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The Technological Ties Between India-US And Their Future Ahead – IMPRI Impact And Policy Research Institute

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The Technological Ties Between India-US and Their Future Ahead

Anil Trigunayat

For India, a forward-looking policy ecosystem would not only attract more investment but also foster innovation and R&D, essential for its technological advancement.

Introduction to India-U.S. relationship

In the fast-accelerating global technology landscape, the India-U.S. relationship stands as a crucial axis, set to influence not only bilateral ties but also the broader technological future. The emergence of this partnership as a response to geopolitical shifts, particularly the U.S.’s increasing concerns about China, has heralded a new era of strategic cooperation.

The U.S. has emerged as India’s largest trading partner, with the total bilateral trade of goods and services growing significantly to USD 192 in 2022, and expected to reach USD 300 billion in the next five years. This increase is not merely a function of trade dynamics but a reflection of the deeper strategic ties that the two nations are forging. It underscores the potential for further collaboration, particularly in the technology sector, which is set to become the backbone of this relationship.

The India-U.S. Tech Alliance: A Strategic Imperative

The significance of the India-U.S. tech ties is underscored by recent initiatives such as the Initiative on Critical and Emerging Technology (iCET). Launched in May 2022 and inaugurated in January 2023, iCET represents a concerted effort to elevate and expand strategic technology partnerships and defence industrial cooperation. Under this initiative, the U.S. seeks to diversify its technological partnerships and India aims to solidify its position as a key global player.

Further emphasizing the importance of this alliance, a major strategic outcome of the bilateral discussion was the recent facilitation of a robust semiconductor manufacturing ecosystem in India. This includes initiatives by American companies to train a significant number of Indian engineers in the semiconductor field and contribute to the growth of India’s semiconductor industry.

Sectoral case studies

The e-commerce sector, a pivotal area of collaboration, has witnessed significant advancements. A collaboration like the India-U.S. Commercial Dialogue in March 2023 will help leverage e-commerce platforms to support local exporters, manufacturers, and MSMEs in reaching potential international buyers, and also aligning with the Foreign Trade Policy 2023. As a noteworthy reference, leading international retailers have notably increased their engagement with India, reflecting a growing economic bond. This includes a significant rise in imports from India and multi-billion dollar investments in the country’s e-commerce and fintech sectors, contributing to enhanced employment opportunities.

Another sector is space tech, which has become a propelling case of both tech superiority and entrepreneurial innovation worldwide. India and the US’s commitment to mutually benefit from the opportunity can be seen in the recent Space Situational Agreement, with the goal of ensuring the long-term sustainability of outer space activities and protecting each other’s satellites from artificial or natural threats.

While both governments have signed various defence agreements amidst the growing global geopolitical uncertainty, the role of private players in the ecosystem has also amped up. India’s approval of its Space Policy in 2023 significantly boosted the Indian private space industry, making it an attractive investment opportunity for investors, especially from the US. The engagement is expected to further diversify with the exchange of both talent and innovation trends.

Keeping a Balanced Approach: A Policy Imperative

The Computer & Communications Industry Association (CCIA), which represents some of the major tech entities of US, while appreciating the reinvigorated efforts to ramp up trade through bilateral initiatives, flagged in note, the imbalance and misalignment in the U.S.-India economic and tech relationship. Describing India’s often “protectionist” approach, it cites the higher taxation of foreign digital services by India, the guidelines on sharing of geospatial data, which it says provides preferential treatment to Indian companies, and the market entry barriers to foreign cloud services, amongst other references.

The recent policy and regulatory changes are being closely observed, especially in their approach towards large technology companies. While there is a growing concern about the influence and practices of big tech, the development of and approach towards policies like the Digital India Act and the Digital Competition Act reflect a cautious approach toward ensuring user security and fair competition. These acts aim to address potential issues like user harm and anti-competitive practices in the tech sector respectively.

While these developments have also prompted discussions among US investors and other stakeholders about the effectiveness and implications of such policies, including the E-Commerce Policy, they can act as a progressive step. These upcoming policies strive for a balanced approach in policymaking, taking into consideration the various perspectives and impacts on the technology industry and its consumers.

For India, a forward-looking policy ecosystem would not only attract more investment but also foster innovation and R&D, essential for its technological advancement. The regulatory framework needs to be conducive to businesses, ensuring ease of operations for both domestic and foreign players. This approach is crucial in sectors where rapid innovation and adaptability are vital.

For the USA, it must balance its strategic edge with open markets and innovation. This means collaborating on critical technologies like AI, promoting open standards, fostering talent mobility, and addressing data privacy concerns. By focusing on collaborative efforts in defence, green tech, and healthcare, the US can unlock the full potential of this partnership for both nations’ prosperity and global impact.

The recent MoU ‘Innovation Handshake’, signed between both countries is a welcoming step in the above process. It aims to connect the two sides’ dynamic startup ecosystems, address specific regulatory hurdles to cooperation, share information and best practices for startup fundraising, and promote innovation and job growth.

Conclusion: Formulating a Balance and Embracing a Progressive Partnership

Balancing national security concerns with the openness required for technological exchange, managing competitive aspects of the relationship, and ensuring equitable benefits from joint ventures are some of the issues that need careful navigation. However, these challenges also present opportunities – to build a more resilient tech ecosystem, to foster innovation that aligns with democratic values, and to create a model of partnership that can be emulated globally.

As India and the U.S. continue to strengthen their tech alliance, the focus should be on building a relationship that is not just transactional but transformative. The tech partnership between both countries, if nurtured with the right policies and collaborative spirit, has the potential to be a cornerstone in shaping a future where technology not only drives economic growth but also reimagines a more connected and equitable world.

Anil Trigunayat is a Retd. IFS Officer, and has served as the trade commissioner in New York, USA. He is also an honorary member of the International Trade Council, Brussels.

The article was first published in News 24 as India’s Tech Ties With US And What Will Drive The Relationship Ahead on January 22nd, 2024.

Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.

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Acknowledgment: This article was posted by Anubhuti Mahanta, a research intern at IMPRI.

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