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TRUE DRIVER OF INDIA-US PARTNERSHIP

Arvind Panagariya

The Economic Times, June 23, 2010

Following the conclusion of the first India-US strategic dialogue , commentators in the Indian press have nearly uniformly expressed frustration with the lack of action under the Obama administration . To judge whether this dissatisfaction is grounded in reality, we must first ask whether each country has enough reason to invest in a close relationship with the other in the first place.

From the Indian perspective, there seem to be sufficient reasons for an affirmative answer. Accounting for almost a quarter of the world's GDP, the United States is by far the largest economy in the world. It is also the only super power on the globe and likely to remain so in the foreseeable future. It is a democracy that values other democracies. And, finally, it is by far the largest single recipient of India exports of goods and services. If we seek rising economic prosperity and increasing voice in the world affairs, America is a good bet.

An affirmative answer seems less clear-cut from the US perspective, at least on the surface. True, India is by far the world's largest democracy. But this cannot be a game changer by itself since it has been true for the last 60 years. At $1.25 trillion, Indian economy is just a little more than 2% of the world economy . Globally, it ranks a low 11th in terms of the economic size, ranking behind China and Brazil. Above all, India accounts for less than 2% of the US exports and imports.

Seen in this context, the puzzle is not why the Obama administration is not doing more to promote ties with India but how India has come to command so much attention on the global stage. The main explanation of this puzzle lies in where the United States sees India going in the next 15 to 20 years.

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