The United States and India must strive to create a $1 trillion economic relationship by 2030 not because it is easy, but because it is hard—to paraphrase that great American President and friend of India, John F. Kennedy.
An ambitious bilateral agenda will help both countries: it will put in place thinking, planning, innovation and execution by the private sector and entrepreneurs of both nations for mutual benefit and beyond. It will lay out a plan for the Indian economy to achieve its potential and for the U.S. to serve the needs of workers at home and consumers in the emerging markets of the world.
A joint agenda will necessitate intense collaboration by American and Indian companies across sectors as varied as technology and agriculture. And it will require governments and non-profits to move dramatically out of their comfort zones and welcome ideas, skills and execution from new sources.
How can this be achieved? Countless papers and books have been written about the enigma of India-U.S. relations, about its opportunities, challenges and unrealised potential. Indians and Americans have spoken at conferences and in the media about the reasons why two countries— both managing diversity at a level that few other nations understand, yet committed to democracy and capitalism—cannot come together more often on the great issues of the day.
But the reality, as most experts understand, is that the short-term objectives of each nation have never been aligned. And until the information technology revolution in India began in the 1990s, there was little deep and sustained interaction between the people of the U.S. and India.
Today, the U.S. is the world’s largest economy and India is the world’s third largest by purchasing power parity. In 2030, the U.S. will, most likely, be the world’s second largest economy, after China, and India will remain in third place. Bilateral trade worth $1 trillion between India and the U.S. may not alter the rankings, but it will dramatically boost the size of both economies.
However, the current trade between the two nations, which is about $120 billion, will not necessarily indicate the pathway to this eventual $1 trillion relationship. Most CEOs and analysts have so far only predicted slow and steady growth that can gradually lead to $500 billion in bilateral trade and investment, as U.S. Vice President Joe Biden has suggested.
That will not help India to transform its economy or America to be better prepared for global competition. Instead, the India-U.S. relationship has to look like the relationship the U.S. has with countries such as Mexico, South Korea and Israel. These countries are not part of the G7 but have deep-seated economic ties with the U.S, and a consistency in policy and collaboration that the U.S. and India must strive for.
A goal of $1 trillion can accelerate an economic growth curve that rivals the “hockey stick” growth curve promised by startups everywhere. For precedent, we can look to the impact of economic liberalisation and the IT revolution. From 1991-1992, when India embarked on economic reforms, to 1996, when outsourcing contracts began to accelerate, foreign direct investment in India increased 40 fold—from $132 million to $5.3 billion.
This, then, is the lodestar for the bilateral’s future. India and the U.S. must look for the correct combination of disruptive innovation, business model transformation, and robust policy reform that can lead to a similar economic acceleration and possibly a $1 trillion partnership.