Why U.S.-India Ties Require Patience, Spur Hopes

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As American companies look to expand globally, many have turned to India. So far this year, India's economy is growing at a pace that's faster than 5%; economists and analysts are forecasting 6% for 2009. The Indian government's ambitious new budget］aims to restore annual growth of 9% in the near future. India now ranks as the 20th largest U.S. trading partner. Given the pace of business deals this year, it's not hard to imagine India breaking into the top 10.

The Problem with Protectionism

Yet major obstacles remain. American corporations continue to attract many of India's best and brightest. They might be working in Bangalore or Buffalo at IBM (IBM), Boeing, Google (GOOG), or Microsoft (MSFT). The risk is that protectionist U.S. laws could make Indians less enthusiastic about working for U.S.-based multinational companies and prevent those companies from hiring the talent they need to be globally competitive. It could also seriously damage business relations between the U.S. and India.

Some U.S. regulations have already put American companies at a competitive disadvantage. Global rivals can often skirt U.S. regulations—notably the Sarbanes-Oxley Act, Foreign Corrupt Practices, and International Traffic in Arms Regulations (ITAR). By making it harder for U.S. companies to hire Indian workers, either as employees or through contract suppliers, Washington could strip those companies of a competitive weapon. That would be unfortunate.

India has to shed some of its old-fashioned ways, too. For example: Barriers against U.S. companies, such as import tariffs, still make it hard to do business in India. Harley Davidson (HOG) has faced hurdles selling its motorcycles in recent years. And while Paramount Farms, the world's largest supplier of pistachios and almonds, has made some inroads with California pistachios in India, Indian growers of cashew nuts and walnuts have freer access to U.S. markets. India could give more U.S. companies a fairer shake by reforming import taxes. (Full disclosure: Paramount Farms is one of my clients.) The two countries need to work together to ensure there's progress on the Doha round of international trade agreements.

Despite the concerns of Indians about trade ties with a U.S. Administration led by Democrats, many in India have high expectations for improving ties. One reason: Indians view Secretary of State Hillary Rodham Clinton favorably. In several official and personal visits to India, Hillary, Bill, and Chelsea have won the hearts of their hosts. Secretary of State Clinton's impending visit to Delhi and Mumbai, beginning on July 19, could quiet the lingering concerns about the current Administration.

I usually coach my U.S. clients to be patient with India, since decisions there can take longer than they might have initially anticipated. But here I advise readers from India to be patient with the Obama Administration. I believe we could see some serious and substantial results by the end of the year. President Clinton did not visit India until the final year of his second term, reflecting India's standing with the U.S. back then. Things are different now. Obama may take a few more months to flesh out his India strategy, but I expect him to be more aggressive in his outreach than past Democratic Presidents.

Bagla is managing director at Amritt, a business consultancy based in Cerritos, Calif.

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