Indo-U.S. Business Relations: Opportunities and Gaps Amid Political Shifts

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Mukesh, thank you so much for joining me and good morning to you from India. So before we start off, now, this has been a very interesting presidential election also because the run up to it started a long time ago, perhaps two years. Now, there have been some surprises in the manner in which perhaps the mandate was delivered, if not the mandate itself, because the markets were clearly expecting it and we do follow financial markets, even from here.

So before we come to all of that, give us a sense on how you see Indo-US business relationships in the previous presidency and or rather the current presidency, which is the Biden presidency. And what in your mind was perhaps either missing, lacking and could have been worked upon and that we can talk about whether that could change in the upcoming presidency?

Well, you have to look at, Govind, the trade between the two countries is roughly over $200 billion. And you have an Indian economy which is growing from $4 trillion to almost $5 trillion and at a growth rate of 7, 7.5%. And when you look at the U.S. economy, it is growing roughly 2, 2.5%, but on a base of $28 trillion with inflation down below 3%, unemployment down by 4%. So you have a very, very strong economy. It still maintains a tremendous, I call fiscal deficit. At the same time, trade deficit. So basically what we are seeing is, is printing dollars and importing within those dollars itself.

So it's basically spending more than it's earning itself. So that's the overall scenario, whereas the Indian economy, they've been able to fix the non-performing loans of the banks last 10 years, have taken a much more strong fiscal responsibility by not exceeding, you know, only a few percentage point on the deficit side. So what we see is that while the Indian economy continued to grow on its own strength, the U.S. economy continued to grow on its spending power itself. So what we have, we're looking at is, is basically geopolitical impact on those economies that has a, I call a potential to drive a strong relationship between the two countries. Let's look at geopolitical. What we have is, is a rising nation, which is China, which is basically threatening the dominance of U.S. superpower. And basically it is saying that it's our time and we need to basically dominate the initially Indo-Pacific region. That is the sphere of influence China has, just like U.S. has the Western hemisphere influence. So Chinese are pushing back U.S. in those geographies itself. Now at the same time, Chinese also don't see India as an equal partner. They will never treat India as the same footing itself, and India will not accept that. Now, what we are seeing is a stress point, which will get deeper and broader coming in with the Trump administration between China and the U.S., but at the same time, we have some kind of a cold war between China and India. We have frozen visas, we have frozen flights, we have banned their apps from TikTok to others itself. Yes, we have substantial amount of imports coming in. That is because of consumer asking for it, or that's because of the business communities are asking for it.

But at some stage, what we see, the stress point will start cracking. But more important is as corporate America sees the stress point with China going up, every boardroom is saying no more investment in China. And at the same time, they're asking the CEOs, what is your China plus one strategy? Now, in certain cases, they moved their manufacturing, not completely, to Vietnam, Cambodia and India. But what we are seeing the trend is that the U.S. companies would like to de-risk their supply chain from China. At the same time, don't lose the market share of the Chinese market. So what they're doing is manufacturing China for China, but moving their manufacturing to other geographies. And India becomes a potential market. And a classic example would be Apple.

Four years ago, Apple was not doing anything in India. And today, they're going to export almost 25% of the iPhone 16 out of India to the rest of the world. But more important is that their domestic sale has crossed $5 billion.

Now, it's not the same as China. China is almost $85 billion for Apple. But I think we see a momentum picking up for these companies to come in into the Indian market and gain the market share.

So where I'm heading towards is that while India provides the China plus one strategy from a de-risk perspective, it is also providing an opportunity to gain the market share for these companies. And that becomes very lucrative to look at India from multiple factors.

Right. So if two questions, one is the China focus carries through from the previous Trump administration. So we've started seeing the early signs of tariffs on 2017. So it's almost seven years. China plus one has been a concerted strategy for countries like India for at least four or five years, maybe even more. So all of this has been going on. So I guess what we're seeing now or likely to see now is an acceleration. So I have two questions. One is, to what extent, in your understanding, as you talk to businesses, are businesses really prepared for this accelerated transition? Second, and this is for audiences who may not really understand the nuances of how business is done in America, because the sense is sometimes that businesses have a lot of say in the way policy gets decided or drafted or delivered. Take us through that.

So a business basically has a fiduciary responsibility to its shareholders. It needs to maximise profits and it will go where it can drive the revenue, drive cost efficiencies, and basically look for cheaper resources, both from a raw material perspective and from a manpower perspective. And while last 20 years, what we have seen is the U.S. industrial base has moved out of U.S. into mainly into China. And that was basically driven by U.S. corporates. They pushed the Clinton administration to get China into WTO. They pushed for China to have a most favoured nation status itself. They pushed to make sure that there is a much more efficiency of flow of capital coming in from U.S. into China. At the same time, supply chain logistics became more efficient between the two countries. And they did not question basically the violation taking place by China on WTO guidelines. China subsidising all these manufacturers so they can compete and gain market share from the global market. So what we've seen is the U.S. companies play a very pivotal role on the Hill, on with the White House, with the administration to ensure the relationship with China do not get disrupted or interrupted in any manner, which impacts their business. Now what we are seeing is while geopolitically, the administration, both Republican Party and Democratic Party is focused on pushing back on China, looking at China as a threat. The U.S. companies are understanding that. And what they are saying is, okay, fine, we will move in that direction. But at the same time, we don't want to use the Chinese market share.

So we will move some of our manufacturing to other geographies such as India. Now what we also see a trend coming in where I would basically use the word U.S. plus one strategy. That is you move manufacturing, high-end manufacturing into the U.S., but look at the supply chain with what I call secure shoring. That is partner with countries where you have security agreement. And so you can have certain material made in those countries and the finished goods coming to the U.S., getting basically approval from the government on the standards of those goods itself. So what we are seeing is a trend taking place that where U.S. plus one strategy is going to start picking up, secure shoring will start driving the momentum as the Trump administration comes in. So if you look at the appointees announced by Trump administration, a large number are coming from U.S. corporate. So they will drive the, I call the tax brackets, they will drive the tariff, they will drive the partnership from an economic perspective. But at the same time, the Republican Party is very, very sure that you have to take China on and make sure that you are capable and build the capacity to deal with the threat of China.

Right. So let's pick on the two key elements of the campaign or amongst the many key elements, but at least two key elements. One is clearly immigration and the second is tariff. So let me start with tariffs first. So as we understood it, 60 percent tariff on China, 10 percent on the rest of the world. So this is a key campaign promise. It's not one of those smaller ones which you can forget about now. Going by your understanding of the past Trump administration and maybe your own conversations in the last week or so, what's your sense? How much of this could translate? In what way could countries, including India, have negotiating ability and how could this play out?

Well, you have to understand that Trump made a commitment on many multiple times that he will impose 60 percent tariff on China and 20 percent tariff on the rest of the world itself. Now, as you get closer to it, there will be, I call, adjustments, negotiation, because, you know, Tesla, 30 percent of the revenue comes from China.

And it also has the biggest factory, I think.

I mean, the mega factory is in Shanghai itself. So for him to be part of the administration and be able to support 60 percent tariff on his vehicles coming out of China may not be practical for him. So you have to understand there are vested interests within the Trump administration who will probably not go in that direction itself.

Now, the key question is, if Trump does not basically deliver on his commitment in the first two years of his presidency, you have midterms happening in basically 2026. And that's where the voters will basically boot out the House and the Senate from a Republican perspective. So the whole calculus is you cannot basically back off on your commitments for the next two years, at least minimum, as you move forward.

Now, the impact is going to be that there will be a disruption in global supply chain. There will be an impact on U.S. consumer because inflation will go up. And all the economic numbers are showing that 20 percent tariff is going to basically slow down the GDP by half to three quarter percent in the U.S. also. So it has an inflationary impact. It has an economic growth impact. It has an impact of disruption in global supply chain.

So I think we're just waiting and seeing what direction the whole administration, new administration policy agenda proceeds forward. But so far, what we in our discussion is that they're serious about it. They basically imposed this tariff during the first Trump administration.

More interesting is you have to understand, China had committed to procure $200 billion worth of goods from the United States from Trump. And that did not happen. So there is a long memory about China's not honouring its commitment. So there is a growing, I call, a basically stress point with China for its lack of delivery of its commitment and moving forward mistrust on China itself.

So let's flip that question, if I could. So the reason Trump said he will increase tariffs and wants to increase tariffs is to eventually create jobs. I mean, I can understand that China, there's an emotional aspect as well to say, OK, we've increased tariffs against China because China is a country which cannot be trusted and all of that. But the principal objective is, as I understand it, is to create jobs in America and to bring manufacturing back. And you know, is America plus one or America first, as some have said. How do you see that playing out? I mean, do you think at a very large level, areas like, you know, retail, garments and apparel, toys and so on, I mean, do you see those kind of areas coming back to America? Do you see those jobs actually coming back?

So you have to understand the multiple factors which are taking place. One is, is the cost of labour is much higher in the US as compared to China. The availability of skilled workers, I call skilled means college graduate engineers, is challenging.

In fact, we have a shortage of a million IT workers at the moment in the US itself. And when you look at the CHIP Act, the CHIP plans being set up in Arizona, in Ohio, in New York, the biggest factor of slowdown in that is we can't find capable engineers to get it and work. So you will have certain challenges.

But what we are seeing is a focus initially is going to be high end manufacturing for such as chips and other aspects. But the low end is going to be difficult to come back to the US because you need mass manufacturing. That industrial base is no longer existing in the US.

And if you do try to build that overnight, that's not going to happen. It took 20 plus years for the industrial base to move out of US into China and other part of Asia. It will take some time for it to start coming back.

So what I see is basically countries positioning themselves as US plus one strategy. We will manufacture low end for you. You will go manufacture the high end.

And if there's a combination of global supply chain, we become part of the global supply chain. And countries which are geopolitically aligned with the US, especially on the security side, will get what I call a secure shoring preference moving forward. So to answer your question, overnight, this is not going to happen, but there'll be a lot of disruption.

There will be some movement, but I think it will take some time.

And what's your sense, having been through this very almost tense and interesting period at the same time, do voters really think realistically that those kind of jobs will come back?

So you have to understand, you know, number one, Trump won the popularity vote. This is after 2004, a Republican has won a popularity vote and more important is he won the electoral vote by 312 to 224 seats. So won all the swing states. The fundamental thinking in the US is you do not want the US becoming a banana republic. And we all look at what's happening in Canada and basically both legal and illegal immigration has basically driven that. We have around 16 million illegal immigrants in the US.

When you look at on a daily basis, you know, thousands are crossing the border. And what's interesting is the third largest numbers are Indian. In fact, I was looking at data every hour, 10 illegal Indians are trying to enter the US.

And so the objective is to basically stop that, stabilise the country, assess as to what is our need moving forward and basically move back to a very productive economy where every citizen is getting the benefit of the government, every citizen contributing towards a tax perspective. So I think the whole objective is let's stop, look at what we're doing and then move forward.

Right. And you brought us into immigration and you've touched upon illegal immigration, and that was clearly a big campaign message this time. But let's keep illegal aside for a moment. Let's come to legal immigration, including H1B visas, which I guess is the inevitable question. Now, this has been in some ways a seesaw over time, because even with previous administrations, this is always a negotiating matter. And Indian IT companies, for instance, an industry that you've been part of, have always asked for more because they want to near shore, because their clients want them to near shore. And I guess this is the challenge where you can't near shore because you can't have too many of your people going from Bangalore to New York or wherever that is. So how do you see this part, the legal immigration playing out and including in the context of industries like information technology?

So now you have basically Republican having a trifecta of House, Senate and the White House, so they can drive reform on the legal immigration. The key factor is, yes, you have to create local jobs, but if you don't have skills available and U.S. companies are going to compete globally, it needs to have more effective, productive workers available. And if you don't have those, then a lot of these jobs will move out of the United States into countries like India itself.

So the leadership realises that and they're all business friendly, politicians, both on the Senate side and also on the House side. So what we see is a very quick reform agenda taking place on the legal immigration. That means, for example, there is a quota of 7 percent of Indian H-1B visa holders to move from H-1B to green card.

The trend, the thinking is we need to hold on to productive technical resources, because if you're going to compete in artificial intelligence, if you're going to compete in quantum computing or in cyber, we need that talent itself. So you will see some kind of adjustment taking place where legal immigration will benefit the Indian I.T. workers. At the same time, it will focus also a lot on getting the STEM graduates from master's and Ph.D. programme, making it easier to stay in the U.S. because they are the one who day one become productive and taxpayer to the society. So you will see a massive reform taking place, which will benefit the Indian students and Indian H-1B workers also.

And why do you say massive reform, Mukesh, was that such a gap in recent years?

There's a massive gap in the sense is, yes, you have a certain segment of the MAGA Republicans saying we want more immigration coming in for Europe and more Caucasian and less basically slowdown coming from Asia itself. But when you look at the skills, look at the young talent, look at the education by the international students, it points to that you'll see more immigration taking place from Asia Pacific. So I think, yes, you will have certain leadership which will drive, hey, we want more immigration coming from Europe.

But at the same time, the business community say, hey, I don't care the colour of the skin. I need a talent. I need a productive workforce where I can go recruit itself. So that's where you need to be able to look at the the graduate programmes, people who graduated from MIT, Stanford and the Ph.D. programme and people who are doing startups itself. So, yes, when I say massive, it may not be millions, but it will be hundreds of thousands itself.

And, you know, when you say business friendly politicians, including in the cabinet, from what we know of it right now, which is the I'm talking about the upcoming presidency, would you say that they were much less business friendly politicians in the previous or the current Joe Biden government? Or how would you balance it?

So when you compare the first Trump administration and Biden administration, you know, Trump basically reduced the corporate tax that really benefit the corporate. At the same time, when you look at the tariffs on China, he put it on that continued with Biden administration. They did not repeal that.

And so they leverage what was done earlier and continue with the policy. I think the biggest challenge I saw in Biden administration was they did not do any trade deals with any countries itself. When you are a economy which is export orientated economy, when you look at the Fortune 500 company, on the average, 50 percent of the revenue comes from international markets.

It makes it much easier to have an efficient flow of goods and services. And that means trade deals will help you. India tried very hard during Trump administration to have a mini trade deal. India tried very, very hard with Biden administration to drive a trade deal. And the message was we will not do that because they were trying to appease the union votes itself. So I would say that plus you have the Lina Khan driving a lot of basically regulatory framework slowing down.

So what we are going to see is within Trump administration, especially appointment of Vivek Ramaswamy and Elon Musk on the Department of Efficiency, is probably a few hundred regulatory bodies will get shut down. You will see massive reform on deregulation itself because you've got to give businesses opportunity to grow rather than spending their money, investment time in dealing with regulation. Yes, they're important to make sure that environment is protected, rights are protected, but don't overregulate. And I think you will see that changing. So, yes, we expect the Trump administration to become much more efficient as far as we are concerned in revenue benchmark with the Biden administration.

And did you have a feeling too that there were areas of overregulation? I mean, is there any one area that jumps out?

Well, when you look at, yes, the basically lawsuit filed by the Lina Khan team against Google or with airlines or acquisition between pharma companies, yes, you have to basically make sure that there's no monopoly, but at the same time, don't get overzealous because sometimes merger brings in more efficiency. And at the end, the consumer benefits from that perspective also. So I think there was an amount of overzealousness in trying to stop this merger or stop this acquisition. So I would say that that will hopefully slow down.

Right. So if we were to look at now, I mean, a tinge of political, you know, the relationship, let's say, between India and the United States or other, specifically Prime Minister Narendra Modi and President-elect Donald Trump, do you see anything changing there that can benefit business, could maybe give India slightly more leverage, negotiating room or something else?

So you have to look at the relationship between India and US in multiple factors. You have to look at the relationship geopolitically. You have to look at the relationship economically.

You have to look at the relationship from people to people. And more importantly, you have to look at the relationship between the leaders itself. The partnership between or the friendship between President Trump and Prime Minister Modi is very strong.

In fact, he admires Prime Minister Modi substantially and he's been very open about it. But at the same time, he's called India the tariff king because, you know, on every aspect, India keeps on putting tariffs to make sure the economy is closed for global goods to come in itself. So while we have a personal aspect of relationship strong, but on the tariff side, India has to start thinking of opening that because that's where you will see aggressive posture coming in from the Trump administration. Now, you look at geopolitically, the stress point between China and US will get deeper and wider. When you look at the appointment of potential nomination of Rubio as the Secretary of State, look at the nomination of Radcliffe as the CIA director, or you look at the nomination of Mike Walz as the NSA director. They are all very pro-India, but China hawks itself.

So you have a perfect position for India to leverage geopolitical partnership into the economic agenda. So our advice is, look at how India can play and become US plus one environment to become a supply chain partner for making America first. Yes, you can support ARPANERV Bharat also from that perspective. They can be in perfect, I call, cohesion. At the same time, basically providing secure shoring to the US. So you will see a very, very strong play taking place between geopolitical alignment and at the same time, economic alignment between the two countries.

And I mean, the question that people often ask, I mean, is there any special treatment that India could get? I mean, this is again, partly a tariff question, because that's the new elephant in the room. And you said 20%. Is there any special treatment that's likely, or at this point of time, does it appear that Indian exporters, for example, let's say whether it's in garments or other products, should brace for the worst?

I would say don't expect any special treatment at this stage. As time goes by, both sides keep on working and bringing the aspect of other relationship. There may be some adjustments. And one of the things which we have proposed is both to the US government and also Indian government is look at the quad. You have four countries in the quad, which is Japan, Australia, India, and the US. These four countries are geopolitically aligned on issue of China.

When you look at the economy of these four countries, it's around $35 trillion GDP. When you look at the partnership, US has a trade agreement with Japan. US has a trade agreement with Australia.

India has some kind of trade agreement with Japan and also with Australia. So why can't we basically drive a cohesive supply chain partnership, movement of goods much more efficiently between the four economies? So basically what we're saying is push geopolitically security alignment into economic agenda also. That may be the way to ease up and differentiate with the rest of the world, both for India and the US.

Mukesh, you live in the United States and have been there for some time. What's changed in the United States? I mean, this I'm asking you more as someone who lives there. And do people recognise that? Because the tendency is to hope that things will return to some normal, which may not change. You talked about how for 20 years, companies have taken away manufacturing from America to countries like China, and that's not easy to come back. But things have changed. And to what extent should people understand that, I mean, in your sense? I mean, and how would you convey that?

I think the biggest change I see is the generosity of America. You look at after the Second World War, the US went into Germany and Japan and rebuilt that economy. You look at Vietnam, after the Vietnam War, the US basically signed an FTA with Vietnam, gave them most favoured nation status and built that economy. When you look at until the Biden administration with India also, what we're seeing is the US under the ICET umbrella is moving some of the crown jewels in technology into India to ensure India's industrial base becomes stronger, India's self-sufficiency in manufacturing goes up itself. So what we are seeing is that generosity is dissipating with time. And people are angry. They're angry that their jobs are not there. Their jobs have moved to China and other geographies itself. And that's the reason Trump got voted, because he said America first now. Will that change? I think it will change once you have the jobs coming back. Once you have basically a much more better ecosystem coming through, because at the end of the day, this is a nation which basically has been generous from centuries itself, in every aspect, First World War, Second World War. But it will take time. It might take 10 years, 20 years. But the generosity has completely gone away. And everybody is saying America first at the moment.

That's interesting. So let's come to IT. And once again, the industry that you're familiar with, and you've led corporations based here in India. Now, this is the part of the industry or business which is interlocked with the United States. I mean, it's not a new trend anymore. It's been there for many years of global capability centres. We are seeing several now new ones come up every week in India. There are more than 1,600 GCCs already. So that represents an interlocking between the two countries in a way that cannot be separated, even if someone wants to. So what can we do there, or could there be anything to be done which can, let's say, strengthen or improve or take forward?

Let me just give you a bigger picture. What you have in India is roughly a population of 1.4 billion people. A median age is 28. You look at the US, roughly 350 million people. Median age is 45. And when you look at India's bulking of the working group, by 2035, India will have roughly a billion workforce itself.

And that's where its bulk peaks. China basically peaked. I'm sorry, Japan peaked in the 60s and Korea peaked the skilled worker force in the 70s, and China peaked in the 90s.

So when you look at every aspect, the global skill in the next two decades is going to reside with India. And as population ages, yes, AI will come in. Yes, you will have other robotic services coming in. You will need skilled workers. And India becomes very critical from that perspective. And why US and India? Because when you look at your 5 million plus Indian Americans, they constitute roughly 1.5% of the total population, but they're generating 6% of the GDP. So that means they are financially very affluent. They're also very influential financially. So you will see the people-to-people relationship also driving that strong agenda between the two countries. These two countries as a democracy are aligned. These two countries as a language are aligned.

These two countries from a value and culture aspects are aligned also. So we see a flow of skills, mobility continuing between the two countries. When you look at the Indian Americans, they basically don't have ghettos in America. They're engaged in the political process, civic process. You look at the last election, substantial number one, the state-level election itself. And we have one or two more in the Congress joining for the Samosa Caucus also.

So the strength, the trend I see is that the people-to-people, business-to-people, business-to-business, the process will continue stronger between the two countries. From an IT perspective, when you look at the Indian IT companies, they've moved on from labour arbitrage. They're moving more on the high end. When you look at GCCs, we have roughly 1,700 GCCs exporting $125 billion worth of services and IP. I'll give you an example. Qualcomm, for example, 50% of its IP now is being generated in India. Every chip in the world is now being designed in India. You can't break that because we don't have the resources here. And also, if the resources are there, it's much cheaper to do the same quality work or better in India.

So why not leverage that? So I don't think that's going to go away. I would say that that's going to move more on the upward cycle of supply chain. And that's where India will play a very pivotal role. Indian companies will play a very pivotal role. And I don't think that is going to disappear in the next 10 to 20 years.

Right. Last couple of questions. Just to come back on illegal immigration, and you yourself pointed out that a substantial number of illegal immigrants who are also getting arrested at the southern borders are of Indian origin or are coming from India. What can be done to address that? Because this can become a pain point, as it appears, which can affect other larger perceptions, negotiations, discussions, and so on.

Well, yes, basically, it does have an impact on the political side, and it does have an impact where the US will ask India to try to stop that. If you look at what the US has done with Mexico, which has the number one illegal immigrants coming in, what it has done with El Salvador, which has number two illegal coming in, where they're asking to stop these people at the border itself. Yes, India is making a lot of effort, but the transit points could be multiple.

They can go as tourists to Europe, from Europe they're going to El Salvador or Mexico and move on. It is difficult to stop, but there will be political pressure on India to look at this more seriously to stop that. I think you have to understand that the illegal immigration will have an impact on legal effort, and we need to stay focused on making sure the legal efforts are becoming much more efficient, much more flowing into the whole process, both from a business perspective and from a geopolitical perspective. So, yes, it will have an impact, and there will be pressure coming in on India from the illegal flow.

Right, and my last question. So, as the CEO of the US-India Strategic Partnership Forum, what's the one thing that you are concerned about and would therefore be watching carefully? And what's the one thing that you're very optimistically looking forward to in the upcoming administration?

So, I think the biggest concern I would have is knee-jerk reaction when you have Trump administration putting 20% tariff across the world and India will get impacted. We should not basically say, okay, Trump has put in 20%, we will put 20%. See, what happens is when you get into the game of I will also match what you've done, US has a bigger gun from that perspective. So, let's not fall into that trap. We need to, yes, protect the export of Indian exporters because the job creation is critical for India. The exports are critical for India.

So, it is important that we need to keep the bigger picture in mind and figure out a way to how to deal with that. So, to me, that's going to be my biggest concern at this stage itself. Opportunity, I believe that the stress point between China and the US will get deeper and broader. This will have an impact economically. US companies are looking at alternative supply chain. They're looking at alternative markets also. That's where India can play a very, very strong role to ensure that they're able to bring in more companies by having ease of doing business, by having a level playing field, by ensuring that these companies are successful. That has to be not just from a central government. Central government is doing a lot of effort from that perspective. It has to come down to the state level because that's where they go set up plans. That's where they go basically hire people. That's where they go get permits itself. So, that effort has to come more from a state level rather than just from a central government perspective.

Mukesh Aghi, it was a pleasure speaking to you. Thank you so much for joining me.

Thank you very much. Pleasure.