Will the iCET get a boost during PM Narendra Modi's visit to the US?

Increasing discussions between India and US on the Initiative on Critical and Emerging Technology has the potential to alter the dynamics of collaboration

Beyond all the discussions about sharing technologies between India and the US that will take place on Prime Minister Narendra Modi’s US visit is the shared realisation that trade relations between the two are hardly technology-heavy. This is where the stress is perceived in the business relations between the two economies. The US, the world’s leading technological power, currently offers hardly any significant products to excite the Indian market; the same applies for Indian exports. The huge upsurge in discussions between the two countries on the Initiative on Critical and Emerging Technology (iCET) takes off from this reality.

Sample these developments. India has this year relaxed the rules for investment in both the defence and space businesses. Even in the nuclear business, where the guard rails were high, they have been lowered with India reportedly considering overturning a ban on FDI in the sector.

In significant meetings like the one Indian National Security Advisor Ajit Doval had with his counterpart Jake Sullivan in January this year, the major officials present were the chiefs of NASA, National Science Foundation and their Indian counterparts. Notice the absence of finance or retail sector bosses.

In May, USAID Administrator Samantha Power met principal secretary to the Prime Minister, P K Mishra, in New Delhi. The ostensible reason for the talks was that Mishra is also co-chair of the Coalition for Disaster Resilient Infrastructure. Significantly, Power is also the first USAID administrator who is a member of the US National Security Council. One of her key roles is overseeing the management of US interests in the vast global network of undersea cables that make possible the scale of net connectivity.

This is where India’s importance lies. As India becomes a key player in the data network business globally, the business and safety of that architecture matters a lot. China and India own more undersea landing stations — 15 each — than any other country except the US.

A report by the Telecom Regulatory Authority of India (Trai) notes that India’s total activated capacity of cable landing stations increased nine times over in just six years up to 2021. Bharti and Reliance are big investors in these cables; Google, Amazon Web Services and Microsoft Azure are fast expanding their presence in the Indian storage business. About a quarter of these cables are invested in by Europe. The USA is interested that the ownership of these cables does not pass into Chinese hands, overtly or covertly, as European ownership gets diluted.

Although the investments in these are by private sector companies, the approvals come from the Digital Communications Commission (erstwhile Telecom Commission) and the home ministry. India also wants to take ownership of repair vessels for these cables with a government-backed consortium.

How did the USA and India arrive here? India’s External Affairs Minister S Jaishankar has said, “I don’t think there’s any other country with which the USA has that kind of technology bonding that it has with India”, in an interview with The Economist.

But the trade basket does not reflect this. So far India’s primary export to the US is diamonds — 15.4 per cent of the total $78.5 billion. The key exports from the US is crude, 36 per cent of the $50.2 billion (all figures are for FY23) The rise in the volume of crude imports from the US is fairly recent (from 2017 onwards) when former US President Donald Trump made the easing of trade surplus that India has with the US one of his priorities. Barring that the key US exports to India are only precious metals and chemical products (see table).

Even in services, the picture is not tech-heavy. Of the total US exports of services of India, almost half is personal travel. The Indian export basket fares better, with a large component of IT-related services. In the past quarter century, India’s exports to the US have increased at an annualised rate of 10.1 per cent. Those from the US have done likewise at 9.73 per cent.

The long-term trends make it clear that the Indian market will not move to a higher consumption of US products from among the current available pool of freely exportable products and services. The discussion between the policy mandarins have to consequently shift to a range of products and services that the US has not offered so far. This is what exactly happened when Piyush Goyal, India’s minister for commerce and industry, and US Commerce Secretary Gina Raimondo met for the fifth ministerial-level meeting of the bilateral Commercial Dialogue in March this year. The ground was set last year in May at the Quad summit where Prime Minister Modi and President Biden announced they will pursue the US-India Initiative on iCET.

Underlying the talk of collaboration between the ministers was the shared understanding that the iCET collaboration will support a “trusted technology value chain partnership between the countries”. It will make possible greater cooperation in critical and emerging technologies, which entails co-development and co-production of these technologies. In the US, these are entirely private sector businesses, for whom it is difficult to do business with Indian government-owned companies in nuclear, space and big tech.

 “There is immense value in the iCET initiative in fostering collaboration between India and the US in critical and emerging technologies. This strategic partnership is a significant step towards global technolo­gical advancement. We believe that the synergy bet­ween these nations will drive knowledge exchange, joint research, and breakthrough innovations in fields such as AI, data analytics, robotics and renewable en­ergy,” said Ashish Modi, president, Honeywell India.

This is the second major effort the US has made to penetrate the Indian market in a decade. President Barack Obama made a furious sales pitch for giving US insurance companies, especially the reinsurance giants, a foothold here with 100 per cent FDI. India is still not there. A related pitch was to loosen banking sector rules to complete the financial circuit. India has instead shut the door more firmly.

Wiser after the experience, the two sides have made a pitch for an assorted line of business in tech products and services. This is the foundation of the iCET pitch from both sides. Note the accent to elevate and expand the strategic technology partnership and defence industrial cooperation between the two countries, which eschews any mention of the earlier blind ends like finance and even retail. The parties are carefully skirting topics such as the World Trade Organization, retaliatory tariffs, currency manipulation, dumping and such issues.

This is quite a reverse of how the US-China relations blossomed in the first decade of this century. The first series of engagement signed on was the US-China Strategic Economic Dialogue by then President George Bush in 2006. The focus initially was on currency convertibility, easier access for US companies into China, and copyright and patent issues. Mutual involvement in high technology came much later.

The strategic trade dialogue between the two nations began only this year. “The inaugural meeting of India-US Strategic Trade Dialogue was held in Washington D.C. on June 6.

The India-US relationship is seeking to begin from the other end. It also makes sense as a trade instrument — which is why the possibilities seem better this time.