By Elizabeth Foster
Secretary Clinton’s visit to India on July 19 and President Obama’s own visit in November last year demonstrated that the U.S.-India relationship continues to be a priority for the Obama Administration. This relationship is also viewed with growing importance on Capitol Hill, where the Senate India Caucus has grown to 38 members since its founding in 2004. There is, however, a lingering perception among some Americans that India is partially responsible for the outsourcing of American jobs. As long as high unemployment persists, and job creation remains the foremost concern of a majority of Americans, the perception of the relationship as a one-way street could present an impediment to initiatives that would foster greater Indian investment in the American economy. To remedy this, American officials must emphasize the tangible economic benefits Americans derive from Indian investment.
Jose Fernandez, Assistant Secretary of State for Economic, Energy, and Business Affairs has said that “foreign investment will be one of the most important drivers for the creation of new jobs” in the U.S. economy. Indian investment exemplifies this trend. Indian companies have saved over 40,000 American jobs by acquiring failing American companies, and altogether Indian companies employ over 60,000 Americans across the U.S according to a 2010 FICCI study (PDF).
Many of these jobs have been created in towns reliant on industry and manufacturing that have been hit hard by the recession. In these areas, Indian investment can have a huge impact. For example, Essel Propack, an Indian-based manufacturer of laminated plastic tubes, has invested over $62 million and created 206 jobs in Danville, Virginia (PDF) over the past nine years. For Danville, a southern Virginia city hard-hit by the recession, this kind of investment is invaluable. Or, take the Essar Group, which invested over $1.6 billion in the floundering Minnesota Steel Industries, and now employs over 7,200 people in the United States.
The Indian economy is expected to sustain a high growth rate over the next fifteen years, and could potentially grow to the third largest economy in the world. As the Indian private sector grows, Indian companies will seek lucrative opportunities outside of India to invest their resources. It is critical for the U.S. to develop a business climate that encourages and welcomes Indian investment in the American economy.
One way to encourage this climate would be the passage of the Bilateral Investment Treaty (PDF) . The BIT would be a huge boon for Indian investment in the U.S., and would also provide protection for U.S. companies investing in India. In June, U.S. Trade Representative Ron Kirk and Indian commerce and industry minister Anand Sharma agreed to fast-track negotiations on the BIT. In the current political climate, getting the necessary 2/3 of the U.S. Senate to vote in favor of the treaty may be daunting. Yet if both the private sector and the U.S. Government can effectively make the case that Indian investment benefits everyday Americans, there is a possibility for a shift in public opinion that could make the passage of this treaty more likely. Passage of the BIT and the encouragement of Indian investment in the U.S. would have benefits for both economies and would further boost what President Obama says will be one of our “defining partnerships” of the 21st century.
Elizabeth Foster is an intern scholar in the Wadhwani Chair in U.S.-India Policy Studies.