THE IND-US FACTOR
06 December 2010
This week our Indian correspondent takes a look at how history has hampered the development of the electronics industry, and how now, with fresh politcal backing from the US, it is now in a position to reach its full potential.
India derives its name from the mighty Indus (Sindhu in Hindi) River that originates from near Lake Mansarovar in Tibet, and flows some 3000 Kilometres through Ladakh and Kashmir in India, and then through virtually the complete North East – South West axis of Pakistan before disgorging its waters into the Arabian Sea near the port city of Karachi.
The Indus River has many ‘facets’. In parts of Ladakh in India it is a placid narrow stream just some 10 metres in width. A very popular recent Bollywood movie was filmed along this stretch. Upstream from this point it takes in boiling, gurgling waters from a few hot springs pointing to the possibility of Geothermal Energy availability here. Downstream it passes through some pretty spectacular mountainous territory, and develops some rather rapid streams giving avid tourists the pleasure of white water rafting. As it passes down into Pakistan, fed by various tributaries, it becomes a really wide fast flowing river. When fed by torrential monsoon rain waters it becomes an angry ferocious demon causing widespread damage as was witnessed in the recent floods in Pakistan. This then was the river that reportedly finally stopped the mighty conquering army of Alexander the Great.
The many facets of the great River sort of exemplifies the highs and lows of the India – US relationship (THE IND-US FACTOR) over the years. As we all know a certain C. Columbus Esq. set out to find a new western sea route to India, sort of got lost along the way and bingo, America and ‘Red Indians’ were ‘discovered’, setting up the uncanny India – US relationship.
Over the years there have been links between India and the US. History records that (Asian) Indian Slaves were carried to the US by the British and French as early as the 17th Century.
There was Lord Baltimore (Founder of Maryland), a Director of the British East India Company in the 1620’s. Elihu Yale (Founder of Yale University) was the Governor of Madras for the East India Company from 1687 to 1692. Lord Cornwallis who led the defeated British forces at the famous battle of Yorktown in the year 1781 was then in 1786 appointed the Governor General in India. Most interesting is the recorded fact that a certain enterprising Frederic Tudor established an ice export business from Maine to Calcutta in 1833.
After India’s independence in 1947, it became a ‘planned economy’ state with licensing and currency controls and most industrial activities were reserved for the Public sector. The world at large put India squarely into the SOVIET / COMECON basket. Bright young Indian students in large numbers finding little of a challenge in the country started (arguably with some help from knowledgeable Americans and appropriate scholarships) to go to the US for further studies and then stayed on to become a part of the foundation of ‘Silicon Valley’.
With the Indian economy a near basket case for many years, dependent on aid and food supply prop ups, it was relegated to the minor league and the Gandhian moralising attitude of India’s leaders had become too much for the Americans to bear! India US relations reached a new low in the 1970’s and 1980’s during the Nixon and Reagan administrations largely due to President Nixon cozying up to the Chinese with the help of Pakistan and President Reagan getting miffed at trenchant Indian criticism (now proving to be correct) of the US support to the Mujahideen (the forerunners of Al Qaida and Taliban) during the Soviet occupation of Afghanistan. India’s first series of overt nuclear tests (hopelessly inappropriately named ‘Operation Smiling Buddha’) in May 1974 piled on further misery. The insidious denial of modern US (and western) technology, equipment and materials to India, perceived to be in the Soviet Block, had now taken on major proportions.
It was the genius of President Clinton, or the huge backing extended to him by the Indian diaspora in the US and his love of Indian food (yes, there is indeed a Clinton Platter, at one of Delhi’s leading hotels), that possibly made the first perceptible changes in Indo US relations putting the world’s two major democracies back on the track of what should have been a very natural partnership. The Soviet Empire was dead and buried and India had also by then changed substantively post the 1991 liberalisation emerging as a rapidly developing open economy. Advanced computers, electronics manufacturing equipment, microprocessors, memory chips and other integrated circuits were now nearly freely available.
The change in the political set up in Delhi in 1998 however brought fresh turbulence in Indo US relations. The newly formed Vajpayee Government in what turned out to be a successful attempt to ‘out’ the hitherto suspected Chinese – Pakistani nuclear weapon partnership conducted a series of nuclear tests in May 1998. President Clinton was forced to invoke the Glenn amendment to the Export Control Act and promptly imposed sanctions on India.
Scores of Indian companies, laboratories, departments, educational and research institutions, and others largely with associations to Space, Atomic Energy, Defence, and Electronics activities were put on a barred ENTITY LIST as Supplement 4 to Part 744 of the Export Administration Regulations. At that time the Indian section of the ‘Entity List’ even had some vendors of tea, coffee and soft drinks to the proscribed institutions, on the barred list (mercifully saner minds prevailed and these were hurriedly deleted). On the Indian ‘Entity List’ were hilariously also some really small scale units such as Auro Engineering in Pondicherry, Ramakrishna Engineering Works in Madras, the tool room of one of India’s leading soap and detergent manufacturers Godrej & Boyce and the Electronics & Physics Departments of my own alma mater, the Indian Institute of Technology, Bombay – I personally never did know of any remotely possible activities at these places that would link them to nuclear or weapons related business.
Anyhow the upshot was that it was now impossible for any of these listed organisations to get even mundane items such as semi automatic screen printers, tape furnaces, mask aligners, diffusion furnaces and what have you from the US (UK, Japan etc. included) all in the name of potential ‘dual use’ technologies. I am sure a purchase enquiry from such institutions for more sophisticated equipment such as high precision X-Ray inspection equipment would have immediately rung some very loud bells for the spooks at Langley, Virginia wondering what these rascally Indians were up to now! Of course all this murky business encouraged Indian engineers and scientists to come up with their innovative best not to mention that competing suppliers from France, Switzerland and the usual suspects from China went laughing all the way to their respective banks!
It was the other ‘master blaster’, President George (Dubya) Bush, who at some point in time realised that the duo of India’s nearest northern neighbours were not up to much good and were possibly playing a convoluted double (or triple) game. It was President Bush who took on the onus of repairing the badly damaged IND-US factor. He personally chartered the course for finalising the India – US Civil Nuclear Agreement enabling India to come out of its pariah status. The Bush administration also took steps to severely prune the Indian section of the ‘Entity List’. It was President Bush who certified to Congress in 2008 that India had become compliant under the provisions of the Nuclear Suppliers Group and Missile Technology Control Regimes.
India was extremely wary when President Obama was elected to office. His campaign rhetoric against US jobs being ‘Bangalored’ did not go down well at all given the fact that Indian companies had created some 50,000 new jobs in the US with 127 green field investments. (Please see my EMT – WW piece ‘Bangalored and Shanghaied during the US Presidential Election’ ; 26th Aug. 2008). Repeated jibes against US companies outsourcing to India during the aftermath of the Lehman Brothers disaster added to the considerable unease in this country. The President’s overtures of inviting the Indian Prime Minister to the White House as the first official guest of his new administration and also declaring himself to be a ‘desi’ (local Indian) on the basis of his room mate at college being an Indian did little to calm apprehensions.
It was then against this backdrop that the country received President Obama in India in the beginning of November 2010. Here was a President making his first overseas trip immediately after the reverses in the mid term polls. The US economy was still not on the mend. No real new jobs were being created. The Israelis were running away with juicy Defence contracts. US companies continued to outsource work to India, and to top it all India was signing multiple civilian nuclear supply deals with France and Russia even though the US was the first backer.
But possibly for the first time ever for a US Presidential visit to India, the country was offering a more confident, aggressive visage and a robust economic scenario. With the economy bustling along at over 8% GDP growth rate, a prominent member of the G-20, a thriving domestic market, and a dynamic innovation scenario (think the ‘Nano car’ effect), it was not going to be just a Photo Op visit. Added to all this was the newly developing Geo Political dynamics in the Asian region, requiring India to massively strengthen its defence and security assets and military co – operation with friendly countries.
Sure enough, President Obama delivered. All the significant India organisations on the ‘Entity List’ were to be dropped (At the time of writing, the Federal register notification has yet to be made). This included Bharat Dynamics the Indian missile maker hinting at a possible India – US collaboration in this sector. India would also move out of the ‘Country Classification’, comprising the usual suspects such as North Korea, Pakistan etc., and move into the allies grouping of UK, Japan etc. The US would also support permanent membership of India in the U.N. Security Council, as also to global non proliferation regimes like Wassenaar Arrangement, Australia Group and the Nuclear Suppliers Group.
India was finally going to be able to get pretty nearly all the electronics production equipment and materials, critical technologies and software for satellites, space launch vehicles, missiles, aircraft, and other weapon systems, high performance computer systems, encryption systems, nano technology etc. that it needs.
And what has India offered in return? A $ 50 billion bilateral trade deal increasing to $ 100 billion by 2015, creating badly needed additional jobs in the US. Further the Indian business community has pledged further green field and other investments in the US creating another 50,000 jobs in the US. Opening of opportunities in the US$ 1 trillion Infrastructure sector to US companies and of course the purchase of military toys such as Boeing Poseidon Long Range Maritime Patrol Aircraft, C-17, Harpoon Missiles and a good shot at the up coming advanced fighter jets purchase by the Indian Air Force.
With the removal of controls and irritants the Indian electronics industry can now look forward to a healthy and robust growth in the years to come.
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