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Subnational Diplomacy: A Pivotal Tool for Biden’s India Strategy
Photo: MOLLY RILEY/AFP/Getty Images
President Joe Biden’s approach to foreign policy is likely to strike a chord with India—provided Indian states are propelled into the mainstream U.S.-India diplomacy discourse. Given their execution capacity and control over the business environment, Indian states remain the pivotal nodes for mobilizing ideas, negotiating contracts, resolving center-state gridlocks, and building global networks. Subnational diplomacy should be a crucial tool of Biden’s India strategy to coordinate and integrate forces for addressing the pressing issues the two countries face like the pandemic, climate change, and economic recovery.
India’s federal system allows states to run as multiple, distinct economies with control of local governance and legislation over key sectors, including land, labor, electricity, and health. Not surprisingly, a few states dominate India’s economic activity. In 2019-2020, five states contributed almost 50 percent to India’s national gross domestic product, and four states attracted 80 percent of the foreign direct investment inflows into India.
State: A Local Partner for a Global Alliance
Collectively, states are a major source of growth for India’s economy, and a sustained, stable investment climate at the subnational level will generate opportunities for U.S. exports. Often, though, the macroeconomic settings of an Indian state are undermined by its institutional voids and capacity constraints. It is in the United States’ national interest to foster enabling factors that allow Indian states to meet their growth aspirations. Encouraging partnerships between U.S. and Indian states is a good place to start. The two are aligned in their desire to promote their respective community’s economic interest and open global markets for their local businesses. U.S. states could build trust and goodwill by opening networks of skilled intermediaries, such as subject matter experts and holistic regulatory regimes to their Indian counterparts. In turn, Indian states could tap into their networks for technology, innovation, and capital. Over time, these exchanges can create global trade opportunities for local communities in both countries.
Indian states’ influence is not limited to economic activity. Some have the political clout to shape India’s foreign and federal policy. Occasional divides between the federal and state governments also results in misalignment between the state and national reform agenda. For instance, India’s flagship renewable energy target has seen slower than expected progress despite the central government’s lofty goals. India (and the United States) will require the cooperation and leadership of Indian states to tackle global challenges such as climate change. A coherent strategy to directly engage states in both countries is vital to help Washington and Delhi meet their respective climate change targets and trigger strategic ties. The Biden administration can best accomplish this by gradually and collectively bringing the reform-oriented Indian states, run by influential local leaders, into U.S. discussions on climate change. This will not only moderate the dissenting voices in India, but also elevate the interests and priorities of the United States to Indian federal decisionmakers.
Leveraging Diversity
There remains a considerable variation across Indian states in the ease of doing business, growth drivers, and institutional capacity. Biden’s policy toward India should not only account for this heterogeneity, but also leverage the differences in skills, labor and land reforms, input costs, and natural resources. The administration will do well to identify and partner with states that are growth engines in critical sectors such as health, trade, manufacturing and more. For instance, the state of Karnataka accounts for 40 percent of India’s information technology exports and is the fourth-largest technology cluster in the world, thus complementing California’s strengths in high-tech product innovation. Similarly, the state of Tamil Nadu is the center of Indian automobile manufacturing, and among the world's top automotive hubs, a potential partner of Michigan for building supply chains for the next-generation electric fleet.
Where to Begin
As the two countries look to solidify their bilateral relationship, both should invest in state-focused diplomacy. Here is a four-point plan recommended for Biden’s India strategy:
India’s federal system allows states to run as multiple, distinct economies with control of local governance and legislation over key sectors, including land, labor, electricity, and health. Not surprisingly, a few states dominate India’s economic activity. In 2019-2020, five states contributed almost 50 percent to India’s national gross domestic product, and four states attracted 80 percent of the foreign direct investment inflows into India.
State: A Local Partner for a Global Alliance
Collectively, states are a major source of growth for India’s economy, and a sustained, stable investment climate at the subnational level will generate opportunities for U.S. exports. Often, though, the macroeconomic settings of an Indian state are undermined by its institutional voids and capacity constraints. It is in the United States’ national interest to foster enabling factors that allow Indian states to meet their growth aspirations. Encouraging partnerships between U.S. and Indian states is a good place to start. The two are aligned in their desire to promote their respective community’s economic interest and open global markets for their local businesses. U.S. states could build trust and goodwill by opening networks of skilled intermediaries, such as subject matter experts and holistic regulatory regimes to their Indian counterparts. In turn, Indian states could tap into their networks for technology, innovation, and capital. Over time, these exchanges can create global trade opportunities for local communities in both countries.
Indian states’ influence is not limited to economic activity. Some have the political clout to shape India’s foreign and federal policy. Occasional divides between the federal and state governments also results in misalignment between the state and national reform agenda. For instance, India’s flagship renewable energy target has seen slower than expected progress despite the central government’s lofty goals. India (and the United States) will require the cooperation and leadership of Indian states to tackle global challenges such as climate change. A coherent strategy to directly engage states in both countries is vital to help Washington and Delhi meet their respective climate change targets and trigger strategic ties. The Biden administration can best accomplish this by gradually and collectively bringing the reform-oriented Indian states, run by influential local leaders, into U.S. discussions on climate change. This will not only moderate the dissenting voices in India, but also elevate the interests and priorities of the United States to Indian federal decisionmakers.
Leveraging Diversity
There remains a considerable variation across Indian states in the ease of doing business, growth drivers, and institutional capacity. Biden’s policy toward India should not only account for this heterogeneity, but also leverage the differences in skills, labor and land reforms, input costs, and natural resources. The administration will do well to identify and partner with states that are growth engines in critical sectors such as health, trade, manufacturing and more. For instance, the state of Karnataka accounts for 40 percent of India’s information technology exports and is the fourth-largest technology cluster in the world, thus complementing California’s strengths in high-tech product innovation. Similarly, the state of Tamil Nadu is the center of Indian automobile manufacturing, and among the world's top automotive hubs, a potential partner of Michigan for building supply chains for the next-generation electric fleet.
Where to Begin
As the two countries look to solidify their bilateral relationship, both should invest in state-focused diplomacy. Here is a four-point plan recommended for Biden’s India strategy:
- Prioritize the passage of the bipartisan “City and State Diplomacy Act,” which will establish an Office of Subnational Diplomacy at the State Department, thus creating a framework for more active state intervention in foreign policy.
- Revive the sister city and sister state agreements signed in the past. If in line with current bilateral priorities, the agreements could translate into immediate “shovel-ready” projects to collaborate on.
- Leverage the planned Summit for Democracy to convene “speed-dating” meetings for like-minded subnational leaders on critical sectors. This could lay the foundation for new alliances between the two countries.
- Encourage participation of nonstate actors, including industry, academia, investors, research institutes in order to build a nimble, dependable network for knowledge and peer exchange, thus addressing India’s capacity-building issues.
