major gain is seen to be
in ‘Making in India’
the equipment for generating 1 gigawatt (1 lakh megawatt) solar power and
almost 60,000 mw of wind power. The financial package announced by Obama
comprised $2 billion US Trade and Development Agency commitment for renewable
projects in India.
If it succeeds it may change the
dynamics of world energy. No country, not even China with its initial success, has
set such an ambitious solar power target in a short period of about five
years.
It may also end the charm of the
nuclear energy, which is neither cheap nor clean. It may clean up Indian politics
as not much muck could be raked up on liabilities. The present promised Rs 1500
crore insurance liabilities in the case of an accident are to be borne by the
public sector insurers. They would be reinsuring with global insurers. The
premium payment itself is a big business. If solar succeeds, which in all
probability it should, the thawing of nuclear power projects is a great possibility.
Those accusing Modi of resuscitating
the gasping nuclear industry in the US
and Europe, possibly may end up praising him
for causing its likely end.
Indian technological development
needs are likely to be taken care of by the US. But some concerns remain. The US had earlier dumped on India not only
junk technologies but even junk food like PL 480 wheat.
While fears always remain in global
politics and trade, it is also a fact that over the past three years, between
2011 and 2014, the US surpassed
Russia as the largest
supplier of military equipment to India. It is possibly an indicator
that both sides are overcoming their mutual suspicions.
It has sold India
$10 billion worth of military gear, mostly via the foreign military sales route
- a government-to-government transaction overseen by the US Defence Security
Cooperation Agency. It includes Firefinder artillery locating radar, Apache
helicopters, Lockheed Hercules and Boeing C 17 planes for army, Neptune long-range maritime patrol aircraft, Longbow
Apache and Chinook heavy helicopters for the Navy.
These and similar other deals in the offing would form part of the $1
billion US Exim Bank finance to small and medium sized enterprises in exports
of ‘Made in America’ products to India.
Obama banks heavily on India
for creating jobs by setting a target of rise in trade from the $ 100 billion
($ 96 billion in reality) to $500 billion. But does he want to reduce his ties
with China
with which even today it has $560 billion trade? May be. It creates more jobs
in China.
Obama wants a shift in that paradigm!
Some benefit that has come to India is seen in the Indian
engineering industry, expecting to double its exports to the $15 billion in the
next three years, says Engineering Export Promotion Council (EEPC). It has
risen by 30 per cent to $5.8 billion in 2014-15 over $4.45 billion a year ago. It
goes beyond to agriculture, pharmaceutical, free trade agreement – may be in
the second phase of engagement, import of US light natural gas (LNG).
The US industry is
concerned about IPR issues in India,
its core sector and infrastructure growth and retrospective taxation
uncertainties. Modi has tried to dispel these by saying: “We will
guide you and walk with you in projects You will find a climate that encourages
investment and rewards enterprise. It will nurture innovation and protect your
intellectual property. It will make easy to do business.”
India is opening up its doors. But
the US
is still not that open. Despite the Obama sops, it is not a total free entry
for Indian goods to the US.
American industries during interaction were vocal about barriers in India, but the US government has not promised to
dismantle its own walls.
India need not be euphoric despite
Obama saying he wanted to see more trade between the two countries. He also
says: “Modi and I are interested in ‘smart’ regulation”. Thus it would be a
regulated entry to the US
market for India though the US wants a free
walk. Despite some normal apprehension as was also in the follow-up of Kosygin
visit, Obama-Modi talks instill confidence for boosting the world economy.
---INFA
(Copyright, India
News and Feature Alliance)
|