Modi's US trip: Economic agenda relatively low key compared to earlier one

The noise about the econ­omic agenda during Pri­me Minister Narendra Modi’s US trip this week is surprisingly low decibel. CEOs of Qualcomm, Adobe, First Solar, General Atomics and Black­stone will of course meet him, first together and then separately. There is as yet no heavy buzz about these meetings unlike, say, the meetings till 2019. As the line-up to meet the prime minister shows, they represent sectors where India has already demonstrated its in­vestment plans to which these companies have responded. This is a signifi­cant difference from the earlier years, and may have been a reason the Ministry of External Affairs felt there was no reason to rush through with a town hall meeting.

One of the reasons for the overall low-key economic angle to the visit is the late finalisation of the travel itinerary. Till a couple of months ago, the expectation in the government circles in Delhi was that Prime Minister Modi would address the UN session in virtual mode. The second Quad meeting of the four heads of state after the first one in March this year was also not in the works so soon. Whatever the reasons for US President Joe Biden to have pursued such heavy diplomacy to get the four leaders together, it has definitely left the Indian government with little time to rustle up a strong economic agenda for the visit.

Yet, in 2021, Modi has a very strong economic suite to play from. The G20 finance ministers have endorsed the plan for a global minimum corporate tax rate of 15 per cent, which India has signed on. New Delhi has also annulled its retrospective tax law — a major pain point for foreign investors, and anno­un­ced a telecom package that will benefit a foreign investor, Vodafone. The insurance sector now offers a 100 per cent foreign direct investment (FDI), an area of great interest for the US financial sector. It would have been a good opportunity to announce these measures to the larger constituency. But unlike the past events, there is no one from the Wall Street firms at his meeting with the CEOs.

The meetings at Washington DC also come just days before China has applied to join the Trans-Pacific Partnership. The putative trade bloc among cou­ntries on both sides of the Paci­fic. This was essentially meant to keep out China, which is why Beijing had joined the other mega trade pact, the Asia-Pacific bloc Regional Comprehensive Economic Partnership (from which India has stayed out).

Of the key elements of the India-US economic relationship, one is the on-off free trade agreement. The other is the continued US pressure on India about supposed currency manipulation. The third is the energy element.

India has, instead this week, begun a ministerial-level discussion with the UAE to conclude a Free Trade Agreement (FTA). The desert kingdom is India’s third-highest trade partner after China and the US.  Britain is the other country with which talks are at a fairly advanced stage. After the departure of Donald Trump from the White House, interest among both India and the US to conclude any FTA has fizzled out.

Interestingly, Commerce Minister Piyush Goyal, Finance Minister Nirmala Sitharaman and Petroleum Minister Har­deep Singh Puri are not in the prime minister’s US team. So, obviously talks on these contentious issues are not expected to figure in detail in the meetings between Biden and Modi.

Of course, the meetings with the CEOs are most significant. General Atomics is the leader in drone technology. It is the top manufacturer of state-of-the-art military drones. India has just liberalised its policies for the use of drones and so this is a clear signal that drones will be bought for its armed forces, though In­dia is likely to push for transfer of technologies in the process.

Meetings with Qualcomm have the same contextual releva­nce. As a chip maker and as one of the leaders of 5G technology, the company has a lot to offer for the Indian market. Given the recent renewed commitment for the telecom sector that the government has shown, the sector is expected to draw in larger investments and is seen as a major opportunity. In July 2020, the investment arm of the company, Qualcomm Ventures, decided to invest Rs 730 crore in Reliance Jio for a 0.15 per cent stake.

Similarly, Blackstone has just concluded the largest real estate deal in India in March this year, acquiring Embassy Industrial Parks for about Rs 5,300 crore. Logistics is one of Blackstone’s core investment themes globally, including India.

First Solar, an Arizona-headquartered manufacturer of solar panels, has already app­lied for government support under the production-linked incentive scheme for setting up manufacturing units. The field is crowded though since there are 19 companies vying for the rights to produce polysilicon, wafer, and cells. A meeting with Modi comes at the right time for the company.

Unlike the loud economic engagement under the Trump administration, India seems to have switched on to a nuts-and-bolts method of engagement with US companies in the Biden term. The emphasis is on fixing individual pain points rather than trying to offer a broadbrush agenda of reforms. As the strength of the economic ties deepens, India will hope the Treasury will have less reason to needle it with charges of currency manipulation.