NCPA - National Center for Policy Analysis

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

January 4, 2013

Foreign policy between India and the United States is unlike foreign policy between most other countries. Whereas most foreign policy discussions focus on government policies and diplomatic initiatives, relations between India and the United States have been driven substantially by corporations and individuals, says Swaminathan S. Anklesaria Aiyar, a research fellow at the Cato Institute's Center for Global Liberty and Prosperity.

Since implementing economic reforms in 1991, India's two way flow of goods and services increased, raising its gross domestic product growth to 8 percent a year compared to 3.5 percent per year previously. This laid the groundwork for India to become a major player in many up and coming industries that the United States would rely on in later decades.

There are several factors that strengthened relations between the United States and India.

  • First, India became a major software producer, especially when it came up with software to solve the "Y2K" problem.
  • Second, India has become a high-tech exporter of goods in many fields such as automobiles and pharmaceuticals.
  • In addition, the rise of the Indian diaspora in the United States increased the clout these wealthy immigrants had on Congress.
  • Even businesses used their clout to lobby Congress for Indian interests because of the interdependence between the two countries.
  • As contact between the two nations increased, the United States saw it could use India as a role model for secularism and democracy in an increasingly volatile region of the world.

Strong economic ties between the two countries have also led to many political developments. For example, during the Bush administration, the two leaders forged a strong bond and even passed a controversial nuclear deal in 2005 to allow civil nuclear cooperation between the United States and India.

The only other country that can really rival the United States' relationship with India is China, considering China's significant rise in power and exports. However, it is unlikely an Indo-Sino relationship will lead to a strong political relationship because the economic relationship is so imbalanced.

Source: Swaminathan S. Anklesaria Aiyar, "India and the United States: How Individuals and Corporations Have Driven Indo-U.S. Relations," Cato Institute, December 11, 2012.


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