Indian trade and foreign investment policy has long been stuck in neutral thanks to uncertainty at home over the political implications of opening up the Indian economy to further global competition, international disagreement over India's food security programme and the lack of ambition in both Washington and New Delhi over where to take US-India trade relations.
It is little wonder then, that Indian international trade, measured on a per capita basis, is just over a quarter of that in China or Brazil, according to the World Trade Organization (WTO).
That logjam might now be breaking up. Prime Minister Narendra Modi's government has liberalised some foreign investment restrictions as part of its Make In India campaign to transform India into a global manufacturing hub. The Obama administration has agreed that the Indian food security programme will not be challenged through a WTO dispute settlement while a permanent solution regarding this issue is hammered out. And US Trade Representative Michael Froman will now journey to New Delhi for a November 25 India-US Trade Policy Forum to explore new avenues of cooperation.
These developments occur at a time when the Indian public is more supportive of trade and foreign investment than previous governments had acknowledged. This is particularly the case with regard to the heretofore thorny issue of foreign investment, long a domestic political hot potato.
Yet India is in competition with other emerging markets for both trade and foreign investment. And Indians fall short of the full-blown embrace of globalisation shown by some of the country's other emerging market competitors.
About three-quarters (76 per cent) of Indians think trade and growing international business ties are good for their country, according to a recent Pew Research Center survey. Such broad support for globalisation is the kind of popular backing all politicians yearn for, but often fail to achieve.
Nevertheless, Indian enthusiasm for trade is relative. Backing exceeds that in Japan (69 per cent) and the US (68 per cent), but trails that in China (89 per cent).
And Indians, much like many people around the world, especially in advanced economies, have greater faith in trade as a principle than they do in practice.
Only about half (49 per cent) of Indians voice the view that trade creates jobs. This is roughly comparable to opinion in other emerging markets. Indians seem to have greater faith in the employment opportunities afforded by trade than the views held by Americans (20 per cent) or the Japanese (15 per cent).
However, Indian faith in the link between trade and jobs trails that in Vietnam (78 per cent), China (67 per cent) and Indonesia (63 per cent). Moreover, Indians are much less convinced than people in developing countries (median of 66 per cent) that international commerce generates employment.
The same holds true for Indian views on the impact of trade on wages. Roughly one-in-two (49 per cent) Indians say trade boosts wages. This is a far more positive sentiment than that found in Japan (10 per cent) or the US (17 per cent). But the Vietnamese (72 per cent) and the Chinese (61 per cent) are more likely than the Indians to see a link between trade and bigger paychecks.
Most important, the Indian public's views on foreign investment challenge the country's reputation for hostility toward foreigners building plants in India or buying Indian companies. Previous Indian governments have used alleged public antipathy toward such investment to justify blocking foreigners making major investments in the retail store sector and for capping foreign investment in certain industries and financial services.
The Modi government has begun to relax such restraints, announcing plans to open up the defense and insurance sectors to more foreign investment. Such moves seem to reflect a public appetite for greater foreign involvement in the Indian economy.
Like most people around the world, Indians have little objection to greenfield foreign investment, when foreign firms build factories in their country. About two-thirds of Indians (68 per cent) say such investment is good for the nation. And more than half of Indians (56 per cent) also back foreign companies buying Indian firms, a practice that is often far more controversial in other countries.
In both cases, Indian support for FDI significantly exceeds that in China, where only 51 per cent of the public supports greenfield investment and just 39 per cent favour foreign-led mergers and acquisitions. Such sentiment suggests that as foreign firms look to expand their operations in Asia they may encounter far less wariness in India than in China. Since New Delhi has long trailed Beijing in the global competition for foreign investment, this should prove a boon for the Modi government's ambitions.
The Indian public's views on trade and foreign investment are more positive than past Indian governments have claimed and more positive than foreigners often assume. Young Indians, men and better educated people are particularly supportive. These represent a constituency in India for an opening up of the economy, a move that the Modi government claims it wants to make. Such sentiment gives India a competitive advantage compared with China, particularly in attracting new foreign investment. Time will tell if the political will exists to exploit that advantage.
The writer is director of Global Economic Attitudes at Pew Research Center
