Khobragade affair: Commerce holds the key to reviving Indo-US relations

ByRavi Venkatesan

India and the United States have come a long way over the past two decades. Our once difficult relationship has developed real strategic significance. Unfortunately the relationship has been under increasing strain and frustration due to issues ranging from immigration, trade and investment toPakistan and Afghanistan. To add to this, the recent (mis) handling of the alleged visa fraud by Indian diplomat Devyani Khobragade has left deep wounds on the Indian side. The alienation and drift in what President Obama once termed as “the defining partnership of the twenty first century” is dangerous and must be reversed.

In the short-term, the turnaround rests on how deftly diplomats are able to work through the tricky Khobragade affair in a face-saving manner. Wounds will have to be healed and personal relationships rebuilt. A lot rests on the skills of one of India’s ablest diplomats, S Jaishankar who has just taken over as India’s Ambassador to the United States but he will need to be supported in this task by leadership on both sides.

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[caption id=“attachment_1301949” align=“alignleft” width=“380”]  Devyani-Khobragade. PTI image[/caption]

However, the more fundamental key to the turnaround of the partnership rests on more vibrant economic ties. US posture and policies are often highly influenced by commercial interests. The reason for the flowering of India-US ties in the first place was the rapid growth in bilateral trade from next to nothing to nearly $100 billion. Business interests enabled cooperation in other areas including intelligence and security. It could be argued that had India’s economy been as vibrant and important to the US as China’s, the Khobragade matter would have been dealt with greater diplomacy and finesse. As President Clinton famously remarked, “it’s the economy, stupid!” Reviving and realigning business interests is therefore the urgent need of the hour and it need not wait for the revival of the Indian economy. Much can be done right now.

In dealing with the pragmatic Americans, India needs to be equally pragmatic, clear and coordinated and approach negotiations with a clear set of “Gives” and “Gets”.

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On top of our list of “Gives” would be stopping arbitrary decisions on taxation and quickly resolving a set of frivolous claims against US companies that have vitiated the investment environment. Reviving the stalled nuclear deal would be up there as well. Then throw in some of the large lucrative arms deals that are in the pipeline.

High on the list of “Gets” for India would be ensuring that proposed changes in the US Senate’s immigration bill on skilled Indian workers is not inimical to India’s IT companies and their US clients. A second issue might be agreement on some sort of “Preferred Market Access policy” that would allow preference in government procurement contracts to domestically manufactured electronic, computing, and telecommunications hardware- a key measure to promote investments in manufacturing that create jobs and reduce India’s balance of payments problem. Perhaps another issue might be support for ’totalisation agreement" that ensures that Indian citizens working in the US would not have to pay social security taxes if they return to India within a defined time period since it is estimated to cost Indian firms nearly a billion dollars annually.

Once agreement is reached on a few high-impact wins for both countries, attention can be given to more complicated and vexing matters such as protection for intellectual property, subsidies for solar panels and opening up of new sectors such as insurance and defense. This could then build the foundation of mutual confidence and trust to set the stage for the next government to negotiate a more sweeping bilateral trade and investment treaty.

India and America are at a defining moment in our relationship. The list of issues is mounting and emotions are rising on both sides. Left unchecked, this dynamic could trigger a spiral of finger pointing and retaliation that will damage the hard-won gains in trust and trade between our countries. Moreover, it threatens to get in the way of the strategic cooperation between the US and India as we address complex issues ranging from the US withdrawal from Afghanistan to the rise of China. Such moments call for bold leadership from the top that will keep everyone focused on the big picture.

Leaders in Delhi and Washington must decide whether they will make the relationship into a truly strategic and valuable partnership or allow it to deteriorate into a welter of finger pointing. Despite the political constraints on both sides, it is worth remembering what is at stake here, and how far we’ve come already. It is vital that the leaders of both countries take a strategic rather than tactical, short-term approach to resolving their differences and realize that commercial interests hold the key to reviving our partnership.

Ravi Venkatesan is the former Chairman of Microsoft India and Cummins India and author of the book, “Conquering the Chaos, Win in India Win everywhere”; he is a Director on the Boards of Infosys and AB Volvo.