US Doesn't Have Much to Offer India
16:42 03.07.2023 (Updated: 11:33 04.07.2023)
© AP Photo / Evan Vucci
Subscribe
“The friendship between the United States and India is among the most consequential in the world,” Biden tweeted after a historic visit by Indian PM Modi, who was welcomed with highest honors and an opulent dinner at the White House.
Although Modi had visited the US many times before, this was his first state visit, which also included his second speech to the joint session of US Congress – a privilege accorded to a handful of people like Churchill. Why this extraordinary American love for India? Two answers: economy and geopolitics.
The economic aspect of the strategic partnership is obvious: American companies get to capture bigger market shares of critical sectors in India, whose economy is set to eclipse Japan and Germany by the end of this decade.
The geopolitical angle is all about China and Russia, the two biggest obstacles to American unipolar hegemony. While the US has been successful in starting a proxy war on Russia using Ukraine and Europe as geopolitical pawns, the war on China is still a few years away. Thus, the US is busy laying the groundwork for the big Asian war. This is why the presidents of the Philippines and South Korea were also wooed earlier this year with pomp and ceremony similar to what Modi enjoyed.
What’s in it for Modi and India?
For Modi, this trip raises his stature in the global stage, and likely boosts his chances for reelection next year. Modi also got to meet and have short 1-1 meetings with famous Americans like Elon Musk and Ray Dalio. Although there were some feigned concerns about human rights in the US mainstream media, the overall coverage was exuberant.
The bigger question is what’s in it for India? The answer is “not much,” in spite of all the hype. Here’s why: The US comes out as a winner in most of the deals. The real benefit to the Indian economy is not significant. Let’s see why.
The most touted deal was the manufacturing of GE F414 engines for Indian Tejas fighter jets. While the headlines brag about how these engines will be manufactured in India and will include technology transfer from the US, there are fine prints. The engines will be built as a joint venture; and the US will transfer only 80% of the technology, while withholding the crucial 20%. In terms of jobs, this will create only a few hundred new jobs at Hindustan Aeronautics (HAL). Overall, not impressive.
Next, India will spend a staggering $3 billion on 31 armed SeaGuardian drones from General Atomics. This is not only a win for the US military-industrial complex, but also a win for the US military, which will use these drones to monitor the Indian Ocean. From a pragmatic point of view, this doesn’t make a lot of sense for India, since the primary conflict between China and India are at the mountains – far away from the oceans.
In another deal, an Indian company will invest $1.5 billion on a solar plant in… Colorado, USA. What? FDI should flow the other way around – from rich countries to developing ones. The US should be setting up factories in India.
So, as you can see, money is flowing in the wrong direction in all the three main deals. Worse, the US will expand H1-B programs, which will result in more brain drain from India. Again, the US wins.
The only new projects that may create jobs in India are those involving US semiconductor companies Micron, Applied Materials and Lam Research, which combined will invest $1 billion. Micron’s investment will involve testing and packaging semiconductor chips, an important sector albeit in the lower end of the supply chain. The other companies will create a small number of white-collar jobs in R&D.
Both countries have also agreed to a joint mission to the International Space Station in 2024; and India will join the Artemis Accords, an American project to return humans to the Moon by 2025. While these are commendable, India could have forged such partnerships outside of grand geopolitical bargains.
Progress in hi-tech is essential, but India’s focus should also be manufacturing industries that provide millions of jobs. Right now, India’s manufacturing and goods exports are one-tenth that of China. India needs to follow what China did two decades ago or what Japan and South Korea did decades ago. The primary objective should be creating industrial champions for consumer products such as washing machines, TVs and electric two-wheelers, not engines for fighter jets.
India should take advantage of US/EU anti-Russian sanctions by selling consumer and household goods to Russia. This will boost Indian manufacturing and will also incentivize Russia to accept rupees for oil. Essentially, it will be a barter system — oil for essential goods. As for Russia, the goods will be much cheaper than those from Europe. Moreover, increased trade will help Russia reduce American influence in India. Win-win.
The problem in India is too much neoliberal influence from the US and the likes of the IMF and World Bank. These bean counters and Wall Street types have no appreciation for manufacturing. They prefer the predatory “FIRE” economy – finance, insurance and real estate which bring in the most profits for the middlemen who contribute little to the economy.
India is a developing country that cannot leapfrog industrialization. It cannot transform itself from an agriculture to a services economy. As I describe in my article, manufacturing creates jobs, expands the middle class, increases productivity in all sectors, and turbocharges GDP-per-capita. It’s the guaranteed and proven path to escape a middle-income trap.
Dump Russia, Fight China?
American media, think tanks and politicians have vivid imaginations, sometime bordering on delusion. During Modi’s trip, there was a terrible but unsurprising foreign affairs article that had the following advice for India: “Dump Russia and embrace the US, because China is the biggest threat.” Here’s why it’s a horrible suggestion:
India needs Russia for military weapons and parts for the foreseeable future.
Russia will/can play a big part in India’s energy supplies in the future.
Creating a Russia-China alliance by alienating both countries will be disastrous for India as well as for BRICS, Asia and a multipolar world.
India’s dependence on China — for everything from electronics to pharmaceuticals — is not going away any time soon. Even the CEO of giant US weapons manufacturer Raytheon recently admitted that his company depends on thousands of Chinese suppliers. China hawks in the US have already discarded the word “decoupling”; and the new buzzword is “de-risking,” which applies to only a handful of tech sectors, like AI and high-end semiconductor chips.
It will be extremely hard for India to have partnerships with Iran, Saudi Arabia and many other strategic countries if Delhi alienates Russia and China, which have enormous influence in the Global South.
There’s no guarantee that the US will be a superpower ten years from now. In fact, all indicators point to a likely and rapid decline of American primacy. Why bet on a losing horse?
One must always secure the neighborhood through peace. Trying to shore up national security by depending on a faraway imperialist boss is just a recipe for subservience and misery. India’s elites just need to study how the American Empire treats the EU.
World is Transforming
Referring to the deepening US-India ties, former Indian Foreign Secretary Shivshankar Menon said, “This is primarily about India’s transformation. I don’t see how we can build a modern, developed economy without working with the US.”
I respectfully and completely disagree. The future of the world lies in Asia and, if peace prevails, in Eurasia. Consider that, in terms of PPP GDP:
Looking at the world’s economic growth, Asia’s contribution will be an astonishing 70% this year. According to the IMF, China will be the top contributor to global GDP growth over the next five years and will be twice as much as the US.
Thus, it’s a naïve claim to say that India’s development will be dependent on the US. On the contrary, the US’ role in the global stage will shrink steadily as a multipolar world emerges.
BRICS will be a game changer when it expands its membership – more than a dozen countries have expressed interest – and introduces a currency of its own for trade. This will accelerate de-dollarization, which has already picked up steam since the US illegally confiscated Russia’s foreign exchange reserves. Take away the extraordinary privilege of US dollar, the American Century will quickly come to an end.
Conclusion
When the glow from Modi’s trip to the US fades away, I hope that the Indian foreign policy establishment will evaluate their options objectively. While maintaining good relations with the US is essential, India must be clear-eyed about the “Empire of Chaos.”
The USA is fumbling grievously in geopolitics by antagonizing civilizational great powers like China, Russia and Iran. Whoever comes to power in India in 2024 will face daunting geopolitical challenges in the following five years, thanks to American destabilization efforts in Asia and Europe. India must stay steady and avoid the temptations to get pulled into disastrous conflicts.
Geopolitical analyst and writer based out of Bangalore, India. Follow him on Twitter: @Kanthan2030 and Substack: slkanthan.substack.com
