When Barack Obama arrives in Mumbai on Saturday he will see large red and yellow billboards telling him that foreign direct investment from the US in India’s retail sector is not welcome.
But with a midterm election “shellacking” behind him, the US president can ill-afford to return short-changed after a three-day stop in India accompanied by the likes of Walmart, the world’s largest retailer, large power companies GE and Westinghouse and aircraft manufacturers Boeing and Lockheed.
The billboards in south Mumbai are a reminder that fast-growing India, where local companies are fiercely competitive and regulation often opaque, is not a market easily conquered. Maharashtra’s retailers, as in many other parts of the economy, are not about to embrace foreign participation.
A nuclear liability law, recently passed by the Indian parliament, has served as a caution to Washington that a political breakthrough along the lines of the 2008 US-India civil nuclear deal does not necessarily clear the way for US investment.
Now Washington is eager to garner what some officials bluntly call “pay-offs” for former president George W. Bush’s bold initiative to legitimise India’s nuclear programme and put the relationship between the two capitals on a new footing. About $10bn worth of deals are expected to be signed.
Before leaving Washington on Friday, Mr Obama said that a four-nation tour of Asia taking him to India, Indonesia, South Korea and Japan would open new markets for US companies and create jobs at home.
“The primary purpose is to take a bunch of US companies and open up markets so that we can sell in Asia, in some of the fastest-growing markets in the world,” the president said.
Time out: Barack Obama is expected to visit Humayun’s Tomb, a world heritage site in New Delhi, during his trip
Mr Obama is bringing to India’s financial capital the biggest presidential business mission ever to leave US shores. It numbers about 200 chief executives and the delegation is holding business summits in both Mumbai and Delhi that will seek opportunities to boost bilateral trade estimated at $50bn this year.
Among Mr Obama’s key goals will be pushing for a contract to supply the Indian air force with 126 fighter jets made by Boeing and Lockheed, worth $11bn. The contract is to be decided early next year, and is part of a bigger rearmament estimated to be worth $100bn over 10 years.
In spite of political will to buy American, the Indian defence establishment is unwilling to sign agreements with the US that would allow the bigger partner any after-sale claim on the technology it has sold.
Others US goals include reducing tariff barriers in sectors where its exporters are strong, including agriculture and engineering.
Emerging markets blog
Follow Barack Obama’s visit to India
One message that Mr Obama will bear is that, if India wishes to access the global economy, it must open up its own.
What is at stake is India’s IT outsourcing industry, which has been built up over the past 20 years by servicing US multinationals. Its executives, many based in Bangalore, are anxious about protectionist measures against their companies as the US faces an unemployment crisis.
Already the US has increased the price of temporary work visas which are essential for Indian professionals working there.
Ahead of Mr Obama’s arrival, New Delhi was defensively stressing India’s foreign direct investment in the US.
“This investment from India is creating, saving or supporting tens of thousands of jobs in the US,” said Nirupama Rao, India’s foreign secretary. “India’s defence acquisitions and major purchases in the energy and aviation sectos ... are contributing in a substantive manner to the US economy.”
Agreements are expected in joint space launches, a global disease centre and a big education summit next year. Yet the US’s private sector will want more. India’s greater claims to the US’s support for its permanent seat in the UN Security Council and access to US technology will depend on that.
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