Why in the News?
Recent U.S. domestic policies on universities, companies, and immigration are causing short-term economic pain for India. However, they also offer long-term strategic opportunities. These changes may indicate the end of Pax Americana.
Why do U.S. policy shifts offer both risks and opportunities for India?
Opportunities for India:
- Manufacturing Opportunity: As U.S.–China tensions disrupt global supply chains, India can attract companies looking to diversify production. Eg: Apple shifting iPhone assembly to India reflects the country’s growing role as a China+1 manufacturing hub.
- Chance to Implement Bold Domestic Reforms: With reduced global dependence, India can focus on strengthening its internal systems through deregulation, decentralisation, and investment in human capital. Eg: A proposed 180-day plan calls for cutting compliance burdens, empowering state governments, and granting autonomy to top institutions like IITs and IIMs.
- Higher Education and Innovation Ecosystem: As American universities face political and financial pressure, India can position its institutions as global research and innovation leaders. Eg: Granting “poorna swaraj” (full autonomy) to institutions like IISc, Ashoka, and IITs can help them climb global university rankings and drive home-grown R&D.
Risks for India:
- Decline in Remittances and Student Enrolment: Stricter U.S. immigration and visa policies can reduce the flow of Indian students and workers, affecting remittances and global exposure. Eg: H-1B visa tightening under Trump led to fewer Indian tech workers entering the U.S., impacting remittancesand brain circulation.
- Disruption to Exports and Supply Chains: Protectionist trade measures and tariffs can disrupt India’s export-dependent sectors like software, pharmaceuticals, and electronics.
What impact has U.S. research and immigration had on India’s growth?
- Skilled Immigration: Indian immigrants in the U.S. contribute significantly to tech and scientific advancement, creating reverse knowledge flow to India. Over 70% of H-1B visas (2022) were granted to Indians, many of whom later founded companies or returned with expertise. Eg: Infosys, Wipro, and TCS have benefited from U.S.-trained professionals in leadership and innovation roles.
- High Remittances Fueling Economic Stability: Indian diaspora in the U.S. contributes a major share of remittance inflows, supporting India’s foreign exchange reservesand rural economy. According to the World Bank (2023), the U.S. contributed over $23 billion in remittances to India, nearly 25% of India’s total remittance receipts.
- Advancing Indian R&D and Education: U.S. federal funding has indirectly boosted India’s scientific growth through collaborations and return migration. The National Institutes of Health (NIH) funded research contributed to 99% of new drugs approved between 2010–2019. Eg: Indian researchers trained in U.S. labs or funded via U.S.-India Science and Technology Forum (USISTEF)have driven innovation in biotech, vaccines, and AI in India.
What does a weakening Pax Americana mean for India’s strategy?
Pax Americana refers to the period of relative global peace and stability under the dominance of the United States, particularly after World War II.
- Push for Strategic Autonomy and Multipolar Engagement: As U.S. dominance declines, India must strengthen ties with multiple global powers while maintaining independence in foreign policy. India’s active role in BRICS, QUAD, and IMEC reflects efforts to diversify strategic partnerships and avoid overdependence on any one nation.
- Accelerated Domestic Reforms for Economic Resilience: With global uncertainty, India needs internal strength through deregulation, decentralisation, and investment in infrastructure and skills. PLI schemes, Digital Public Infrastructure, Make in India, and self-reliance efforts show a move toward economic resilience.
- Enhanced Role in Global Governance and Norm Setting: A weakening U.S. opens space for India to shape the global agenda in climate change, digital governance, and international trade. India’s G20 presidency and promotion of Digital Public Infrastructure as a global good underline its leadership in global norm-setting.
What are the key reforms that can boost India’s global economic standing? (Way forward)
- Simplification: Simplifying regulations for employers by reducing compliance burdens, redundant filings, and removing criminal penalties in business laws can foster a more business-friendly environment. A focused 180-day plan to cut red tape would significantly improve ease of doing business and attract global investors.
- Decentralisation: Decentralising power to States and cities by transferring funds, functions, and personnel empowers local governments to drive regional economic development. This enhances capacity for targeted innovation and creates globally competitive manufacturing ecosystems.
- Autonomy: Empowering higher education and research institutions like IITs, IISc, and IIMs through full autonomy allows them to innovate, form global collaborations, and improve their position in international rankings.
Mains PYQ:
[UPSC 2018] How would the recent phenomena of protectionism and currency manipulations in world trade affect the macroeconomic stability of India?
Linkage: The rise of protectionism, which can be associated with policies like “Make America Great Again” mentioned in the article, signifies a shift in global trade dynamics. This question asks about the impact of such phenomena on India’s macroeconomic stability, underscoring the need for India to adapt and strengthen its economy in response to these global changes.
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