Insight April 14 2010 11:13AM EST text size: TT
Geithner’s Missed Opportunities in India
The Indian market is too important to U.S. business interests to be treated so casually by U.S. officials writes columnist Gunjan Bagla
By Gunjan Bagla
This month U.S. Treasury Secretary Timothy Geithner became the latest of President Barack Obama’s cabinet members to make a quick trip to India. Having lived in New Delhi’s Friends Colony as a child when his father was an official of the Ford Foundation Geithner might have been expected to be sensitive to India’s concerns and proactive in promoting vigorous bilateral economic cooperation. The trip could also have served as an effective precursor to Obama’s planned visit to India’s capital this summer.
By most measures however Geithner’s trip did not appear to have much impact and won’t be remembered for long. Instead of taking the time to focus on the Indians’ specific detailed needs and concerns Geithner’s cookie-cutter approach was superficial and may even have seemed insincere to some in India. The Treasury Secretary also missed an opportunity to help U.S. businesses in India. In March Standard Chartered Bank STAN:LN announced intentions to raise 500 million to 750 million from Indian investors via the newly created Indian Depositary Receipts IDRs. A few years ago the India affiliate of Edinburgh-based Cairn Energy CNE:LN raised a billion dollars on India’s stock market. Geithner could have pressed for ways for U.S. companies to participate more vigorously in such opportunities.
U.S. media reports on Geithner’s visit focused on how foreign direct investment into India falls far short of FDI in China. Annual total FDI into India in 2009 was about 23 billion compared to 94 billion into China. That is the wrong measure and the wrong benchmark. Such Indian companies as Essar Steel Tata Tea TT:IN and Hindalco Industries HNDL have invested billions into the North American economy and India is among the top foreign investors in Britain. Indian investment into the U.S. doesn’t prompt the sort of outcry that we often see on Main Street when Chinese companies want to acquire American assets. Geithner and other Obama cabinet members such as Commerce Secretary Gary Locke should encourage and celebrate such investment from India.
The statement Geithner issued in Delhi spoke warmly of India’s commitment to quality higher education. While this is true the global reputation of the Indian Institutes of Technology and the Indian Institutes of Management is not new news. He could instead have mentioned India’s hot-off-the-press landmark law that guarantees the right to free education for any child between the ages of 6 and 14.
Japan has won big rail deals in India
Visiting a branchless mobile-banking service site affiliated with Eko and the State Bank of India the Treasury Secretary was shown how 42000 customers are served via 350 store outlets where the small retail store owners serve as human ATMs and use cell phones to help with transactions. According to Reuters Geithner said I don’t think that India needs any help in this area. That’s wrong. With a potentially huge base of cell-phone customers in India it’s not hard to visualize how U.S. sensor and semiconductor technology could create a special mobile phone that could authenticate both banker and customer using fingerprint recognition or other robust secure means. It would be a loss for the U.S. if innovations from Nokia NOK Siemens SIE:GR or Samsung 005930:KS fulfill such breakthrough opportunities in India.
U.S. engineering companies such as Bechtel have helped build Reliance India’s ultramodern oil refinery near Jamnagar. But U.S. government encouragement might lead to more active participation for American companies in building Indian roads bridges and airports. The government of Japan through its Japan International Corporation Agency has been cooperating with India’s Railway Ministry since 2008 in planning the Mumbai- Delhi freight corridor to connect the busiest port in India by modern rail to the markets of northern India. Japanese companies such as Mitsubishi Heavy Industries 7011:JP Toshiba 6502:JP and Hitachi 6501:JP will benefit from lucrative construction contracts. Japanese companies will locate new manufacturing sites along key sections of this corridor. India would be receptive to a bold U.S. initiative say to modernize Mumbai or Bangalore.
In the 1960’s India’s farmers and citizens benefited hugely from U.S. innovation in what became known as the Green Revolution. American Norman Borlaug was awarded the Padma Vibushan India’s second-highest civilian honor as a result. Forty years later U.S. farming and food-processing techniques have become far more advanced and have much to offer to India. My own client Paramount Farms the world’s largest grower and processor of pistachios has made a great start with California-grown pistachios now available via the wholesale markets such as Khari Baoli in Delhi.
India’s needs: defense entertainment
The new U.S.-India Economic and Financial Partnership launched during Geithner’s visit is vague and unspecific. The only real commitment made public is to meet again. This is not enough if India is to rise from being America’s 14th-largest trading partner to the top 10. Two sectors where U.S. exports could skyrocket are defense and entertainment.
U.S. companies are generally free to sell defense hardware in India but not in China. While India could certainly streamline its defense-acquisition processes the more immediate bottlenecks are U.S. export-control procedures that have lagged the visions of U.S. political leaders. For example some of the most modern defense technologies that set U.S. suppliers apart from others are not approved for sale to India. This has created opportunities for newcomers: Israel which was not even a player in the Indian defense market 10 years ago has now supplanted Russia as India’s major defense supplier.
While Google GOOG pulls out of China and Hollywood releases are tightly controlled by Beijing India places no such limitations of censorship or trade on U.S. companies. Collaboration between Hollywood and Bollywood is skyrocketing. Steven Spielberg the king of American cinema has accepted Indian capital for DreamWorks from Anil Ambani’s Reliance ADAG. Geithner would have done well to acknowledge the growing two-way alignment around entertainment during his visit to Mumbai the center for both entertainment and finance in India.
Success in India is about both nuance and intent. Geithner’s trip fell short on both counts. India is too important to U.S. interests to be treated casually. President Obama needs to direct his cabinet to take India seriously and get beyond talk of democracy and a free press.
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Bagla is managing director at Amritt a business consultancy based in Cerritos Calif.
Last updated: July 9th, 2024
