Building a Stronger Future: How US-India Trade Relations are Paving the Way for Technological Advancement
Just recently, India has become the most populous country in the world, dethroning China with 1.417 billion citizens to their 1.412 billion citizens. With such a sizable and still-growing population, India is not only the largest nation in the world by population, but it’s also the largest democracy with a free-market economy globally.
Given the fact that India is still a developing nation, there lies a lot of opportunity for further strategic trade relations between the United States and India–even more so than the two nations have already taken advantage of.
Specifically in the technology sector, there are benefits that have yet to be discovered as joint initiatives between the two nations’ governments and private companies continue to develop and lead to further innovation for the global technology industry.
Throughout this article, we will discuss how US-India tech trade relations have benefited both countries to date, and the ongoing talks among both nations’ leadership teams to advance such mutually beneficial relationships and unlock further strategic benefits.
U.S. Technology Industry’s Reliance on India
Since the 1990s, the United States’ technology sector has had a large reliance on India, especially as it pertains to IT staffing. Effectively situated on opposite sides of the globe, having a presence in India gives US-based companies the ability to operate 24/7.
Businesses in the United States have increasingly seen the benefits that partnering with Indian talent can provide them with, either setting up their own in-house tech operations in India or outsourcing this work to Indian IT firms. At this point, nearly all major US tech companies have outsourced some portion of their work to India, including industry leaders like Microsoft, Amazon, Google, Dell, HP, and others.
As we mentioned above, the growing population of India is one of the main factors that makes the nation so appealing to US tech companies as a haven for talent. What’s more, India has the largest English-speaking population in the world, giving US companies access to a massive pool of talent compared to the ongoing labor shortages that have occurred domestically over recent years. So as US population growth slows and the supply of qualified labor tightens here at home, it’s only logical that these corporations would turn their sights abroad.
In addition to the sizable supply of qualified talent, it’s also much cheaper to hire workers in India. According to Bain, the salary of entry-level developers in India is 85% less than their counterparts in the United States. For a startup tech company looking to hire a full team of developers, hiring Indian talent makes much more sense on a practical level–it’s more affordable without having to compromise on the workers’ technical abilities.
Aside from these benefits that directly impact tech companies’ bottom line, strategic relationships with India also play another important role in the global sense. As US companies look to lessen their reliance on China amid rising geopolitical tensions, India is an obvious alternative when it comes to supply chains, joint ventures, and technological innovation capabilities.
Notable Indian-American CEOs
It’s hard to discuss the large benefit American tech firms have experienced from international talent in India without covering the countless examples of Indian-American CEOs who have been dominating the tech sphere for some time now, including:
- Satya Nadella - Microsoft (2014-present)
- Sundar Pichai - Alphabet (2015-present)
- Vasant Narasimhan - Novartis (2018-present)
- Shantanu Narayen - Adobe (2007- present)
- Arvind Krishna - IBM (2020-present)
How These Trade Relations Benefit India
There are clearly many benefits of US-India relations for the US tech companies who want to experience cost savings while still accessing highly-qualified talent. But, the benefits are not all one-sided. In fact, the United States is currently India’s biggest trading partner, with bilateral trade between the two countries for 2022-23 valued at $128.55 billion.
US investment in India has led to massive job creation for the population. As much as the nation responded to the growth in demand for IT professionals in the 90s and early 2000s, there is now a similar opportunity in SaaS and more product-related tech positions.
Even though India has strength in numbers, it is still a largely underdeveloped nation that could benefit from increased foreign investment. Thus, expanded ties between the US and India could prove fruitful for the large portion of the talented workforce that could be gainfully employed by willing US tech companies.
India has notoriously complex and intricate regulations when it comes to accepting investments from international firms. But, there have been talks among their leadership to roll back some of this red tape to make it easier for US companies to take part in the burgeoning Indian market.
The Indian government has made it clear that they wish to remain an independent actor on the global stage even as motions to make the two nations even more entwined are underway. However, it appears as if they understand that international investment could be what their tech sector needs to become more dominant on the global scale.
How This Trade Relationship Impacts Global Innovation
Continued collaboration between the United States and India in technology only works to advance innovation for the global sector. As the two largest democracies and free markets globally, there is a sizable potential for both economies if further integration takes place.
So far, trade relations between the two nations have created room for more collaboration and exchange of knowledge between US and Indian tech firms, further supported by increased investments from US entities into India’s developing market.
As each side benefits from these ongoing relationships, both the public and private sectors in either country will see further innovation and economic growth emerge. To show their commitment to this progress, both nations have agreed to a number of joint ventures and strategic initiatives in recent months, which we will discuss in more detail below.
Partnership for Global Infrastructure and Investment (PGII) Fund
In February, the US Treasury Secretary Janet Yellen announced that the United States would provide funding for Indian tech entrepreneurs and infrastructure projects out of its $200 billion Partnership for Global Infrastructure and Investment (PGII) Fund which was introduced last June.
Yellen further explains that the US plans to deploy the entirety of the billion-dollar fund through 2027 to support infrastructure development in developing countries worldwide. Part of the motivation for such an initiative is something Yellen calls “friendshoring”, or strengthening the supply chains between trusted trading partners like India.
At the moment, specific targets of investment by the PGII Fund in India include renewable energy innovations, health, agri-tech, and digital payment apps for microentrepreneurs, among other areas.
Initiative on Critical and Emerging Technologies (iCET)
Just this January, the National Security Advisors of India and the United States announced the launch of the US-India Initiative on Critical and Emerging Technologies (iCET). This agreement sets into motion the cooperation and collaboration between the two countries as it relates to critical and emerging technologies.
The creation of this partnership was a clear communication that the ties between India and the US are strengthening on many fronts and will include the public sector, research laboratories, the private sector, and academia.
Specific areas of focus for the iCET initiative include quantum communications, semiconductor manufacturing development, defense innovation, commercial space expansion, and research collaboration.
The Future of US-India Trade Relations
The recent joint initiatives between the United States and India that we covered above signal an increased commitment to the trade relations between the two nations, specifically when it comes to technology and innovation.
With both countries agreeing to expand their economic and technological ties, there is no doubt that this will spur further economic growth and innovation that we will all benefit from. But, the progress doesn’t end there. More high-level talks are in the works at this moment, with India’s Prime Minister Narendra Modi set to visit the White House in Washington D.C. in June 2023 and the US’s President Biden to visit New Delhi in September for the 2023 G-20 Summit.
It’s clear there’s a large upside to both nations from deeper trade relations; however, this doesn’t mean the advancement comes without challenges or roadblocks. As we previously discussed, there have historically been strong barriers in Indian law that discourage foreign investment in their economy or their native companies, which will need to be addressed before more meaningful advancements can be made on either side.
At the same time, there is a large talent pool present in India with deep IT knowledge. But, it may be challenging to transition these professionals to more product-based technologies that are becoming more widely used today.
Possibly the most important and looming challenge at the moment is the pull that India feels between its two largest trade partners–the United States and China–who are currently at odds on the geopolitical stage.
Regardless of these challenges, the importance of the US-India trade relationship is paramount for the future of the global technology industry. With more collaboration between the two largest democracies and free market economies in the world, global tech innovation will reach new heights as information, knowledge, and investments flow more freely between the two nations.
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