As India engages in track II diplomacy with the US for the second time, the interaction covers more issues and spans across more sectors than the first exchange a decade earlier. Amit Mitra, secretary-general, Ficci, in an interview with FE?s Huma Siddiqui, talks about the goals that Ficci had set out to achieve through the visit, the investment of Indian companies in the US and the paradigm shift between developing and developed countries. Excerpts:
What are the goals that Ficci has set out to achieve through this month-long endeavour?
The goals were multi-dimensional. The over-arching goal was to deepen Indo-US strategic partnership by adding a significant track-II element which complements the government-to-government (G2G) exchange and brings about fresh, frank and open thinking on matters of engagement between the two major democracies, both driven by markets and enterprise.
This effort was spearheaded by the Ficci-Brookings track II dialogue which, interestingly, was opened by G2G leaders from both the sides ? India?s foreign secretary Nirupama Rao and her counterpart from the state department of the US. This was followed by a day-long frank, and at times contentious, dialogue on future deliverables. Though the focus was on President Obama?s upcoming visit to India, issues discussed ranged from security, terrorism, Af-Pak, Sino-Pak, Indo-Pak issues and of course, economic issues such as the technology denial regime of the US towards India and equity caps on FDI in insurance and defence on India?s part.
The second goal of Ficci?s 18-day visit was to bring about greater cooperation in innovation and technological engagement. This effort was spearheaded by the signing of an MoU between the Competition Council of the US and Ficci, with focus on a greater private sector-led cooperation in innovation.
Another important goal of the visit was to facilitate a dialogue between 12 members of the Indian Parliament with US intellectuals, legislators (Congress and Senate along with India Caucus of the Congress) and the US government.
This exercise also aimed to attract investments from the US. How has the response of US companies been?
While the popular perception has it that Indian companies are taking away jobs from Americans and adding little value to the US economy, nothing could be further from the truth. The authors of How America Benefits from Economic Engagements with India have shown that Indian companies have been investing steadily in the US for decades.
For too long, the relationship between developed and developing nations had been a one-way street. Mechanisms like America?s PL 480 program (Public Law 480) provided much-needed food aid to developing countries as a means to combat world hunger and malnutrition, and develop export markets for US agricultural commodities and products.
The value of acquisitions by Indian companies in the US fell in 2008 and more steeply in 2009 ? a result of the recession. It is however, interesting to note that greenfield investments rose through 2008, achieving their highest level, and then registered a decline in 2009, though the decline was not as steep as that for acquisitions.
What are the sectors in which one can expect accelerated action between the two countries in the near future?
Technology-intensive sectors were the most receptive. Multinationals from developed countries also began to disseminate technology to junior partners in developing countries, with the idea of using such technology to produce and sell products there.
In the 2000s, we are seeing a dramatic paradigm shift through which developing countries are now creating multinationals of their own, and these multinationals are making acquisitions and other investments in developed countries at an accelerating pace.
You have recently partnered the University of Maryland and India-US World Affairs Institute on trade relations between India and US. What are the findings of the report?
Multinationals from India are now making significant acquisitions and greenfield investments, and creating jobs, in the US. Some of the Indian companies to which work was being outsourced earlier are now insourcing such jobs within the US itself, using American workers to perform value-added work.
Indian companies have been investing abroad for decades, though the pace of foreign investments has accelerated significantly since 1991, and especially in the 2000s.
While in the 1960s, 70s and 80s, Indian multinationals invested in other developing countries, the trend in the last decade has been to go ?up market? and they are now also investing in highly developed economies like the US.
Between 2004 and 2009, as many as 90 Indian companies accounted for 127 greenfield investments worth $5.5 billion, and created 16,576 jobs in the United States. The five US industrial sectors that received the maximum greenfield investment were metals, software & IT services, leisure & entertainment, industrial machinery, equipment & tools and financial services.
Why have you shied away from discussing defence and security-related issues during the tour?
These were discussed in depth during the track II dialogue with Brookings Institute.