Ahead of the first India-U.S. Strategic and Commercial Dialogue, a new study has suggested that India could establish its leadership role in the world economy by greatly expanding engagement in global markets. The study “India’s Rise: A Strategy for Trade-Led Growth” by C. Fred Bergsten of the Peterson Institute for International Economics, argues trade liberalization would enable India to increase its annual economic growth from the current 7 to 8 to 10 percent.
The study released here Thursday noted the government of Prime Minister Narendra Modi has proposed a series of sweeping reforms to reach the goals of employing its rapidly rising population and to eliminate its sizeable pockets of remaining poverty.
“But even this ambitious programme will not be enough. India must also greatly expand its engagement in global markets to both meet its economic objectives and establish its leadership role in the world economy,” it said.
“In particular, India must sharply increase its exports of both manufactured goods and services to achieve its target growth rate with the corresponding job creation and poverty reduction,” the study suggested.
India could increase its exports by $500 billion per year by joining the next stage of the Trans-Pacific Partnership (TPP) trade agreement, Bergsten said. Alternatively, it could proceed step-by-step, perhaps starting with investment concerns via the bilateral investment treaty (BIT) now under consideration between India and the U.S.
As major services economies and exporters, the two countries could negotiate a services-only agreement en route to comprehensive free trade. “The United States has strong economic and foreign policy interests in pursuing such a course with India,” Bergsten said.
“As the soon-to-be third largest economy in the world, India can provide strong support for global prosperity and enhance regional stability and balance throughout Asia.” Under free trade with India, the U.S. could double its services exports to that country and increase its merchandise exports by 50 to 60 percent, the study suggested.
The crucial starting point for enhanced Indian trade must be the reform programme proposed by Modi, Bergsten said. Its success, coupled with new policies toward international trade and investment, can propel India to a new “growth miracle”.
As both the domestic reforms in India and the international negotiations involved are complex and highly political processes, Bergsten said, India and the U.S. must urgently begin the process “to enable the earliest possible payoff for both countries.”
“The bonding between President Barack Obama and Prime Minister Modi has re-established a strong rapport between India and the U.S., dramatically reversing the difficulties that prevailed as recently as early 2014,” he said.
They have instituted consultations on a wide range of economic (and other) issues in an effort to deepen the relationship, with 77 initiatives emerging from their January 2015 summit alone, Bergsten noted.
Meanwhile, State Department spokesman John Kirby noted during President Barack Obama’s January visit to New Delhi he and Modi had elevated the U.S.-India Strategic Dialogue to the Strategic and Commercial Dialogue. This reflected “the United States and India’s shared priorities of generating economic growth, creating jobs, improving the investment climate, and strengthening the middle class in both countries,” he said.
The dialogue, Kirby said, “will be an opportunity for the United States and India to further strengthen their partnership to meet the challenges of the coming decades, from climate change to regional security, and of course, to deepen the economic and commercial ties between our two countries.” Thus the U.S. was “very much looking forward to that dialogue next week,” he said.