Losing India

Surely not an option, even for Obama?

360_india_call_center_1016Originally published by The Commentator

Last week saw India's envoy to the US air discontent over imminent moves by US Lawmakers to tighten visa regulations on high-tech firms as part of a larger immigration reform. This move would restrict the ability of US based Indian IT firms to source their employees from India.

It is interesting to note that the uncanny and resigned tone of the envoy's statement has come to define US-India relations in recent years. Once seen as blooming and dynamic, this relationship is now showing signs of deep trouble.

Those working in the US State Department and New Delhi's South Block on "diplomatic solutions" to these increasingly frequent impasses might not succeed in the long run. For these are mere symptoms of a greater malady.

The reason for this deteriorating relationship is two-fold. The first directly arises from President Obama's new foreign policy approach. He promised voters in 2008 that as President he would talk to enemies and this is a promise he really has delivered on.

It is a laudable approach to "positively engage" enemies, provided we live in an ideal world where good deeds are reciprocated. But the extended hand of friendship by the US has been seen by adversaries as a sign of weakness; encouraging despots like Assad to play "Russian roulette" with his chemical weapon stockpile, Iran to carry on Uranium enrichment and China to employ strong-arm tactics on Japan.

It has another unintended effect as well. This approach incentivizes bad behavior by enemies and at times penalizes loyal allies. The concessions made to adversaries have come too often at the cost of loyal friends. India has been quick to notice that in the region and has made no secret of her discontent.

The second aspect of this problem might be related to the first one, but has a "values" dimension to it. The current US administration does not seek to be the moral leader of the world. "American Exceptionalism" is not a guiding principle of foreign policy.

The US seeks to reduce its geo-political footprint and assume a more "equitable role" in the world. Another altruistic position, one might think, but it has an impact on India beyond the framework of disengagement politics undertaken by the current administration.

To put it candidly, India's political leadership did not embrace free market capitalism as a result of an acquired conviction, but it was forced upon them after a balance-of-payments crisis in 1991. The initially painful steps imposed on India paved the way for her growth story. The US at that point played the role of a catalyst nudging India to overcome her initial hesitations and embrace free market capitalism.

India's economic growth and her foreign policy tilt towards the U.S. have occurred simultaneously and that is by no means a coincidence. India's initial ascent on the world economic stage was a direct result of her embracing quintessentially American values.

By curbing government control on private enterprise, cutting taxes, and reducing the size of the government bureaucracy through privatization, India unleashed the entrepreneurship of her hard working and ingenious people.

If one was to summarize India's success in one word, it would be "incentives". For the first time in the history of modern India millions of families had a real chance of lifting themselves from poverty, not through government programs, but as a direct result of economic growth and private enterprise.

Economic mobility dented the rigid and inhumane Cast System. Indian women broke new ground and were empowered by their increased participation at all levels of the economy.

However, the last decade saw India falter on this path. Rather than pushing ahead with economic liberalization and focusing on growth, the government is again resorting to the remedy of "social programs".

The US that India had been dealing from the early 90s was assured of the superiority of its values and willing to inspire others to follow her. But with the present US administration focusing on reducing America's 'footprint' and reluctant to even assert the correctness of its values, let alone defend them, India has lost a vital pillar of support.

That said, India does not seem to have any good option but to push through with her economic reforms and re-embark on her long walk to prosperity. India has a billion reasons to do so.

The coming general elections this summer could be a defining moment for India's economic future. India has a chance to overcome current political indecisiveness and get back to the path of much needed economic growth by modernizing governance and liberalizing the economy.

However, if India does falter it will have dire consequence for the world's largest democracy, and the U.S will surely come to see that as a cause for profound regret.

Vijeta Uniyal is an Indian-born analyst based in Germany.

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