As recent events in Syria, eastern Europe, and South Korea demonstrate, the incoming Trump administration will face an even more uncertain world in 2025 than in 2017. Several of these geopolitical challenges are centred around and impacted by the rise of China. To combat these manifold challenges, the US and its allies will benefit from working with friends, like India, which has its own reason for wanting to push back against China.
China’s desire to replace the US-led post-World War II order with Chinese characteristics is centred upon building economic, technological and military power. To face the China challenge, the US and partners, like India, need to further deepen their people-to-people ties and economic partnerships. India has a huge human capital dividend, especially in fields of high technology, that is critical to US research institutions and businesses.
The US has capital and technology that, in turn, would help India build its potential to match China’s. While President-elect Donald Trump shared a strong personal bond with Prime Minister Narendra Modi, during his first term, Foreign Direct Investments (FDI) from the US to India were quite low. To counter China’s economic rise, the US would benefit by supporting India’s economic potential.
However, for this to happen, both countries need to ensure that the demands of domestic politics, especially populism and protectionism, do not come in the way of national interests.
Exchange of ideas and talent
During the first Trump administration, the demands of domestic politics led to a slowing down in the issuance of non-immigrant and work visas for Indians, among others. A similar approach toward immigration would restrict the flow and exchange of ideas. A more prudent and mutually beneficial approach would involve implementing mechanisms to facilitate a free flow of ideas and talent from which both countries have historically benefitted.
In 2024, both the world’s oldest and largest democracies held their general elections. The key issues that engaged voters were jobs, economic growth, and national security. These issues are not new, but the governments in each country need to actually undertake actions that benefit their people.
The Biden administration initiated policies such as the CHIPS and Science Act, the Inflation Reduction Act, and the Infrastructure Investment and Jobs Act to bolster domestic manufacturing in key areas like semiconductor capacity, catalyse Research and Development, boost clean energy and scale up infrastructure projects.
The Trump team’s focus has long been on rebuilding America’s manufacturing capabilities including in the high-technology arena. While the US has the capital to do so, a key challenge might be the availability of skilled workers. For instance, currently, the US has a shortfall of 90,000 professionals in the semiconductor sector. Some estimates suggest that the success of the CHIPS Act will require another 3,50,000 professionals over the next 10 years.
India has a large demographic dividend. Its challenges are skilling and jobs for its millions of young people. For this, India needs capital investment, and for that, the economy needs to be more open and competitive to attract foreign capital. India is woefully behind in the goal of creating at least 20 million jobs a year.
In 2023, FDI to India decreased by 43 per cent. This is particularly concerning given that multinational corporations (MNCs) are actively exploring supply chain realignment options in response to changing geopolitical realities, yet India doesn’t seem to be a preferred destination. A decline in FDI signals a lack of competitiveness.
Compounding this issue is India’s underperformance in innovation, which is hindering technological advancement. India especially lags in high-tech exports. For instance, India’s share of high-tech exports to its manufacturing basket is a mere 12 per cent compared to 23 per cent, 22 per cent, and 39 per cent of China, Israel, and Vietnam, respectively.
While every country has its own priorities, India and the US share a remarkable complementarity in many fields. They can leverage each other’s comparative advantages to address their respective challenges. The US is currently facing a shortage of skilled talent. To maintain its dominance in the technology realm, it needs to “advance research, development, manufacturing, and commercialisation across a series of emerging technologies”.
However, relying on domestic talent may not be enough. The American economic, tech and military heft has been built upon the country attracting the best global talent for the last few decades. Turning away such talent would only hurt the US in the long run.
This is also an ideal opportunity for Indian talent to fill these roles. Given the outsized role of Indians and Indian-Americans in the US growth story, particularly in tech, it is reasonable to expect their continued contributions.
However, historically, there has always been a unidirectional flow of talent from India to the US. This does not serve either country’s interest. While India receives remittances, the resultant brain drain—the loss of India’s top talent—will hamper its long-term growth and development. Similarly, at a time when immigration is a key factor in US domestic politics, championing more immigration from India would not work well in America as well.
To ensure both countries benefit from the continuity and acceleration of ideas and human capital exchange, they need to reimagine their current ways of engagement.
Read this article, co-authored by Sarthak Pradhan, in The Print.
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