Celebrating the Promise of Two Republics: U.S.–India Strengthen Ties

President Obama has just wrapped up his state visit to India as the chief guest for Republic Day and there is renewed optimism about the relationship between the world’s two largest democracies. This is good news for the information and communications technology (ICT) sector. Just a few short months ago, Prime Minister Modi met with President Obama in Washington to rekindle a relationship that had gone south over the past several years, and in between the two trips, there was a flurry of activity on both sides to ensure continued momentum.  

With ICT center stage, both sides have worked to reduce trade friction in the World Trade Organization (WTO) and have recommitted to regular bilateral dialogues affecting technology and trade. These discussions have been open, honest, and productive and they couldn’t come at a better time as Modi begins his extremely ambitious plans for a “Digital India.”  

The vision of a prime minister who firmly believes in the power of technology, Digital India is an incredibly ambitious plan. It aims to deploy broadband and mobile communications access to every village in the country, provide unique digital IDs for India’s citizens to facilitate the delivery of vital government services, and to improve quality of life through the use of technology in e-government, education, healthcare, banking, and other areas. The ICT sector shares the goals of Digital India, but we also recognize that the government of India will need to commit itself to establishing a better policy environment in which technology trade and innovation can thrive.

There are lessons to be learned from similar previous efforts in the early 1990’s, when India reassessed its closed economic model and implemented a series of strong liberalizing reforms to turn things around. In addition to monetary and fiscal policy changes, India drastically reduced tariffs and controls on imports, allowing Indian computer services firms to buy the electronics, hardware, and software they needed at competitive prices. India also encouraged foreign direct investment in joint ventures, allowed full 100 percent foreign equity in key economic sectors including information technology (IT), and created tax and other incentives at the federal and state levels targeting foreign-owned ICT companies. These reforms were necessary steps in creating the environment for India’s subsequent explosive growth in mobile telecommunications, software, and services. 

These reforms had an extraordinary effect as average GDP growth more than tripled, reducing poverty dramatically with an estimated 431 million Indians moving out of extreme poverty from 1991 to 2009. 

Today, India is again looking to technology and innovation to drive growth and prosperity. For the ICT sector, creating an ecosystem for successful growth will require addressing the need for increased transparency and predictability, as regulatory risk and uncertainty threaten to hamper global industry engagement. This includes consulting with global industry stakeholders as early in the policy-making process as possible to help minimize more costly mistakes down the road.   

In addition to rolling out the Digital India initiative, Prime Minister Modi is seeking to promote his “Make in India” campaign. The ICT sector also supports the goals of greater investment and manufacturing in India; however, the government must also recognize that both the Digital India and Make in India initiatives must make sense within the global supply chain. Neither should be advanced at the expense of global trade and India’s own consumers. Some of the programs’ goals may be achieved best by less, not more, government intervention.

The visit by President Obama has already set the stage for further policy reforms in India. The technology sector hopes that there will be similar commitments by the Modi government to build upon the momentum of the past several months and shape an environment that supports ICT trade and growth in ICT manufacturing and investment. Keeping this relationship healthy will be critical, as our countries compete and collaborate, creating innovations and opportunities globally. 

Public Policy Tags: Trade & Investment

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