China playing a catalyst in India-America closeness: Economic policy analyst Sean Randolph

Ritu Jha–

A week after Prime Minister Narendra Modi’s much celebrated Washington DC visit, Sean Randolph, Senior Director of the Bay Area Council Economic Institute released the Economic Institute’s new report Seismic Shift: Economic Growth and Strategic Alignment Between the Bay Area and India, held Silicon Valley Bank in Palo Alto on June 28.

Randolph along with the panel at the event shared the growing geopolitical alignment between the United States, the challenges, and the opening of new pathways for technology cooperation between Silicon Valley and India.

“I think everybody would go back and look at the early 90s as when this all began. And then go back maybe six or eight years as the time when India took a qualitative leap forward. The question is how far will that lead carry India,” Randolph told indica on the sidelines of the event and believes, Modi’s recent visit to Washington has deepened
a relationship that has grown progressively stronger.

“Bay Area is such a digital place and India is a huge platform. Reforms in India regarding foreign investments have made it easier than it was to invest in India. And then in the background, politically, the growing strategic partnership between India and the US is creating even more channels that are being encouraged by both governments for companies in the industry to get together. Whether it’s around secure and resilient supply chains or semiconductors.”

He then turned his focus on India’s digital privacy law which had caused much concern among the industry’s players in the US and in India.

“Many of our companies have been in India for such a long time. Many of them are in the digital sector. The original 2019 draft of the digital privacy law raised a lot of concerns about actually the security of the data.

“It’s not necessarily more secure if it’s stored in India. Data security increased costs associated with exclusively storing that data in India and the transactional costs. So, there was a lot of input on this from Silicon Valley companies. And I think it was remarkable looking from the outside that the government took the input. It was quite contentious. They took it aboard.

“And for a variety of reasons, the last draft was withdrawn. There was a lot of stuff in there that went so far beyond personal data privacy. So, they narrowed it down. And one of the big concerns, which was around mandatory storage of the data in India, was also addressed.”

“Now the government is saying, if you’re a trusted and verified entity then the data can leave the country. Of course, the government has discretion on who is a trusted entity, and that was well received by Silicon Valley companies. It is considered to be a positive development and a good response. So, the Indian government listened and it responded. There’s more to be done in finalizing all of that and bringing more clarity to actually how it will work. I think that addressed one big concern by companies here in Silicon Valley,” Randolph said.

Asked about the role played by California in Indo-US partnership, he said: “The biggest connection is through tech because so many of our companies are heavily invested in across India, going back a couple of decades already and a growing footprint. That includes manufacturing now and we think about Apple manufacturing and Chennai, Tamil Nadu, and growing that relationship. It’s not just the tech, it’s a variety of services and investments are taking place in both directions.

Agriculture also has been a big part of the story. California is the nation’s largest agriculture exporter. India is a big market for our fruits, vegetables, and nuts.”

About China’s role as a catalyst in bringing US and India closer, Randolph said: “It’s actually playing a huge catalytic role. I think the relationship was already growing stronger anyway because a lot of the differences that have kept the US and India apart starting with nuclear issues under George Bush when he was president were resolved. Doors were opened up and the relationship had been growing closer anyway, and then the Modi administration started its economic reforms to make India more business-friendly to attract investors. That started to open doors wider for businesses just on the practical level. But then the China relationship I think is what really accelerated the conversation because of shared security concerns and what China is doing in the Himalayan region, in the South China Sea, and the Taiwan Strait. Chinese questions, and intentions strategically and the authoritarian nature of what a lot of the China government is doing politically. Those things and also China’s stated ambition to be
the leader or to dominate key global technologies.”

“I think as market democracies the feeling is with both the US and India that’s not something we should simply stand by and accept. We need to come together to address our common security concerns in the Indo-Pacific region to assure that there’s a lot of leadership in technology and really cement kind the deeper relationship between US
and India for market democracy. Without China this relationship would have evolved anyway but not as fast. It has really brought together the thinking strategically beyond just trade, and investment. But then as the governments work together to enable the industry to get more involved in defense in strategic and critical technologies, I think that opens more doors for business and industry.”

“Companies around the world especially from the US look at the global landscape, especially in the Indo-Pacific region. Many of them have been in China for several years. They’re not necessarily going to leave China but they ask where are secure supply lines. A lot of them were badly burned during the COVID epidemic in China when the Chinese government shut down things and they couldn’t operate and a lot of them said we can’t allow that to happen. They are diversifying and India has massive numbers of highly trained engineers and a massive market with more people than in China. That’s why it’s really a moment of opportunity for India because governments and especially companies are kind of broadening or shifting their gaze. They’re looking beyond China to where are their best partners for the future and then India looms very large on that map which creates a lot of opportunity if
India can capitalize on it. I think it will but you know it’s a work in progress still. There are barriers still it’s still a complicated place to be but a lot easier than it was five or ten years ago and I think everybody would acknowledge that,” Randolph added.

The state dinner hosted by President Biden is considered to be a significant event in hastening Indo-US cooperation in the defense, and security sectors. Randolph feels that now Quad is playing a more important role in drawing the two nations together. “We’re talking within the Quad. Countries like Australia, and Japan are involved, and we have multiple frameworks. We’ve got the Quad doing certain things which go beyond military exercises. There’s a lot of technology discussion within the Quad. And then you have the bilateral connection between the US and India which is another layer of discussion. But those things weren’t really happening when it was simply business-to-business relations. So that again strengthens the channels
more, it opens up the doors more because the governments are encouraging this now and creating channels for it to happen,” he said.

Sharing what he thinks makes India rise today to the challenge, Randolph believes that there’s a lot of growth in India because the government recognizes that “this is a moment of a unique opportunity for India”. He says that India’s opening up the market through more reforms to attract more investment is an acknowledgment of this. “That can enable the economy to grow, diversify, and boost the strategy of digitalization with Aadhaar, UPI and health interface.”

He also feels that these enabling services help address the divide in India between the very tech-savvy, wealthier, and a lot of people who are very poor. “Addressing that gap is a big piece of strategy. India is now creating markets and opportunities and accelerating growth through economic reforms. It wouldn’t really be happening in the way it is without reforms that have opened up investment and democratized the economy through digitalization. This combination is attracting global interest.”

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