Biden’s take on India’s economy is both bizarre and bothersome

Biden made the comment at a fundraising event for his 2024 re-election campaign, so it could be argued that it was for a domestic audience. But it is impossible for any US President to say something like this about other nations and expect it to be ignored outside America.

India prides itself on inclusivity, having pitched for it strongly with the motto of 'Vasudhaiva Kutumbakam’ (the world is a family) at last year’s G20 summit. China stridently opposed this theme before it was included in the Leaders Declaration, of which Biden was a signatory. The sudden discovery of xenophobia in the signatory countries – including India, China, Russia and Japan – less than a year later is indeed puzzling. For the US to club India with China on this is even more annoying.

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India prides itself as the fastest-growing major economy and to have that repudiated by the US President, even for a domestic audience, rankles. Both the World Bank and the IMF, not to mention scores of investment banks, have upgraded their projections of India’s growth rate not only this year but well into the decade.

While there’s no denying that New Delhi has a lot of policy reform to conduct in sectors such as power, tax, land and labour to keep attracting foreign capital, xenophobia is surely not a concern.

Immigration imbalance

Biden’s comment was particularly in reference to immigration. He sought to compare the US policy of “welcoming immigrants", crediting it as a key reason for the country’s economic growth, with “xenophobic" India and others. “Why is China stalling so badly economically, why is Japan having trouble, why is Russia, why is India… because they're xenophobic. They don't want immigrants. Immigrants are what makes us strong," the Biden said.

It is true that India does not grant work visas easily – not even to professionals from developed countries, as the work-visa policy is often based on “reciprocity". Under these rules, expatriates from countries such as the US and the UK, with which India does not have a social-security agreement, can access 24% of their salaries and allowances only after turning 58. Tax rules on foreign investments have also become more stringent of late.

On the other hand, scores of Indians, especially students and IT professionals, obtain work visas in the US with relative ease. That the quotas for Indians seeking H1B visas is a topic of intense discussion between the two nations makes it easy to overlook this.

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Yes, if foreign investors are to set up shop in India at scale, our work-visa rules will have to be loosened quickly. We cannot lose sight of that. And yet, the visa regulations and other rules instituted by various ministries for foreign nationals working in India hardly count as xenophobia, which is a distrust of foreigners. The scale of the immigration problem is certainly nowhere close to affecting the growth rate of the Indian economy. That is someone else’s problem.

In fact, almost all key countries have in place blanket bans on migration of unskilled labour and stringent restrictions on the migration of skilled workers. Singapore, despite being predominantly dependent on imported workers, has rolled out the Complementarity Assessment Framework (Compass), which poses huge workforce-planning challenges to local and international organisations hiring foreigners to work in the country.

The same is true of the UK, where Prime Minister Rishi Sunak has seen a political advantage in anti-immigration rhetoric. The number of migrants who arrived in UK in 2022 – nearly 7.5 lakh – was "far too high", he said recently.

Playing with fire

But Biden ought to be mindful of playing with fire on this matter. Even conceding that he, too, was playing to the domestic gallery ahead of the elections, if the immigration issue flares up, temperatures between the two countries will rise.

For decades, India has pushed for free movement of labour around the globe —known as the Mode 4 issue – at forums such as the WTO. Countering India, both the US and the EU have instead demanded the free movement of capital. Indian negotiators have railed against this.

India is also negotiating free trade agreements with both the UK and the US. Biden’s observations, if included in those documents, would represent an unfortunate setback that reduces the room for progress.

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