View: Let’s recalibrate expectations for US-India ties during poll season

By Neil Bjorkman

In meeting after meeting in both New Delhi and Washington, DC, we continue to hear the same thing: the political side of the Government of India will soon be consumed by elections, which will likely take place in early 2019.

The window for achieving major economic reforms is quickly closing. Once India falls into its long election cycle, it will tout its victories to international investors: goods and services tax (GST) implementation that streamlines the tax system and simplifies cross-border trade between states; demonetisation, which encouraged the economy to digitise; and opening single-brand retail to FDI, allowing major brands like Apple and Nike to set up their own stores in the country.


India watchers in Washington understand that elections are the kryptonite of major reforms. That is why there is a major push to enact legislation once a new Congress is sworn in (think repealing Obamacare and enacting tax reform).

In fact, election season produces such an effect that media outlets in the US track how much gets done in an administration’s first 100 days – the precise moment when the next election is furthest away. Of course, the US Congress has long been in election mode with the midterms in November.

International commentators often forget about elections and local politics when they discuss India’s ability to make big moves. They scrap the domestic political reality that has stalled true reform and liberalisation since the market was pried ajar in 1991.

India’s former PM, Manmohan Singh, deserves credit for cracking the door open. But trade barriers remain a blotch on the bilateral relationship. Evidence of this is found in the 2018 USTR National Trade Estimate report on trade barriers facing US companies.

The report’s India section spells out over 30 issues (price controls on medical devices, data localisation, high tariffs on tech products, lack of intellectual property rights protection, etc.). The history of protecting local players is a well-intended but ultimately counter-productive strategy for growth.

Where then should we as investors, entrepreneurs and true believers in India focus our attention? Agriculture? Certainly, much could be done regarding high-tariffs on US agricultural goods and onerous requirements on dairy products. Unfortunately, these issues often prove too sensitive to drive serious change, which would potentially threaten India’s farming community.

What about defence? The US-India relationship was recently under threat due to CAATSA (Countering America’s Adversaries Through Sanctions Act), the US law that could impose sanctions on India for purchasing the S-400 missile defence system from Russia. This obstacle has been overcome by the National Defense Authorization Act (NDAA) for FY19, which contains a special carve-out for India.

It took heroic efforts by secretary of defense James Mattis and a group of bipartisan congressional leaders who understood that punishing India for buying from Russia would only push India closer to Putin. Secretary Mattis understands the strategic importance of India as a check against China. Solving CAATSA erases an existential threat to the US-India bilateral and puts the relationship nearly back where it was.

Important stakeholders on both sides are becoming frustrated, and it is unclear whether the 2+2 dialogue will be more than a relationship-building exercise.

And that’s not good for anyone except China and Russia, which stand to gain from strife between our two great countries. As we have seen in recent years, gains in defence buoy the relationship but trade remains the lead in our boots.

While elections capture political leaders’ time and attention, we must engage with both bureaucracies, especially at the working level where great ideas percolate to the top. Let’s throw the US-India relationship a life jacket so it can weather the storm and emerge stronger after the US midterms and federal elections in India. There’s too much at stake not to.

(The Author is the VP for legislative affairs at the US-India Strategic Partnership Forum)