Despite exports from Maryland to India decreasing by almost 15 percent in recent years, Maryland businesses are optimistic about growth in trade between the two ahead of Indian Prime Minister Narendra Modi’s visit to Washington.
Modi, who was elected earlier this year, will make his inaugural trip to Washington Sept. 29-30. It comes amid a downward trend in Maryland and India trade following a period of stalled diplomatic relations between the U.S. and India.
However, Maryland businesses are hopeful, based on Modi’s priorities and a recent trade delegation from the state, that they can benefit from trade with one of the largest economies in the world.
Economic Ties
Maryland exports to India have decreased from $233 million in 2010 to $202 million in 2013, according to the U.S. Census Bureau. During the same period, imports from India fell from $465 million to $416 million, a drop of more than 10 percent.
But Maryland is looking to change that.
One sign is an upcoming Montgomery County delegation to India, said Dr. Vinod Jain, president and CEO at the Maryland-based India-US World Affairs Institute.
The delegation, which will be led by County Executive Isiah Leggett and leaves for India in November, is focusing on culture, education and business, Jain said.
Currently, trade between the two varies wildly from information technology to coffee. For example, the U.S. subsidiary of the Indian IT company Infosys has its headquarters in Rockville, while Eight O’ Clock Coffee, which has a production plant in Landover, was bought by the Indian company Tata Coffee in 2005.
Jain said the upcoming delegation would focus on improving trade and investment specifically in the biotechnology, manufacturing and pharmaceutical industries.
The trip is looking to build on another Maryland trade delegation in 2011, when Gov. Martin O’Malley led more than 100 business leaders, educators and government officials to India.
It was the largest delegation to India ever sent from Maryland, and the first ever by a sitting Maryland governor. Jain believes it was among the largest sent by any U.S. state to India.
The trade delegation resulted in business deals worth almost $60 million being signed, a press release from the governor’s office said.
The hope among analysts is that trade delegations can overcome some of the hurdles in improving economic ties between the two.
Despite being the third largest economy in the world based on a metric known as the purchasing power parity (PPP), India ranks only 18 out of Maryland’s top 25 international trading partners in terms of exports from the state. That is well below exports from Maryland to smaller economies like Saudi Arabia and Belgium, according to data from the Census Bureau.
This can primarily be explained by the internal situation in India under the previous government led by Manmohan Singh, said Elisha Pulivarti, executive director at the Maryland India Business Roundtable.
“There were a lot of problems in India,” said Pulivarti, mentioning low investor confidence because of the perception of high corruption and bureaucratic red tape.
Based on 2013 data, India ranked 186 out of 189 countries when it came to enforcing contracts, according to the World Bank’s ease of doing business ranking. Only Timor-Leste (East Timor), Myanmar and Angola ranked lower, all countries that have suffered major internal conflicts in the past decade.
However, there is optimism that the issues can be overcome and Modi’s trip can foster better trade relations between India and Maryland.
“Economic ties are No. 1 on the list,” said Milan Vaishnav, an associate at the South Asia Program at the Carnegie Endowment for International Peace, a Washington-based think tank.
One Maryland business that made the 2011 trip to India was Shah and Kishore, a Rockville-based immigration law firm.
Calling the delegation a success and saying the results from the trip would take longer than three years to have an impact on Maryland, Devang Shah, the firm’s managing partner, said the future for Maryland-India trade is likely to improve.
Much of the optimism is based on Modi’s reputation as a business-friendly leader willing to create investor-friendly policies, said Shah.
Diplomatic Tensions
But bilateral ties must overcome recent diplomatic tensions at the national level, said Michael Kugelman, senior program associate for South and Southeast Asia at the Woodrow Wilson Center, a Washington-based think tank.
“In recent months relations have suffered from some of their greatest tensions in years, and certainly since the early 1990s, when decades of turbulent bilateral ties yielded to a new era of cooperation,” said Kugelman, in an email.
Diplomatic relations stalled last year when an Indian diplomat, Devyani Khobragade, was arrested on charges of visa fraud and underpaying her nanny.
While Khobragade was eventually released to India, Indians were furious over what they perceived as high-handed tactics used by U.S. authorities, including her being strip-searched.
The Indian government responded to the arrest by, at one point, removing security barricades in front of the U.S. embassy in New Delhi and refusing to meet a visiting U.S. congressional delegation.
The meeting between President Barack Obama and Modi is likely to also, at least initially, focus on publicly making the Indian prime minister feel welcome in the U.S., said Jain from the India-US World Affairs Institute.
In 2005, Modi, at that time the chief minister of the Indian state of Gujarat, was the first person denied a U.S. visa under the 1998 International Religious Freedom Act. The primary reason were the riots in Gujarat in 2002 between Muslims and Hindus, which led to almost 1,000 people being killed.
While there was no evidence that Modi, from a Hindu nationalist party, was responsible for the killing of hundred of Muslims, “he was responsible for the performance of state institutions at that time,” said David Mulford, U.S. ambassador to India from 2004-2009, in a statement soon after the visa rejection.
There is an expectation that Modi’s trip will focus more on “ceremony than substance” in order to overcome that incident, said Vaishnav, from the Carnegie Endowment for International Peace.
Optimism Moving Forward
As the Indian economy grows under Modi, it is imperative Maryland position itself to be the “gateway into the U.S.,” said Shah, from the law firm.
India’s economy is expected to become a “global economic giant” by 2050, with a GDP of $ 34 trillion – which would be more than three times that of Brazil – according to the “World in 2050,” a report by the accounting firm Price Waterhouse.
Economic ties between the two are “becoming more and more important,” he said, with the hope being that Maryland can benefit from India’s expected growth.
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