Policy Analysis No. 713

India and the United States: How Individuals and Corporations Have Driven Indo-U.S. Relations

Foreign policy discussions tend to focus on government policies and diplomatic initiatives. But relations between India and the United States have been driven substantially by corporations and individuals, with the two nations’ governments trailing behind and catching up only now. During the Cold War, India’s quasimilitary relationship with the Soviet Union led to cool Indo-U.S. governmental relations. Despite this, Indian citizens went in droves to the United States for education and employment, and the United States became India’s largest trade partner. After India’s economic reforms in 1991, two-way flows of individuals and corporate activity greatly accelerated. U.S. corporations became an important foreign policy lobby for India in the U.S. Congress. The Indian diaspora in the United States grew rapidly to 3 million, and these people are among the richest, best-educated ethnic groups in the United States, and hence politically influential, too.

The Indian and U.S. governments, far apart during the Cold War, have now started building on the solid foundation created by individuals and corporations. The George W. Bush–Manmohan Singh nuclear deal of 2005 was a landmark event. Later, President Obama backed India for a permanent seat in the United Nations Security Council.

Individuals and corporations have also taken the lead in expanding India’s footprint in other countries across the globe. The India-based Tata group is now the largest private-sector employer in the United Kingdom. As in the Indo-U.S. case, Sino-Indian commercial and individual relationships have also grown despite cool governmental relations, and could one day lead to warmer political relations.

The lesson is that good economic policy is good foreign policy, too. Indian foreign policy should promote measures that expand individual and corporate ties with the United States, as well as other countries. This means embracing globalization and emphasizing international exchanges in trade, investment, and the movement of people. India must see the movement of talented Indians abroad as mutually enriching “brain circulation,” not a “brain drain.” Even those Indians who do not return to India become a foreign policy asset in the shape of a powerful diaspora. Indian diplomacy needs to pay more attention to harnessing this asset.

Swaminathan Anklesaria Aiyar is a Research Fellow at the Cato Institute’s Centre for Global Liberty and Prosperity.