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In almost every area, it’s undeniable that U.S.-India ties have been transformed over the past two decades, said Ambassador Kenneth Juster, who left his post as the top U.S. diplomat in Delhi in January.
But even as the world’s two largest democracies grow increasingly aligned on security issues in the tense and strategic Indo-Pacific region, their economic entwinement has moved ahead more slowly than expected, he told a World Affairs Council of Atlanta audience July 8.
While bilateral goods trade has grown from $20 billion when Mr. Juster served as undersecretary of commerce in 2001 to $147 billion last year, the outgoing envoy said President Joe Biden may yet find trade to be an “area of frustration” as India retrenches toward protectionist tendencies that have long kept the vast, diverse country from enjoying even faster growth.
“India’s economy unfortunately has not opened as readily as we think it’s in their own interest to do,” Mr. Juster said, registering his personal disappointment at the Trump administration’s inability to land even a mini-trade deal with India during his tenure.
“While levels of trade and investment continue to rise … it falls far short of what the potential is for these two countries,” said Mr. Juster.
It’s not that India hasn’t been moving forward; its first wave of reform started in 1991 with the dismantling of the “license raj” that removed much investment-stifling bureaucracy. Prime Minister Narendra Modi, who made a name for himself by opening the door for foreign investors in his home state of Gujarat, took a similar approach to axing regulation at the national level upon taking office in 2014. A tax overhaul and new bankruptcy law helped the country ascend the World Bank’s Doing Business rankings.
Since about 2018, however, Mr. Juster has seen the steady but slow tide change course, perhaps breeding second thoughts for investors that have poured into the country during Mr. Modi’s tenure.
“India has now started to gradually close and raise tariff and non-tariff barriers to trade; it still has as well a less-than-predictable regulatory regime, so it’s not always regarded as the easiest place to do business. There are also challenges of infrastructure and labor law issues, and U.S. companies have to make a decision: what’s the long-term projection for India and how willing are they to deal with some of the short-term obstacles and difficulties of operating there,” Mr. Juster told Charles Shapiro, the World Affairs Council’s president, in a conversation via Zoom.
Recently, proposed agricultural reforms welcomed by foreign economists, have proven politically untenable after sparking monthslong protests in the capital by agitated farmers from all over the country.
Technology is another area where India has embraced an increasingly nationalistic stance, especially in the wake of a skirmish with China in a Himalayan border region that killed 20 Indian troops. Hundreds of Chinese smartphone apps have been blocked, a sign that the country is linking rather its security aims and economic initiatives in new ways.
Meanwhile, the country has been pitching itself as an alternative to China for U.S. companies, particularly in the manufacture of smartphones, medicines and other items deemed vulnerable to supply-chain shocks like those experienced during the COVID-19 pandemic.
Defense industry ties with the U.S. are also growing. Even as India retains a posture of “strategic autonomy,” it has embraced more American weapons, planes and technology.
“It has slowly diversified, and in the last 15 years U.S. military sales have gone from virtually zero to over $20 billion, and we significantly added about $3.5 billion in my time as ambassador,” Mr. Juster said, though he noted that the interoperability with legacy systems purchased from Russia, a longtime partner, could be a challenge.
“You are not just trying to accumulate equipment. You need to build systems and networks that can talk to each other,” he said. “And it’s tough to do if you have different equipment from different countries including some which are adversaries and won’t talk to each other.”
In some ways, he said, Indian foreign policy is becoming more targeted; it remains non-aligned, but amid perceived threats from China and Pakistan, India is deepening relations with democracies like the U.S., Japan and Australia, which it has joined in the recently revived Quadrilateral Security Dialogue, known as the Quad.
“(India) views the world as a multipolar place where India can have leverage because of its ability to have good relationships with the countries around it and throughout the world. I think, though, the world is moving in a direction that may not be as favorable to India’s perspective.”
Given that it’s not a country in crisis, India sometimes can be put on the back burner when it comes to U.S. foreign policy, Mr. Juster said. In his view, that would be a mistake, as India will soon be the world’s most populous country, with 1.4 billion people, and thus will be key to tackling global issues like climate change, terrorism, energy security, space governance and much more.
“A strong India-US relationship is a key pillar for strategic prosperity in that region,” he said.
For his successor (which will be Los Angeles Mayor Eric Garcetti if his nomination is confirmed by the Senate), Mr. Juster recommended getting out of the embassy and getting to know a land that “in some respects is many countries rolled up in to one.”
As ambassador, he managed not only the embassy but one of the largest U.S. missions in the world, comprising four consulates, 2,500 employees and more than 30 government agencies and offices.
One other soft power tool he recommended tapping into: sports diplomacy.
“I was very big on sports diplomacy when I was in India, from cricket to badminton to field hockey and football (what we call soccer), and we also hosted the National Basketball Association for its first exhibition games in India,” he said. Mr. Juster enjoyed his own moment in the spotlight, showing off his own considerable basketball skills in a viral video welcoming the NBA’s arrival.
This week, two weeks after he addressed the World Affairs Council, Mr. Juster was named to the global advisory board of the U.S. India Business Council, adding to a long list of positions driving U.S.-India commercial relations.
While at the Commerce Department heading up the Bureau of Industry and Security in the early 2000s, he co-founded and served as U.S. chair of the U.S.-India High Technology Cooperation Group.
Watch the full recording of the event, sponsored by Atlanta-based Novelis Inc., here:
