OPO-It’s a long way from Delhi to D.C.

2014/9/1 0:18:42

Relations between India and the United States have had their ups and downs over the years, not least because India has depended upon Russia for most of its military hardware for decades. Relations might improve under the Modi government but the upcoming Washington visit by India’s new prime minister could have some unexpected surprises.

 

< Narendra Modi, Prime Minister of India


KYIV, Sep 1, 2014 (UBO) – As a long time journalist, I’ve had ample opportunities to learn a bit about politics and governments, mostly as a reporter and as a press secretary in the U.S. House of Representatives.

 

Of course, a great deal of my experience has related to American politics but as permanent resident of Ukraine for many years, I occasionally get asked to talk to university classes and visiting academic and cultural groups. Whenever such an occasion comes along, I update my knowledge based by contacting Congressional, Obama Administration and “think tank” sources active on the scene in Washington.

 

With a new classroom group beckoning that has a particular interest in India, I thought this might be the perfect time to learn more about the new government of Narendra Modi, who swept into power on a platform that included a severe housecleaning to rid the government of corruption.

 

Modi, in September, will arrive in Washington for his first official visit as prime minister, we set out to determine what the chances are that the visit will result in a major improvement in India-U.S relations.

 

What we found was far from encouraging. In fact, based on the evidence available to date, we cannot help but believe after all the smiles, pomp and happy talk that goes with such a visit are completed, Modi may not be very happy with the results.

 

A major part of the problem lies in the immense job of government house cleaning that Modi promised voters during the campaign. There is reason to believe that some clean-up efforts have begun. However, the kind of wholesale cleanup that is really needed has hardly begun to shake the strengths of such corrupt fixtures that allegedly control large swathes of the economy.

 

As an example, on April 4 this year the World Post, a partner project of the Huffington Post, titled a story “Corruption – An Epidemic of Epic Scale in India”. As the article pointed out “India ranked a dismal 94 out of the 176 countries in the Corruption Perception Index of Transparency International,” and then went on to explain in exquisite detail just how deep problems remain.  Studies by multinational professional services firms, such as Ernest & Young LLP (“Bribery and corruption:  ground reality in India”), echo the same findings.

 

Numerous articles make reference to a so-called Mafia Raj, a name given to the organized criminal groups that include government officials, elected politicians, business interests, law-enforcement authorities, non-governmental organizations, and trade unions. These structures are alleged to control certain cities, states, government departments, public sector businesses and in some cases entire sectors of the economy. Even if the Modi government makes a serious, sustained effort to deal with these problems, there is a widespread acceptance that it would be a years-long job.

 

While Modi may be able to finesse broad, non-specific questions about corruption with reference to efforts in these areas in discussions at the White House and cabinet-level agency heads, he may find the Congress a much less hospitable place to visit. It is on Capitol Hill that differences between the presidential and parliamentary styles of government will begin to become most apparent. 

 

Making the Modi U.S. Congressional finesse even harder is a recent quote by Modi’s soon to be chief economic advisor - Mr. Arvind Subramanian of the Peterson Institute for International Economics in Washington - reported in the Wall Street Journal (08-22-14), “There is a race between rot and regeneration in [the] underlying institutions of the state and politics. And it is far from obvious that the forces of regeneration are winning.”

 

As with other visits by foreign heads of government, calls on the various Congressional power bases are routine. However, some of those visits appear set to be anything but routine since party positions mean little and the senators and congresspersons prepare to grill Modi about very specific issues of interest to their constituents.

 

U.S. corporations are not bashful about using their elected officials as battering rams to make progress on stalled issues, even if the foreign visitor does head the government of the world’s second largest country by population.

 

In our discussions with senior House and Senate staffers, who are longtime associates, we found that two issues in particular are likely to pummel Modi during his visit.

 

Banking

 

U.S. firms have confirmed and have long complained that Indian banks are difficult to deal with and can be quite inefficient in their dealings with international commerce. American diplomatic sources in Washington and abroad concur with the American business grievances. 

 

However, there is one particular case that is certain to face Modi in meeting in both the Senate and the House of Representatives. This situation implies tacit approval by the Indian Government for its banks to engage in international wrong-doing. 

 

We were provided the following information by a Congressional source that explains one of the specific banking issues that Modi will certainly hear about:

 

On Dec. 9, 2013, a New Jersey firm erroneously sent a large US dollar wire transfer to Punjab National Bank, which falls into the category of state-owned banks as described above. The funds had been sent in error to Crown Milk Specialties Pvt. Ltd.

 

On Dec 12, 2013, Crown Milk advised Punjab National that the funds were not theirs and should be returned to the New Jersey sender.

 

On Jan 10, 2014 the New Jersey business through its American and Indian lawyers, made legal demands for return of the misspent funds.

 

As of Aug 30, 2014 we are advised that in spite of the best efforts of the U.S. Embassy in New Delhi and Congressional offices, the firm has been unable to get Punjab National to return the funds in spite of the fact Punjab has known since Dec 12 last year that neither Crown nor Punjab had any rightful claim to the misdirected funds.

 

Visas

 

The second issue that is certain to trouble Modi on this visit has much broader implications. Sen. Dick Durbin and other members of the Senate have accused the major Indian IT companies – TCS, Infosys, and Wipro – in collusion with the Indian government of abusing the H-1B program set up to allow foreign IT experts to enter and work in the United States for three years to alleviate the shortage of domestic IT talent. The senators and other member of Congress claim that certain large Indian companies are monopolizing the program, claiming large blocks of visas and sending IT engineers to work in the U.S. while paying exorbitant fees to these companies.

 

My Congressional sources in Washington believe that the new Indian ambassador and his mostly young and inexperienced staff have not prepared Modi properly for the trip and that the prime minister will arrive not fully briefed. Some of those involved with preparations on the American side believe that rather than improving U.S.-India relations, the visit could become an embarrassment for Modi.

 

The two issues mentioned above, although neither directly related nor of the same magnitude, have become linked through a highly skilled lobbying campaign to the point they are considered almost a single package by the growing number of coalition members representing various interests, i.e., agriculture, pharmaceuticals, anti-immigration forces, etc. This brings to mind the old adage, “the enemy of my enemy is my friend.”

 

Modi could solve the issue of the misdirected funds issue simply by bringing enough pressure on Punjab Bank to make the necessary funds transfer. It is not our place to advise either side but it would seem from my years on Capitol Hill that the Indian government would be well-advised to find a way to get the matter settled before the trip.

 

So far as the H-1B visa issue, it is a much more troublesome matter but one that the Indian authorities might be well-advised to have some suggestions for settlement in their bags when they arrive.

 

As for this writer, I will be busy attempting to make some sense of these disparate issues as I prepare for my next classroom visit.

 

Jim Davis

 

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*OPO – “One Person’s Opinion” is an occasional opinion piece by the editor of Ukraine Business Online.

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