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Mainstream, Vol XLVIII, No 48, November 20, 2010

Obama’s Visit to India: Powering the Eagle

Wednesday 24 November 2010, by Sudhakar Panda

Obama’s visit, which was initially hailed with a note of caution, created a sense relief, comfort and strengthened friendship with the US after the nation heard him addressing the Indian Parliament. In Mumbai where he landed with his business entourage consisting of CEOs of American MNCs, the President, as expected of him, talked of the US’ business interests in India and at Delhi he addressed some of the vital politico-economic issues ranging from cross- border terrorism from Pakistan to high-tech exports to India and the US support for India’s permanent membership in the UN Security Council that formed the core of Indo-US relations. President Obama, maintaining the dignity of his high office, offered India what he could in exchange for what he wanted from India. He had the most pressing problems of the American economy, its “macroeconomic imbalances” like the excessive current-account deficits running to $ 430.9 billion and its budget deficit as a share of the GDP that is estimated to rise to 10 per cent in 2011 in his mind and he had to find solutions to these problems on which the future economic performance of his country and the political success of his party would depend.

The US economy, still the richest economy in the world, has not as yet recovered from the recessionary effects of the world economic melt-down of 2007-08. The economy, though not wrecked, is not in good shape. Its housing market is still to revive. The aggregate domestic demand continues to remain low. It has yet to recover from the systemic banking crisis. Unemployment is still high at around 9.6 per cent (September 2010). Some of the local governments in the USA still continue to lay off their employees as they face shortfalls in their revenue generation. This creates a larger responsibility for the Obama Administration to promote healthy growth and reduce the magnitude of unemployment in the country. The President himself is facing political challenges from within his Democratic Party after its setbacks in the mid-term elections. And as is widely known, his own job approval rating has been sliding down, even to below 50 per cent. Political prospects for the Democrats in the States as well as at the federal level are not that bright. This must be an uncomforting factor for President Obama. His priority will be to usher in strong and sustained development in America by cutting down unemployment and creating more and more space for growth. And without growth it will be difficult to make himself acceptable to the American electorate. A resurgent US economy will make him stronger and have a positive impact on his election prospects and influence the political fortunes of the Democratic Party. And that makes it clear that he was here to strike business deals with India that would propel growth in his home economy.

AMERICA, therefore, is in need of redefining its macroeconomic strategies for development keeping in view the continuous economic rise of China, India and Brazil, the three most important emerging economies in the world. A time has come when the US economy, still the most powerful economy, has the economic necessity to keep itself aligned with these economies and approach them for gaining uninterrupted access for exporting its goods and services to their vast and growing domestic markets. Unmistakably the signs of real strength of the US economy will lie in its growing share of the world export market. This will not only create business and employment opportunities in America, but will also impart a touch of strength to the American dollar, the demand for which will keep on increasing. This, in turn, may help America in dealing with countries like China (which has succeeded in exporting its goods and services to the US market by keeping its currency under-valued).

We have to understand and appreciate the US concern for its economic interests when the President in Mumbai said: “It is not unfair for the USA to say…well, if our economy is open to everybody, countries that trade with the US have to change their practices, too.” This was as much a call to India as to the Chinese Government (which is unwilling to appreciate its yuan) to change their trade policies vis-à-vis America by opening up their sectors to American trade and investments. This was as much a challenge to the Indian industry as much as it was a cheer to the American trade and industry.

Obama expressed his interest in strengthening economic ties with India and offered to remove the barriers, if any, to trade and investments. The USA needs India more than ever not only in building up its trade relationships but also in joining it in fighting the global threats including terrorism which is a common concern for both the countries.

President Obama’s visit to India, apart from political reasons, has been driven by the desire to strengthen the presence of American MNCs in the Indian market. More trade with India is not enough. Things may go wrong and trade may get dislocated. A great emerging economy like India with rising incomes, an expanding home market and increasing consumerism offers immense scope for business in retail, banking and finance, insurance, infrastructure and other services sectors. Besides, India needs high-tech products, including military hardware and space technology, from America. Obama was honest enough to disclose the real purpose of his visit to India in Mumbai, the trade and business capital of the country, when he said: “We want access to your markets. We have good products to sell. You think you have good products to sell us. This can be a win-win situation. We are here because this will create jobs in the USA and it will create jobs in India.” A very honest and candid expression of his agenda in India! The message is very clear—that no country including India can sell in the USA market without buying from there and that trade is not just a one-way street and that there has to be a policy of give and take between America and India to benefit both the sides. A fast growing American economy will provide new opportunities to the Indian investors as well. India, on its part, should be more serious about deregulation and opening up of its economy to foreign investments in hitherto restricted sectors.

By praising India as a global power, appre-ciating its deep-rooted democracy and its unity in diversity and offering US support for India’s permanent membership in the Security Council, Obama offered sweet vindication for what India has and what India hopes to have and tried to bank on India’s strength to provide a big boost to the American economy where growth continues to be sluggish.

A rapidly growing Indian economy has become a bigger prize for the developed nations of the world including the USA to court for a bigger share in its market. It is up to India how valuable it makes itself to the US.

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