New economic relationships are being forged. American companies are
now looking at India as an attractive investment in India is no longer
just permitted, but actually welcomed. In 1990, foreign investment inflows
to India were just about $165 million. In 1993/94, they amounted to
$4.7 billion. In the last three years, almost 50% of the foreign investment
inflows and approvals to India were from the USA. India is realising
that in order to export, it must also import. So the Indian market is
opening up. Tariffs are coming down. In the last four years, the import-weighed
average tariff has come down from 90% to about 30%. India is in the
protection laws thus removing a major barrier to the acquisition of
new technology from American companies on a continuing basis.

Relationships in science and technology are being cemented. This is
one of the best things that Reagan and Indira Gandhi did for India and
the USA. The science and technology agreement has brought together in
areas of great importance like health, biotechnology and energy. India’s
vast and extensive infrastructure in science and technology is beginning
to be recognised for its value and potential by its American counterpart.
For instance, Du Pont has recently signed a major collaboration agreement
with the National Chemical Laboratory.

Political relationships are less prickly. Areas of difference remain
like non-proliferation and missile control. But India and the USA have
not allowed these differences to come in the way of a rapprochement.
India has finally recognised Israel. More than that, states as Rajasthan
and Gujarat are actively wooing Israeli investment and technology, something
that has helped improve India’s standing in Washington. After an initial
period of some controversy, American understanding of the complex Kashmir
issue has become sophisticated and less unacceptable to India. India
has become sensitive to American concerns on human rights. India and
China are taking steps to settle their border disputes, again something
that the USA appreciates. India is taking on peace-keeping responsibilities
in troubled spots of the world under UN auspices.

Academic and cultural links are being consolidated. A new generation
of Indian eager to learn about its roots has emerged in the USA. This
generation is acting as the bridgehead for bringing the two countries
closer together. India went off the American campus and academic circuit
beginning the mid-1970s. But interest is slowly reviving and in many
cases the catalysts have been the ABCDEFGHIs (American Born Confused
Desis Emigrated From Gujarat Hindu Indian!). A new generation of US-trained
and US-educated Indian is also coming back home, albeit temporarily,
as American companies set up shop in India. This class too is acting
as a bridgehead for closer links between the two countries. All this
bodes well for the future. But it would be wrong to be smug and complacent.
More requires to be done to consolidate on what has been accomplished.
Some steps by the USA and some by the two together.

First, India has towage peace in its immediate neighbourhood. This is
needed not just to win kudos in Washington but more importantly to improve
the well-being of a billion people. Indo-Pakistan relations have touched
a new low. Who is to blame is irrelevant. There are steps that India
can take unilaterally to improve the atmosphere. An unequivocal declaration
on the no first-use of nuclear weapons is one such initiative. A pull-back
from Siachin is another. India and Pakistan must have a joint programme
for controlling the narcotics trade. India-Bangladesh and India-Nepal
relations are no better. The whole of Eastern India, Nepal and Bangladesh
is wallowing in poverty because of the failure of India to show vision
and statesmanship on the river waters issue.

Second, India must restore democratic processes in Jammu and Kashmir
in the next six months to a year. It is true that India is not given
enough credit for her J&K policy. India did not do what China did in
Tibet or what Israel did in the West Bank and the Gaza strip. There
is still not enough appreciation of critical importance of J&K to the
maintenance of a secular India, a dream still cherished by a majority
of Indians. J&K is not just real estate. It is an integral part of the
vision of India. But mistakes have been committed by India. Pakistan
has taken full advantage of these blunders. The USA has role to play
in using its not inconsiderable leverage on Pakistan to adjure violence
and support terrorist activity in the valley. For its part, India must
open a dialogue with cross-sections of Kashmir society and the Kashmiri
diaspora in America, Saudi Arabia and the UK that is playing an important
role in keeping the militant movement going.

Third, the Indian intellectual elite must begin to re-question some
of the sacred cows of our strategic policy. Can India afford to spend
$ 1 billion every year on its nuclear establishment? Can India afford
to spend 25% of its R&D budget on defence research alone? It is not
enough for us to take refuge in the fact that defence spending is just
about 27% of GDP now, lower than that in most other countries. 2.7%
of GDP in absolute numbers translates into $ 7billion, a huge sum for
a poor country that has such a huge backlog of essential development
tasks yet unfulfilled in substantial measure. We spend as much on defence
as we do on education. What good is external security when there is
internal insecurity caused by large scale illiteracy and unemployment?
At the same time, the United States must take note of what George Bunn
and Roland Timarbaev, the men behind the NPT. It must move towards a
comprehensive test ban, a cut-off in the production of fissile material
and a prohibition on the first use of nuclear weapons. The US must continue
to put pressure on India on the non-proliferation issue. But it will
be taken seriously only if its record is clean. It simply is not.

Fourth, India must recognise that in the long-run it is not just investments
but trade that will win it friends in the USA. China’s leverage with
the USA comes from her imports from America. 200,000 American jobs are
dependent on trade with China. 14% of Boeing’s sales are to China alone.
This is enough for US Presidents to condone China’s appalling human
rights record and take it more seriously than a more democratic and
open India. There is a large lobby in the US that still feels that US
investment abroad means loss of American jobs. So, the leverage that
India can extract from direct foreign investment of American companies
is limited and certainly is not on par with the leverage afforded by
trade links. True, one-third of America’s international trade is intra-company
trade. So trade does follow investment. But it is not automatic. Moreover,
non-trade issues are looming large on the horizon. Issues relating to
child labour, consumer safety standards, and environmental regulations,
if not handled sensitively by both sides can disrupt trade relationships.

Fifth, the USA must play its part in the reconstruction of Afghanistan.
The tragedy of Afghanistan was largely the contribution of the Russians
and the Americans. Let that be. A Somalia-type situation in Afghanistan
is a source of great trouble for Pakistan and India. The USA cannot
walk away from that region. It must work with its friends and partners
in Pakistan and other Central Asian republics to salvage the situation.
This is the very least it can do to atone for the horrendous mess it
helped create in the first place. In addition to Afghanistan and Pakistan,
the United States must use its influence with Nepal and Bangladesh to
goad these countries not to be needlessly intractable in their discussions
with India over the sharing of river waters. Ultimately, US aim must
be to broker a Indus Waters Treaty-type arrangement in the Ganga-Brahmaputra-Barak
Basin in close collaboration with institutions like the World Bank.

Sixth, the USA must be and must seen to be a little more sensitive to
the Indian mantra of `preserving our territorial integrity and solidarity.’
At times, many Indians, even those favourably inclined to the United
States, have felt that the USA is not doing enough to discourage elements
preaching secession from India. Part of this is because Indians do not
understand how the correspondence section in the White House operates
or how Congressmen are dependent on their constituents for financial
support. It is difficult to be specific on what the US must do because
we are dealing with perceptions here. Repeated declarations by key officials
to the effect that the USA is committed to the strengthening of India
as it is geographically constructed today could perhaps help. Congressmen
who are hostile to India on this score could be encouraged to visit
India and see for themselves that India is not the ogre it is made out
to be by some of their rich and influential constituents. Rep. Torricelli,
an India-baiter, visited Punjab and went back a different man. There
is a lesson here for India as well. You lobby not with the Moynihans,
the Solarzs and the Gores. This is trying to convert the converted.
You have to lobby with the Helmses, the Burtons and the Hagers. India
has not always done so and has been preoccupied with going after the
India-wallahs, ignoring the damage valuable of those who know little
about India.

Seventh, the USA must back off on sensitive issues like the social clause
and issues like the social clause and issues relating to intellectual
property. Richard Freeman of Harvard University has shown that it is
not imports from low-wage countries but changes in technology and automation
that have destroyed American jobs. America’s trade with `low-wage’ countries
is just 3% of her GDP compared to 2% in the 1960s. The point on intellectual
property has been made and has been accepted by both made and has been
accepted by both Indian industry and the government. Too much pressure
can be counter-productive. In any case, India has already signed the
Marrakesh Agreement on the Uruguay Round and is committed to changing
her patent laws. India is already a member of the Berne Convention for
the protection of literary and artistic works. India’s copyright laws
are ahead of the provisions laid out in the Uruguay Round agreement.
Computer software is protected as literary work. India is already a
signatory to the Washington Treaty of 1989 on intellectual property
in respect of integrated circuits. India’s laws relating to trademarks,
trade secrets and industrial designs are on par with international standards.
But this is not why the USA must back off. The USA itself must question
the wisdom of some of the recent developments in patents. A patent has
been awarded for transgenic cotton and soyabean. Is this wise even for
the United States? It is certainly disastrous for India. At the same
time, Indian companies have to familiarise themselves thoroughly with
US standards relating to consumer safety and environment. Accreditation
facilities in India will have to be upgraded and come up to US specifications.
The US can not be excepted to take the initiative in this regard – India
has to do so.

Eighth, just as India must take steps unilaterally in respect of Pakistan,
the United States should take some major steps unilaterally that could
impart a new momentum to its relationship with India. Most Indians feel
that with India signing the Uruguay Round Agreement, it makes no sense
for America to keep India on the Special/Super 301 list. A unilateral
step taking India off the list would be a giant step forward. Unfortunately,
the USA talks about multilateralism but in the heart of hearts it wants
to retain bilateral tools. The current debate in the USA on the WTO
is testimony to this. Another unilateral initiative that the USA can
take is to help India reschedule a part of her international debts.
India is the only country in the world that has not sought rescheduling.
Her international debt repayments are now around $8 billion per year
and her debt service ratio will continue to be around 30% of her export
earnings in the medium term. Countries like Mexico have benefited from
US-led initiatives like the Brady plan. Surely, India deserves some
tangible reward for making such bold departures in her economic policies.

Ninth, the USA must play an active role in demolishing what the economist
Lance Taylor has called the Washington Consensus. The Consensus that
is being embraced enthusiastically by all countries in the world is
simple – low fiscal deficits, reduced government spending, greater foreign
investment, more imports and exports, reduced import duties, etc. What
has compounded the problem is that in most countries like India, the
controllers of the 1980s have become the liberalisers of the 1990s and
therefore have all the dogma, zeal and simple-mindedness of the recent
convert. Unfortunately, the Washington Consensus is based largely on
Wall Street America, not New Deal America. It ignores the critical role
that regulation plays in fostering and sustaining competition. It ignores
the critical role that the state plays in key sectors to ensure that
competition is free and fair and to ensure that competition has a human
face. Even in the United States, in industries like telecommunications,
airlines, computers and pollution control, it is not the magic of the
market place but the perseverance of regulators like judge Harold Greene
and Alfred Khan that led to the industries being deregulated. The USA
is doing great disservice to itself the institutions of regulation and
the New Deal with the same Zeal and vigour with which it propagates
the elements of the Consensus.

Tenth, India and the USA must jointly explore ways of replenishing Pl-480
funds which run out in two years’ time. These funds have played an invaluable
role in strengthening relationships in science and technology. If they
are not replenished, an extremely critical dimension of Indo-US links
will be dealt a severe blow. A joint foundation with seed capital and
American governments should be established. Subsequently, private companies
in both countries can add to the corpus. This foundation can then take
over once the PL-480 money is exhausted.

Eleventh, India and the USA must jointly explore new avenues for mutual
co-operation. There is more to India and USA than the corporate sector.
There are exciting possibilities of co-operation between co-operatives,
NGOs, universities, think-tanks and academic institutions. American
foundations like Ford and Rockefeller have played a critical role in
India’s development. They have an important role to play in new areas
like public health and in the rejuvenation of what they helped launch
like the agricultural universities. The corporate sectors in the two
countries will find their respective niches. But the scope for collaboration
to mutual benefit in the non-commercial sector is considerable. This
cannot be left to market forces. A mechanism to identify and pursue
such opportunities needs to be evolved jointly. In addition, Indian
companies must invest in creating interest in India on American campuses.
Funding of chairs is one way of doing so. India must also explore ways
and means of utilising the services of the one million-strong Indian
diaspora, the Indian diaspora has perhaps the weakest links with the
mother country.

Twelfth, both India and the USA must be alive to the `threats’ on the
horizon that could abort the current honeymoon. It is not just a question
of today’s threats but also threats that are likely to emerge. Textiles
is a prime example. Both sides are being overly sensitive. Just because
India exports a few billion dollars of textiles to the US, there is
no need for the US to make such a big issue out of market access to
US textiles, specially when India is already permitting US textile companies
to set up shop in India (for example, the Arrow brand is now sold in
India). On the other hand, there are certain categories of textile products
like industrial textiles where India can provide greater access to US
companies.