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India is open for business: Should the United States continue to invest?

India is open for business: Should the United States continue to invest?

The Indian Prime Minister Narendra Modi’s recent visit to the United States (U.S.) has generated a significant amount of buzz in both India and the U.S. The Prime Minister actively sought new private and public investment in India from the U.S. The message is unmistakably clear: India is open for and seeks continued investment from the U.S.

But should the U.S. invest in India? This is a difficult question to answer pithily because the question of investment and the implicit support it connotes for Modi’s government and its view of India cannot be divorced from the Prime Minister’s political record thus far and geopolitical events that are buffeting our world today.

Let us first take a look at Modi’s record in India. There is no gainsaying the fact that Modi has a done a lot to promote economic development for many Indians and he has also gone to great lengths to substantially improve India’s hitherto crumbling infrastructure. As a result of these and other actions, many Indians are now much better off than they were in 2014 when Modi first came to power.

Stacked up against these admirable accomplishments is his assault on democracy, civil society, and minority rights. He has gone out of his way to vilify Muslims, cast them as anti-India, and he also attempted to revoke the citizenship of some Indians in the state of Assam. As a result, in the Economist Intelligence Unit’s 2022 Democracy Index, India is considered to be a “flawed democracy” and in the 2023 World Press Freedom Index, India ranks a lowly 161 out of the 180 nations surveyed. It is in the context of these disconcerting numbers that one needs to view Harvard professor Maya Jasanoff’s stinging denunciation of Modi and his government.

Does this saturnine state of affairs mean that the U.S. ought not to continue to invest in India? This is where geopolitical events enter the picture. The recent rise of China, enabled, to some degree by the U.S., and Russia’s invasion of Ukraine has led President Biden to view foreign policy as battle between democracy and autocracy. In this battle, President Biden has created a coalition of like-minded (mostly Western) nations that have collectively imposed sanctions on Russia, put a cap on the sale of Russian oil, and armed Ukraine. To combat China, initially President Trump and now President Biden have instituted stringent export controls, encouraged the Committee on Foreign Investment in the U.S. to scrutinize Chinese deals carefully, and have reiterated their support for Taiwan in the event of a military invasion by China.

President Biden has made several attempts to get India to subscribe to his, and more generally, the West’s cause against Russia and China. So far, India has done a delicate dance, refusing to condemn Putin’s war with Ukraine, regularly buying discounted Russian oil, and, at the same time, participating in the activities of the U.S. led Quadrilateral Security Dialog or Quad.

Similarly, even though India is suspicious of China and has had regular border skirmishes with it, Modi is reluctant to openly join a U.S. led club whose avowed objective is to contain China and thereby preclude a victory of autocracy over democracy.

Given these less-than-ideal circumstances, the Biden administration is not in a position to base its foreign policy by making friends exclusively with nations with unimpeachable democratic credentials. In addition, in the multipolar world in which we now live, the U.S. and its allies (Canada, the European Union, and the Quad) are not in a position to dominate the world in the way that the U.S. did after World War II and briefly after the fall of the Soviet Union in 1991. The U.S. urgently needs allies in the developing world and despite all its imperfections, there is at present no better ally than India, the world’s most populous democracy. In fact, in today’s world, spurning India would weaken the fight to strengthen democracy globally. Put differently, U.S. foreign policy must confront tradeoffs.

Just as official U.S. policy needs to engage constructively with India, warts notwithstanding, U.S. public and private entities need to invest in India. Not doing so would be imprudent in the sense of Voltaire who reminded us to not let the perfect be the enemy of the good.

Batabyal is a Distinguished Professor, the Arthur J. Gosnell professor of economics, and the Interim Head of the Sustainability Department, all at RIT, but these views are his own.