ASG's 4 Essential Questions: Prime Minister Modi's U.S. Visit
CONTEXT OF PRIME MINISTER MODI’S UPCOMING VISIT
Indian Prime Minister Narendra Modi is expected to be in the United States from September 23 – 28 to attend the United Nations General Assembly in New York, meet with President Obama, and attend tech-focused meetings in Northern California, including a town-hall hosted by Facebook’s CEO Mark Zuckerberg. He’ll be making the case for his ambitious reform agenda, which has the potential to reinvigorate the Indian economy after years of slow growth.
Given that India is set to overtake China in total population and is the fastest growing economy in the world (7.5 percent this year), it is in the interests of the United States for India to be a leader in South Asia, especially with the recent economic disruptions in China.
India is the world’s fastest growing economy and is slated to become the second-largest economy in the world by 2050:
ASG chart, uses data from World Federation of Exchange and ASG analyses and is derived from PPP calculations.
Additionally, unlike his predecessors, Modi is openly embracing India’s leadership role in the security of South Asia. Tensions in this region are always high, with recent challenges coming in the form of the war in Afghanistan, the insurgency in Pakistan and the additional turmoil facing Nepal after the deadly earthquake a few months ago. India’s role in the security of the region is expected to come up in his conversations on this trip.
ASG provides the 4 Essential Questions to consider when looking at this visit:
1. HOW WILL THIS TRIP COMPARE TO MODI’S U.S. VISIT LAST SEPTEMBER?
This visit follows Modi’s triumphant post-election tour of the U.S. last September, including a rock-star like rally at Madison Square Garden in New York. Last year’s visit was aimed at re-defining the United States-India relationship after years of unfortunate and mostly minor disputes during the previous government of Prime Minister Manmohan Singh. This month’s trip will be focused on making the case that the time is now to trade with, and invest in, India. If Modi is unable to convince influential companies and investors that he can make his ambitious reforms a reality, his image as a can-do reformer may be in doubt with consequences for the long-term growth of the Indian economy.
2. WHY IS MODI’S REFORM AGENDA IMPORTANT?
With a population of 1.2 billion and rising, India’s economy needs to create 100 million jobs over the next 10 years, an average of 800,000 jobs each month – no easy feat.
When Modi was elected in 2014, the Indian economy was facing a slow growth rate of 4.7 percent. His far-reaching reform agenda to grow India’s economy includes labor law reforms, land reforms, and increasing the caps on foreign direct investment and ownership making it easier for foreign investors to do business in India. Although his signature initiatives - Make in India, Digital India, and Smart Cities - are receiving widespread support both domestically and internationally, the specific reforms necessary to make those initiatives a reality have been delayed.
Modi’s economic and reform agenda is facing strong pushback from opposition parties in Parliament, primarily led by the Congress Party. His supporters are concerned about the shrinking window of opportunity. In fact, the Indian political system dealt Modi a blow recently when his land reforms didn’t pass Parliament due to strong opposition, primarily from the Congress Party. For an already skittish private sector, this amplified existing doubts about the sustainability of his entire reform agenda.
3. WHAT DOES MODI HOPE TO ACHIEVE DURING THIS U.S. VISIT?
The U.S. and India have had their share of disagreements over trade and investment; the disputes between these two nations at the World Trade Organization (WTO) are legendary in the trade community. But at this point in time, with the Indian prime minster fully embracing the power of trade and investment to bring about increased economic opportunities and development, the two countries are viewing the world in quite a similar fashion. This rare moment in time must be seized upon if real progress is to be made on Modi’s reform agenda.
Modi needs validation and support from the private sector and the estimated 2.6 million member Indian diaspora community in the U.S. to implement his reform agenda. The Northern California visit is of particular importance to Modi because he will be meeting with executives from technology firms seeking their support for his Digital India initiative with both investment dollars and technological contributions.
The private sector, quite rightly, is somewhat skeptical and hesitant about jumping back into India after years of betting on the country only to see it not live up to its potential due to a lack of progress on reforms, policy paralysis and poor leadership. Modi is trying to build bridges with the private sector and the diaspora community, who took their knowledge and skills and used them to contribute to the development of the highly resilient technology sector in the United States. He would like to see that same development in India.
4. HOW WILL THE NATIONAL SECURITY OF SOUTH ASIA PLAY INTO THIS VISIT?
India is an example of a thriving democracy in a region that has struggled with governance issues. But only when India is confident about its ability to address important internal political issues will it be able to take on difficult external ones, like its turbulent relationship with Pakistan and its competition with China. If Modi’s reform agenda gains support from the international community and successfully takes on entrenched political and economic interests, India can serve as a leader in South Asia and help ensure stabilization in this important region.
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