The rock star reception Indian Prime Minister Narendra Modi received at New York’s Madison Square on Sunday in a $1.5mn event attended by a sellout crowd of mostly 20,000 Indian Americans, his power-packed breakfast with most of America’s top executives on Monday as well as the dinner meeting with US President Barack Obama have all firmly put the business-friendly Indian premier on the international scene on a strong footing.
In a joint “vision statement” issued on Monday, Obama and Modi said they would work together “not just for the benefit of both our nations, but for the benefit of the world”.
At the breakfast meeting with US corporate captains, Modi asked them to look afresh at the country and shed any fears they might have developed about investing in India in recent years.
But global investors say more needs to be done. In the defence sector, no foreigner can have a controlling share of any joint venture in India since the cap on foreign ownership remains at 49%. In sectors, such as retail, more severe limits on foreign capital are still in place. India has also been accused of sabotaging a $1tn World Trade Organisation deal in July.
Modi has described the US as India’s “natural partner”. But relations have been rocky. In 2005 Modi was denied a visa to the US under a 1998 law barring entry to foreigners who have committed “particularly severe violations of religious freedom”. A New York federal court issued summons against Modi last Thursday, ahead of his arrival, in a lawsuit filed for his alleged role in the 2002 communal violence in Gujarat when he was the state’s chief minister.
Relations hit a low last year when the Indian deputy consul general in the US was arrested and strip-searched in New York on suspicion of visa fraud. India retaliated by removing the concrete barriers at the US embassy in New Delhi.
History also speaks about how former Indian president APJ Abdul Kalam was frisked twice on board an Air India flight at New York’s JFK Airport in 2011 even after a previous such incident involving him in 2009 despite the protocol exempting such dignitaries from searches. Former Indian defence minister George Fernandes was strip-searched twice in 2002 and 2003 at the Dulles International Airport in Washington. Bollywood superstar Shah Rukh Khan was detained in 2009 at New York Airport for two hours in an incident of alleged racial profiling.
The five-day visit by Modi to the US now seems to have put relations back on track; economically and politically.
Corporate giants from a $15tn economy that has stagnated since 2010 cannot help looking at the tantalising prospects of India’s nearly $2tn, consumer driven economy (one of the world’s 10 largest; and third largest on a purchasing power parity basis). About half a dozen large American firms are pitching for deals worth up to $5bn in defence and aerospace sectors during Modi’s visit. Washington would also want to play on the strength of an emerging power like India as a counterweight to check China’s growing influence in the region.
Make no mistake, Modi means business and is candid about that. But the corporate euphoria surrounding his landmark US visit will die down soon, but any firm invest commitment from US firms and the resultant FDI flows will not.
They are yet to come.
