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News Analysis: Obama’s Delhi Announcement Overshadows Mumbai Deals

13 November, 2010

The commerce and trade aspects of President Barack Obama’s trip may have been overshadowed by the U.S. leader’s endorsement of India’s entry into the United Nations Security Council as a permanent member, but the multibillion dollar deals he announced during the visit is being seen by many in the United States as a step in the right direction.

That includes some in Congress, where Obama’s overall agenda is certain to run into road blocks, with the Democratic Party losing control of the House of Representatives by a big margin the same week he left for India. 

“This is a good first step,” Republican Rep. Ed Royce, a long-time ally of India in the House, told VCCircle, adding, “but much more can be done to increase economic cooperation.” Also welcoming the deal was Sen. Christopher Dodd, the retiring Connecticut Democrat whose state is going to benefit from one of the deals.

The 20-some agreements that Obama announced in Mumbai while addressing a U.S-India Business Council summit are worth more than $9.5 billion and they are expected to generate 53,600 jobs in the United States. After his party was roundly thrashed in the midterm polls just before he embarked on the trip, the White House had played up the business and jobs aspects of the visit. 

The deals certainly gave the embattled president just enough materials for some positive spin at the beginning of the trip. Obama described the agreements “landmark deals” that are “significant for both our countries.”

Two of the biggest transactions involve Boeing, the Chicago-based aircraft manufacturer: one a preliminary agreement to sell 10 C-17 Globemaster III military transport aircraft to the Indian Air Force, and the other a “definitive agreement with the budget carrier SpiceJets for selling 30 B737-800 commercial planes.

Just these two deals are worth $6.8 billion, or nearly 70 percent of the total trade transactions. They are expected to provide 35,130 jobs—roughly two-thirds of the overall projected jobs as part of the deals.

Besides the commercial and military aircraft sale, other agreements include the sale of gas and steam turbine and mining equipment and the setting up of a motorcycle assembly plant.

From the jobs standpoint, it is obvious that their impact will more be on local and state economies, such as that of Connecticut, as its retiring Sen. Dodd pointed out on Monday. The senator, whose term ends next month, said in a press release that the Air Force deal would give his “state’s economy a much needed boost.”

The engines used in C-17 Globemaster II planes are manufactured by Pratt and Whitney at its East Hartford and Middletown manufacturing units in Connecticut. “The purchase of 10 C-17 aircraft represents a great investment in Connecticut’s defense industry,” the senator said.

And that industry has not been doing particularly well, lately. United Technologies, owner of Pratt and Whitney and the largest single employer in Connecticut, had recently announced its plans to shut down two plants in the state. The company had already cut 15,000 jobs in the state.
Citing the new deal the company bagged, Dodd urged United Technologies to reconsider its decision to close the plants.

The fact that the White House touted details of each agreement with the number of jobs it is likely to generate—including one that will create a meager five jobs—showed the importance it attached to job creation in the wake of its stinging election rebuke.

But not everyone is buying the hype. A skeptical Financial Times wrote on Wednesday that this past month the U.S. economy had created three times the number of jobs Obama announced in Mumbai. 

To put the job numbers in perspective, the $14-trillion American economy employs around 135 million people. Nearly 15 million are unemployed in the country, according to the latest figures from the U.S. Department of Labor’s Bureau of Labor Statistics, the agency that keeps tab of labor market activities in the country.

It is also worth pointing out that the current agreements are not unprecedented in scope or scale in Indo-US bilateral trade. Just one January 2006 agreement alone, between Air India and Boeing to purchase 68 aircraft over a 10-year period, was worth more than $11 billion. That was India’s single-largest commercial plane order.

Among those that think the deals are merely part of “an ongoing process” is Arvind Subramanian, a senior fellow at the Peterson Institute for International Economics, a Washington think-tank that studies international economic policy. “It is a modest positive step,” he told VCCircle. 

“I can’t say that it is a big breakthrough,” he said when asked about the long-term significance of the deal. “That’s not a headline grabber.”

One reason it didn’t grab enough headlines in the United States was perhaps due to what transpired in Obama’s next stop, Delhi. There the president announced his county’s support for the induction of India as a permanent member of the United Nations Security Council. “All the headlines have been grabbed by the Security Council announcement,” Subramanian said.

On bilateral trade, Subramanian said the Indo-U.S. commerce still does not “have the scale,” unlike the U.S.-China trade. “The point is that we still have to be patient.”

The economist welcomed the lifting of U.S. restrictions on the export of “duel use” technology to India, which was also announced during the visit. “Export control move is useful,” he said.

The relaxation allows India access to technology that can potentially have both commercial and military applications, in areas such as “non- proliferation, national security, missile technologies and crime control.” Under the previous regime, any technology exports in these areas required an export license requirement, and it has been one of the contentious issues in the bilateral relationship.

Indian defense and space research entities and organisations that are going to benefit due to the new initative includes Bharat Dynamics Ltd and four subordinates of the Defense Research and Development Organization and the Indian Space Research Organization. 

The DRDO suborinates exempted are the Armament Research and Development Establishment, the Defense Research and Development Lab, the Missile Research and Development Complex and the Solid State Physics Laboratory. The ISRO subordinates removed from the so-called “entity list” are the Liquid Propulsion Systems Center, the Solid Propellant Space Booster Plant, the Sriharikota Space Center and the Vikram Sarabhai Space Center.

Rep. Royce, who has championed India-U.S. military-to-military cooperation, also hailed the lifting of the curbs. “If the U.S.-India relationship is to become a defining partnership of the 21st century, active defense cooperation between our two countries is a must,” he said.

In special arrangement with Global India Newswire.


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News Analysis: Obama’s Delhi Announcement Overshadows Mumbai Deals

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