Geography Reference
In-Depth Information
Economic Linkages
For much of the past decade, economic ties were frequently lauded as the force
pulling the United States and India together; they would provide the 'ballast' for
the relationship, in the conventional formulation. The economic liberalization
New Delhi initiated in 1991 persuaded many in the American business
community that India was the next 'emerging market'. Indeed, President
Clinton's Commerce Department awarded India this designation, and until
recently the department had a larger presence in India than anywhere else in the
world.
The success of India's information technology sector, and the high percentage
of Indians and Indian-Americans in California's Silicon Valley and other US
high-tech centers, lent further credence to the belief that India represented a new
and largely untapped reservoir of opportunity. Trade and investment, the Indian
ambassador in Washington observed in mid-2001, had emerged as 'the prime
mover' in the bilateral relationship.
27
Alas, harsh realities have yet to catch up to the enticing expectations. Today,
ten years after the inauguration of India's reform program, the country remains a
bit player in the overall American economic picture. While the United States is
India's largest trade partner and source of foreign investment, two-way trade
between the two countries still represents less than one per cent of America's
total overseas commerce. Trade between India and the United States in 2000
totaled $14.4 billion, that between China and the United States $116.2 billion.
28
This disparity is all the more striking given India's inherent advantages over
China, including a developed legal system and the prevalence of the English
language. Belgium buys nearly three and one-half times as much from American
producers as does India, with a hundred times the population. Thailand on a per
capita basis purchases 23 times as much
29
from the United States as does India,
Malaysia 111 times as much. The investment picture is only marginally less
bleak. While US direct investment in India has grown over the past decade, the
city of Shanghai still draws more American investment than all of India. Worse
yet, many of the US firms that flocked to India in the mid-1990s—by some
accounts, a majority—have since packed their bags and returned home to await a
more propitious business climate.
For many American business people, the difficulties experienced in
Maharashtra by the US energy giant Enron have become a metaphor for the
frustrations of doing business in India. The relative merits of the grievances of
the Texas-based corporation and the Maharashtra State Electricity Board have by
now become almost irrelevant. Instead, Enron has become a cautionary story for
American investors and corporate chieftains. Influenced by Enron's travails,
many US companies appear to have concluded that doing business in India is
just not worth the aggravation.
