Alyssa Ayres discusses the relationship between the United States and India–where things are, where they have been, and what's ahead.
The CFR Master Class Series is a biweekly 45-minute session hosted by Vice President and Deputy Director for Studies Shannon O’Neil in which a CFR fellow will take a step back from the news and discuss the fundamentals essential to understanding a given country, region of the world, or issue pertaining to U.S. foreign policy or international relations.
O'NEIL: Welcome, everyone, to our CFR Master Class Series. I'm Shannon O'Neil. I'm presiding over today's discussion. So today the subject for our deep dive is India and U.S.-India relations, and we have with us Alyssa Ayres. She is our senior fellow for India, Pakistan, and South Asia. She's been with us for a good amount of time here at CFR, and during that time, she has adroitly led a task force on U.S.-India relations. She published a great book about two years ago, it was called Our Time Has Come: How India is Making Its Place in the World. And before CFR, she worked in the State Department, so she's dealt with lots of these issues from a governmental perspective, as well as before that in the private sector. So she'll be bringing all these perspectives to our discussion today. I'm going to turn it over to her for opening remarks for about 10 minutes, and then we will begin the discussion. So go ahead, Alyssa.
AYRES: Thank you, Shannon, for that wonderful introduction, and thank you for the opportunity to be part of our new Master Class Series. And yes, you asked me to speak a little bit about India and U.S.-India relations. So I will start with some of the headlines from the past several months. India has been in the news in recent months, especially due to the deadly ongoing military standoff with China on their shared border, as well as the TikTok ban, which made global headlines and appeared actually to spur Washington to take similar steps. I thought these two developments give us a good vantage point from which to step back and take a look at India geopolitically, and at the U.S.-India relationship where things have been and what might lie ahead.
You mentioned my recent book about India's growing role on the world stage. It looks in detail with the changes in India and the changed relationship between Washington and New Delhi. For decades, U.S. foreign policy has placed relatively greater emphasis on regions other than South Asia. And although India has since its independence in 1947 been the world's largest democracy, we were on other sides of the Cold War, India was not aligned, fiercely independent, had a strong relationship with the former Soviet Union, and the United States and Pakistan were allies. So it wasn't until the 21st century that the current strategic partnership with India developed and I would note this growing relationship has been nurtured very unusually, by U.S. administrations across both parties, and three different governments in India.
Despite India's growing global role, it remains a struggle to get it on the U.S. foreign policy radar screen in a way commensurate with its size. So I often like to frame this for people who are not always focused on India as a question of how far it has come economically. India has one of the world's largest economies, it has been hovering between number seven and five over the past few years—and that's using market exchange rates not purchasing power parity terms. Its economy is approaching around $3 trillion, which puts it in line with France and the United Kingdom. Just to further underscore the economic context, India's economy at market exchange rates is larger than Italy's and Canada's, which are both members of the G7. Of course, in per capita terms, it's still in the bottom third, globally: a little over $2,000 a year.
But prior to the COVID-19 pandemic, India had pulled more than 270 million people out of extreme poverty in the decade between 2006 and 2016. It's a remarkable fact and one that pointed to the growing heft of the Indian economy. Of course, India also has one of the world's largest militaries, the third largest by personnel strength and consistently one of the biggest defense budgets in the world, around number five. India conceptualizes its interest as global and maintains an active diplomatic presence around the world and across multilateral organizations. India's foreign minister uses the term "leading power" to describe how the country sees itself and its global role. But India still lacks representation in central global governance institutions where it seeks a voice, like on the UN Security Council. And despite the size of its economy, it is not a member of the Asia Pacific Economic Cooperation Forum and others. We'll certainly hear more in the months ahead about Security Council reform because India will be taking up a non-permanent seat in January.
Now, as people are likely aware of the past 20 years have seen China rise and become far more assertive on the world stage, that has included within the South Asian region. In the early 2000s, New Delhi was already looking warily at the growing ties between China and all of India's neighbors. And a common interest in ensuring the balance of power in Asia pulled the United States and India more closely together. You can see in some of the early statements during the George W. Bush administration that supporting India's rise as a balancer in Asia was one implicit factor in that administration's big opening to India. India's increased interest in its maritime presence in the Indian Ocean—reclaiming in a sense, its maritime history—and not seeing itself just as a land power. That was another important development in defining its own security interests.
So the ties between India and the United States with the door first cracked by Bill Clinton in the year 2000, then pushed open by the George W. Bush administration and the civil nuclear agreement, gained further momentum with the Obama administration. That's when you saw ties expand across a wide range of areas like clean energy, climate change, higher education, more science and technology cooperation, expanded technical cooperation in areas like weather forecasting, global health, trade and investment ticked up despite long standing frictions. You also saw development cooperation, like coordinated training and agriculture for third countries. I could go on with a very long list. But that all just illustrates the deep engagement across every issue you can imagine, has been important for the relationship and linked both countries closer together.
I'd note as well, this has been a phenomenon not limited to federal governments. The way I became interested in sub-national engagement was precisely by seeing a rapid increase in the governor and mayor-led delegations to India. Post-COVID, I think we'll probably see more of this, including at the city level as India continues to urbanize. Which is adding to this landscape, the advent of the Belt and Road initiative from 2013 forward, further strengthen China's ties with all of India's neighbors, and it put New Delhi in a competition for influence in its own region. India has publicly shunned participation in the Belt and Road, and has declined to send a representative to the Belt and Road forum gatherings. One result of all of this is that New Delhi has become less reticent to be seen partnering closely with the United States and U.S. allies.
Although of course, and I'll underscore India places a premium on its own independence and is not an ally of the United States and does not seek a formal alliance relationship. But that brings us to today, the Trump administration has continued to deepen the strategic partnership with India with a heavy emphasis on defense and strategic ties. The administration's concept of the larger Indo-Pacific region similar geographically to what the Obama administration described as the Asia-Pacific and Indian Ocean region. But that concept has created a more central geopolitical role for India, at least in the geographic framing of the region, resuming the quadrilateral consultations with Australia, Japan, India in the United States has helped underscore the strategic interest these four countries in the Indo-Pacific share and upholding international rule of law and freedom of navigation. So the security partnership with India continues to deepen. The Trump administration however—this won't be a surprise to you all—has also brought a sharply punitive approach to trade. There is a lesser known trade war underway with India right now. And despite the growth of two-way trade over the past 15 years, the list of frictions is long and unfortunately growing. Our field guide to trade tensions with India is available on CFR.org, and that provides a little bit more of a long history and current status of many of these arcane but important issues.
I would also note that the past year and a half has been one of substantial domestic tensions in India. Since the reelection of the Modi government last year, particularly on the question of India's secular character, the place of and protections for religious minorities, especially Muslims, and issues like freedom of expression. India is the only country in the region that Freedom House rates as free. But in this year's “Freedom in the World” report, the nonpartisan organization expressed concern about the health of Indian democracy. Let's look ahead. I mentioned India's TikTok ban at the beginning. I'd like to come back to this because this development connects geopolitical and geoeconomic shifts, and suggests what will likely remain important in the near term ahead. As I mentioned India has been in a military standoff with China on their undemarcated border in the Ladakh area since April. So the geopolitical concerns that New Delhi and Washington both share about Chinese aggression have become far sharper. The standoff turned deadly in mid-June when 20 Indian soldiers and an unknown number of Chinese soldiers died in manual combat when both sides are supposed to be disengaging. In addition, the verbal commitment to disengage has so far not been realized in action, and in early September shots were fired for the first time in more than four decades in this same area. Successive diplomatic and core commander level talks have not so far resolved the situation.
So I really would like to emphasize here that these are two nuclear powers, but a tense border dispute that has not proven amenable to de-escalation over a period of now six months. The United States has weighed in with Secretary of State Pompeo calling for a peaceful resolution and describing China as engaged in a clear and intensifying pattern of bullying its neighbors. One way New Delhi has responded to these military provocations on the border has been through denying access to India's large and fast growing digital economy to a growing list of Chinese apps. India's also used other measures like tariffs and investment restrictions, citing national security concerns. Given the prominence of the digital economy and the fact that India's is now the world's largest open Internet economy by users—that's because China's is closed—I can't help think that this space will grow even more prominent as a site of new geoeconomic tension that extends from the geopolitical. We also have to recognize that the COVID-19 pandemic, and a terrible economic toll that the national shutdown to prevent spread of the virus took on India will inevitably shape options going forward.
The Indian economy was slowing even prior to the pandemic. In January, the IMF had lowered its estimate for India's previous fiscal year to 4.8 percent. That might sound good to us sitting here, but it's actually well below the estimated 8 percent or so India needs to generate jobs for those who come of workforce-age each year. Last year, according to official data, the unemployment levels hit a 45 year high at more than 6 percent. Now, the COVID-19 lockdown managed to pause for a brief time spread of the virus but at great pain for the millions in India's informal economy and especially for migrant laborers. And on August 31, economic data covering the April to June quarter came out, and it put India's economic contraction at nearly 24 percent for that quarter. That's just very painful data. And as the Daily News reminds us, COVID-19 is continuing to spread now in rural India, where access to health care is simply more difficult. Economists expect the Indian economy to pick back up but it's clear that things will be strained. And therefore so will government finances for some time ahead. And that raises questions about how India will prioritize. We've already seen news from the defense ministry in April about budget cuts of at least 20 percent. At minimum, it suggests uncertainty ahead for what Indian leaders will feel they're able to undertake at home, and of course in the world. So I'll stop there and look forward to the questions.
O'NEIL: Great. Well, I'm going to ask Teagan just to remind people how to ask the question, and then I'll take the first question.
STAFF: (Gives queuing instructions). We will take our first question from Arvin Bahl.
Q: Hey, can you guys hear me?
O'NEIL: Yes, yes.
Q: The first question is, you know, how does policy change under a Biden administration, and who does the government in New Delhi want to win this election? Because on the one hand, the left wing of the Democratic Party has been very critical of Modi, given his handling of Kashmir and a few other issues. You know, in addition, you know, right wing, Hindu nationalists love Trump. But at the same time in a Biden administration, you may get, you know, less tariff wars, you know, more strategic coherence. So, if they see China as the main issue for us to contend with, maybe you get a get a deeper partnership. So, you know, who does India want to win? And how does policy change under Biden? And the second question is that do you think this turns into a left-right issue, the way that the Israeli-Palestine conflict is, right? So in the U.S., the more pro-Israel you are, the more right you are, the more likely to the Israeli side, you are, you know, more people on the left become more of a Palestinian, is there the same risk here in India in the sense that, given the affinity between, you know, Hindutva, and with Trumpism, you know, just the left oppose India more or given the natural affinities, the, you know, the natural interest, it's not really your concern?
AYRES: Well, that was a long and complex two-part question. Let me take the second part first, because I have written a little bit about this. I certainly hope that we don't see a kind of partisan split, as I said, in my opening remarks, one of the great strengths and a very unusual strength of the U.S.-India relationship has been the fact that it's been supported over successive governments of different parties on both sides. I haven't analyzed all bilateral relationships around the world, but it does strike me that that is pretty unusual. And it has helped carry it forward. I mean, you see that the George W. Bush administration carried forward what the Clinton administration began, you saw the Obama administration carry forward what the George W. Bush administration began, you've seen the Trump administration, particularly on the strategic side, less so in some of the other areas, carry forward with the Obama administration was working on there. And that's been, I think, a great strength.
Now, your other question is, is actually more complicated. I certainly defer to the Indian government and Indian political parties. I don't know if they have a selection. It's not my lookout. I simply don't know the answer to that. I also want to be transparent with you, as my CFR bio notes, I am volunteering for the Biden campaign, so I've got my own take on this. I served in the Obama administration, so I'm not neutral on this question, and I wanted to make sure you were aware of that, so there's not any misinterpretation. I do personally think that what you would see in a different U.S. administration would be a shift in emphasis and a greater openness on immigration, of course, you know, being appropriate in looking at the types of reforms that would keep our country safe while also opening up for our private sector, I think you would see a different approach to trade and investment. We have a long standing list of trade frictions with India, that is not a secret. I think if you were to ask any U.S. Trade Representative from any U.S. administration, going back probably 20 years, they would cite many of the same issues for you, because some of them have been hanging around for so long, these issues without resolution.
But I think you would see a different approach to tackling some of these. Under the Trump administration actually escalated some of these tensions with a set of tariffs that have been applied, particularly on steel and aluminum, this was never an issue with a relationship before and suddenly has become one. The focus on trade deficits, again, never an issue in the relationship before. So I think we would see a different approach and a different dialogue emerge. I also think that you would see in a Biden administration a return to focus on a number of the big global challenges that have been kind of off the radar screen, because of the way the Trump administration approaches things like climate change and clean energy. These were actually large, important areas of us India cooperation 10 years ago, and they're now off the radar screen in the current dispensation. So I think you would see a return to focus on those issues too.
O'NEIL: You know, let me just follow up and especially on the trade and investment side, and sort of two-part question. One is, my sense is that United States is not the only country that has problems with India on these issues—
O'NEIL: And, you know, I don't want to say the failure of our set, but the delays in getting a sort of Asian trade agreement that includes China and India, in part seems there, so maybe what I'm interested in, overall, India's view of the world vis-à-vis trade and investment. Does it want it, does it not want it? What are the terms, the kinds of things it wants it on? And then the other question, I would love for you to address and this came up in your initial remarks is, you know, sort of the India-China comparison, right? And we hear we hear this a lot, it makes a lot of sense, because of the two countries with over a billion people in them. Right. But yes, it is a big economy, it's number five, six, or seven, depending on you know, on the year. But it is only 2000 per capita and Chinese thing used to be 2000 per capita and now it's 10,000 per capita. So, you know, the comparison between India and China don't usually go in India's favor. What has India done or not done—or what has China done or not done—that has allowed China to take off when India even if it's still growing? It's doesn't seem to be catching up? Or is it just a sort of a time lag thing? So one is, trade is trade investment, one of those. So where are we on trade investment? And then what do you make of this comparison between China and India? And why does India seem to fare poorly, vis-à-vis China?
AYRES: The trade and investment question is a really good one. And you mentioned RCEP, the Regional Comprehensive Economic Partnership negotiations that went on for years and years. And we used to talk about this as a China and India-led Asian trade negotiation. Last fall, so not quite a year, almost a year ago, India decided that they would no longer participate in a negotiation, that they just simply weren't going to do it after all these years. And this was driven by a sense that many Indian enterprises, micro, small, and medium-scale enterprises simply would not be competitive with a flood of goods coming in from China. And Indian political leaders didn't want to risk that. Now, another approach to trade could have been to say we want to take the domestic reform choices, those decisions at home, to allow our industries to grow and become competitive, and then open up so we can better deepen our relationship to global supply chains.
You now see, in fact, it has been a little bit confusing, frankly, in the wake of COVID. You've seen different sort of statements and announcements from India particularly, you know, from the Prime Minister's level talking about the importance of India becoming more self-reliant. And this, when you hear this it kind of brings to mind well is this you know, going back to kind of days of autarky and what does this mean self-reliance? And in later days the concept of self-reliance in the wake of COVID has been explained more as in many of the same ways the United States has had conversations about supply chain resilience, you work on this. You've seen Indian political leaders and economic thinkers really grapple with this issue of what does it mean to be dependent on active pharmaceutical ingredients coming from China, when you've got a, you know, tense geopolitical relationship with China? What does it mean to find yourself unable to fulfill orders for certain kinds of pharmaceuticals because of those challenges? So in much the same way that the United States has been looking for resilience, I think you've seen this kind of concept of supply chain resilience re-emerge in India. And you've also seen Indian leaders talk about wanting to be more embedded in global supply chains. India is a kind of major pharmaceutical producer for the world, certainly for the United States. So that is a big issue that that they care a lot about. But it has been a real challenge, you know, this issue of what pace and to what extent can political leaders take on economic reforms to help the economy grow?
And now we get to the second part of your question, which is about the comparison between India and China. And there's no doubt that the economic comparison comes out with India on the short end of the stick. I mean, there's no way around that, right. If you look at you know, the scale of economic growth, and you begin at 1980, and you looked up today, it's kind of in the same place, and one goes like this, and one goes like that. So there really has been quite a divergence in economic growth and what that has meant for delivering prosperity at home, you mentioned China's per capita income is now around $10,000 a year, there are still tens of millions of people living in poverty in China, but certainly not to the same extent, as you see in India. But that's one reason that India's economic growth had been so powerful. And it's one of the reasons I mentioned that, you know, pulling 270 million people out of extreme poverty over you know, the recent decade, it is really quite something.
It's another reason that I do worry now about what COVID-19 and its after effects are going to mean, because we don't know how quickly the Indian economy can rebound, but it certainly is important to see that rebound happen to help ensure that people who had made it out of extreme poverty into let's say, lower income status, don't slip through the cracks there. I mean, that that actually is a really important priority. But the India-China comparison, I think when people make this comparison, is no longer one of stacking the economy side-by-side. That's not really a comparison you can make. But it is one of saying when you look around the world, and this was the observation, this is one of our findings from the taskforce that you mentioned, we when you look around the world, and you look at what economies have the potential to become another $10 trillion plus economy. There are not a lot of countries that have that potential. And India is one that does have that potential. It isn't there right now. But it certainly has the potential to get there. And so that gives it a different kind of a place. When you're just thinking about the possibility of future growth. It's one reason this digital economy issue I think has become so large, so quickly, because that is where you are seeing rapid growth.
O'NEIL: Great, let's take a member question.
STAFF: Certainly, we will take our next question from Fred Hochberg
Q: How are you Alyssa, how are you Shannon?
AYRES: Hi, Frank. Love the tomato?
Q: Well, it's you said my book there, but that seemed to promotional. And the tomato I grew. So Alyssa, one of the things that India, you know, you mentioned in terms of on the human right side, in terms of Muslims, Kashmir gets a lot of criticism from the business community. There, it's a very difficult place to do business. You know, the retroactive taxes, a number of restrictions. Are these things that India is actively trying to address? Or is it sort of, they're happy with that policy, and they want to continue it?
AYRES: You know, there was just a decision, the international arbitration decision on the Vodafone retroactive taxation case, just went in Vodafone's direction. So, I thought that was very interesting. But you're right, it has been a difficult place to do business. That's why so many companies have so many different and kind of intricate kinds of challenges. I mentioned the field guide to U.S.-India trade tensions which I did. I guess it came out in February. And the reason I did this field guide is because you know, honestly, if you go back and look at the complexity of these trade tensions, some of them like the intellectual property rights issues, issues with pharmaceuticals, patents, issues with tariffs on Harley Davidsons, they just announced they're not going to be manufacturing in India anymore. I mean, these issues have been around for a very long time without a good resolution. It's hard to resolve some of these. And I think that is in large part because the Indian government, it really is focused on, it does still have a kind of protectionist mindset. I want to be clear, if you compare where India is today with where it was prior to the onset of economic reforms in 1991, it's far more open. But people no longer compare India, where it is today with where it was in 1991. They compare it with other economies, they compare it with what it's like to do business in Vietnam. One of the citations I like to provide is the fact that Bangladesh, which is about one-sixth the size of India in population terms, it's become the world's number two ready-made garment exporter after China. It's not India. You'd think India has that potential. And it still does have that potential.
But it has just been harder, as you say, to do business there for a variety of reasons. Now, last week, there was some important economic reforms that took place, one in the agricultural world that should benefit farmers. But this actually has been extremely controversial, there been a lot of protests about this, farmers are worried about whether they'll be able to retain a minimum price for their goods, it has to do with government wholesale sales places. Another major reform that took place was lifting the cap on how many workers a manufacturing facility could have before needing to ask for government permission. Hopefully, that should help ease and promote growing manufacturing. India has a very large number of small-scale industries. And the idea would be to help grow those to larger and more competitive industries, so it can better compete with places like Bangladesh and Vietnam and perhaps eventually also with China. But yeah, you're absolutely right, it is a challenging place to do business. And there's always some kind of an issue. The newer issues, of course, have to do with the digital economy privacy debates that are coming up where you've got a major economy that's now thinking about its own rules on privacy and data localization. So that's now a whole new arena. That is preoccupying time and attention too.
O'NEIL: Let's take another question.
STAFF: We will take our next question from Moushumi Khan.
Q: Hi, Alyssa, from Ann Arbor, Michigan. Beautiful.
AYRES: Hi. Oh, thanks for joining.
Q: Yeah, it's been great. I really enjoy your comments and reminded of our trip to India that you guys organized, how many years ago now? Right. It was an amazing trip. And I feel that some—
AYRES: Term member, term member trip.
Q: Exactly. Term member trip, right, I should have clarified, thank you. And that was my first exposure, first trip to India. And I feel now that I've been living in Bangladesh, for the last 10 years or so, so many of those issues are still the same, right? And my question is actually regarding what are your thoughts on India's relationship with its neighbors and the impact that that has on the U.S.'s relationship? So for example, in Bangladesh's case, as you mentioned, India has had historically a very strong relationship with the Bangladesh government, particularly this government, and historically, and that has had some impacts on the relationship that Bangladesh has with the U.S. And would that would be my first question and an observation, a more recent observation is, in about the last six to eight months or so, China has been increasingly been much more involved, let's say in Bangladesh, and a lot of from the belt and highway investments to other diplomacy. And the Bangladesh government seems to have given indications that they're certainly more receptive to the Chinese investment as well as other bilateral relations. And that has had its own impact on its relationship with India. So my main question is, what do you think the impact of India's relationship with Bangladesh for example, or its neighbors is the impact with its relationship, those countries relationship with the U.S. and then these kind of changing dynamics where you see China playing a much more active role in investment and otherwise.
AYRES: Yeah, thanks. That's a really great question. I would highly recommend to everyone if you haven't seen it yet. Last week, the Economist did a kind of analytic deep dive in the China, India relationships with Bangladesh, particularly looking at FDI. And they crunch the FDI numbers going back to 2014. And what they found was fascinating. The graph was fascinating: 2014, 2015, 2016, the FDI levels of both China and India in Bangladesh are around the same. 2018, it shoots up Chinese FDI into Bangladesh is about five times India's. 2019, it's almost 10 times India, so it's very rapid change in the way that's occurred. Now, if you look at the trade basket of the trade relationship, I, we did a piece on this five years ago, as part of a new geopolitics project for CFR. If you looked at the trade data, you could have seen that China surpassed India as the major trading partner for Bangladesh, quite some time ago, I think it was in the late 2000s. And that's directly related. If you look at the trade basket, it's directly related to the garment industry and importing, you know, machines for factories and supplies, everything you can imagine, you're familiar with it.
But the investment piece is interesting. You've also seen in the last couple years, a series of commitments that China has been making to Bangladesh for certain kinds of infrastructure, including facilitating more Teesta River bridge projects. China has also building a lot of coal-fired power plants in Bangladesh, which is another interesting development. But you're absolutely right. There is a lot underway now with the China-Bangladesh relationship. Five years ago, I would have said that the India-Bangladesh relationship was one of the biggest success stories of the first Modi government. And that's because in 2015, late 2014-2015, they managed to resolve the India-Bangladesh boundary issue. And for everybody on this call, who are not familiar with the India-Bangladesh border, it was long-called the world's most complicated border. I mean, you had these enclaves and then even enclaves within enclaves, this border was incredibly complicated. And it goes back to the issue of the birth of Bangladesh in 1971. And, of course, the partition of India in 1947. And they actually managed to solve this, it was a very big deal.
In the last year, things have gotten much more tense. And it's had to do with this issue of the National Register of Citizens process in India's state of Assam. And that effort again, it's not unique to the Modi government, it goes back to 1951. But some of the statements and comments that you heard India's home minister make about this process, referring to Bangladeshis as infiltrators, or in some cases as termites, but think it's been disturbing to Bangladesh and you've seen some more tension in that relationship, as you noted. So, you know, India's relationship with its near neighbors, there's for about 15 years, been a kind of pendulum swing, often with China's influence in these countries and India's influence. And it's a little bit different phenomenon for each of the countries concerned. I won't go into detail on each one, because there are kind of different considerations for each of them. But it is very much a phenomenon. It's why I flagged I mean, this this sort of geopolitical issue with China's engagement, deepening its engagement with all these countries, the Belt and Road is kind of amped up a process that was already underway. It really has put India in a position of needing to ensure that it is stepping up and furthering and deepening its ties with its neighbors.
O'NEIL: Let's take another question.
STAFF: We will take the next question from Lee Cullum.
Q: Thank you very much, Alyssa. This has been a fascinating presentation. Thank you. I'm a journalist in Dallas. A comment and a question. I sat next to an Indian actor a few years ago who said "just look at it this way, young India versus old China." It hasn't worked out the way you hoped, but maybe India will assert itself but my question is actually about opposition to the BJP in India. Has the Congress Party ever survived the Gandhis, and what became of that anti-corruption party led by what's his named Kejriwal, is that his name?
AYRES: Yes, Arvind Kejriwal, yeah, hi, Lee. Thanks for joining us today. Your life sounds a little bit more exciting than mine, who you're sitting next to. I'm in my chair in my home office all the time now. No, this is a great question. And I actually do think that you know, the demographics that you refer to and which the actor you were sitting next to refers to a very real. China is aging. By 2040, India is still going to have a very young workforce. China, Western Europe, Japan, are all aging. So there is a real opportunity here. And that's why when people are looking, you know, two, three decades out, India does continue to look like a country that's got great opportunity and great potential. But you're absolutely right. You know, when you look right now at the economic constraints, and it's not just India, right. I mean, the world is in recession, we are facing real challenges because of the pandemic. But this is an issue for India, because there are so many people still needing to move up out of extreme poverty and grow that lower income and grow that middle class. So the demographics, still true. That observation, it is very important.
Now, you asked about opposition. You know, it's a federal system, there are seven national parties more than 20 single state parties, a couple thousand parties that are registered but unrecognized across the whole country. The BJP is now a dominant political force, but they're not dominant in every single state. And that's something to keep in mind. The Congress Party is at a low point, it's at a real low, it has not been able to meet the parliamentary threshold required even to be declared the formal opposition. So there isn't a single party that can play that role of a formal opposition. But you do have a number of other parties that, you know, have their own views, particularly you can see this in other states, like in South India, and you mentioned the anti-corruption party, that party is in power in Delhi, the National Capital Region. And it has continued its anti-corruption focus, but in an effort to try to grow and become a more national party, they were not able to do that. So they're pretty much located right now, just in one union territory, the Delhi National Capital Region.
O'NEIL: Take another question.
STAFF: We will take our next question from Islam Siddiqui.
Q: Thank you, Alyssa. This is Ambassador Islam Siddiqui. I used to be with CSIS. And these days, I'm a consultant formerly—
AYRES: Nice to see you.
Q: —at USTR. Of course, nice to see you.
AYRES: You can tell us about ag tensions I'm sure you have a lot of stories.
Q: I still remember those issues. And I know that from my source and USTR, they are still unresolved. I think those are issues which we can negotiate. I'm very optimistic one of these days, we'll get USDA products into India, and more quality products. But I think my question is this rise of Hindutva and decline in Indian democracy, democratic values under the Modi government. I think as a strategic partner, and all the focus we people of Indian origin, including myself, and many Americans want this relation to blossom into a fully strategic partnership. But I think for investment to American FDI, to be there in India, I think we have to worry about India holding those democratic and secular values, which we love here and also we advocate around the world. So if there was a Biden administration, my question to you, should we be putting that on the table in order to make sure that India abides by its international commitments on human rights and protecting the rights of minorities?
AYRES: Thank you for that this is a really important issue. And there has been a lot more focus and attention on this issue over certainly the course of the past year and a half, because we've seen the government take some legal steps that are changing the situation in India. I think what you've seen from the Biden campaign is a recognition that India is an important global power, but a desire to make sure that all issues are on the table and can be discussed openly. At least that's what the campaign says. I'm again, I want to just be transparent on volunteering for the campaign, but I certainly can't speak for it. But it is important, I think, for all of us as Americans to say that, you know, our own country is at its best, when we uphold our own highest ideals and in the same way India is at its best when it upholds its own foundational constitutional principles. The Indian constitution is a very powerful document modeled on the American and it provides for great freedoms and rights to citizens. And the country is at its most inspirational when those foundational ideals are afforded to all the citizens.
Q: Thank you.
O'NEIL: Let me we have just time for one more question. I'm just going to take the prerogative and I want to take you back to TikTok, because TikTok is a big deal in my household. I have a budding teen and this is what she likes to do in her in her free time. But I'm really interested in one for those of us who aren't following it closely in India, what has been the path there? Obviously, we're struggling with it here in the United States. What is India's path been? And then maybe if you can just step back a little bit? And what is what they're doing, they're not doing there? How does that play into this digital divide that we're all worried about? Right? We have a, you know, we have an example in China, where they keep out the New York Times and Facebook and Google, and they just shut the doors to any outside media, we have other places that are much more open to it. And where is India falling along this? Where do you see it going? As they found the third path along the way? Or? Or how, how is India going to lead or not lead as we struggle with these issues around the world?
AYRES: Thanks for asking this. The reason I highlighted the TikTok issue. I mean, in part, it was a big headline. And you know, the president of the United States then look to do something similar. But also because it really does get to this kind of emerging issue of global governance and the kinds of economies that will exist in the digital space. So right, China is completely closed, they have their own digital ecosystem. Their digital ecosystem doesn't look like the rest of the world's. India's digital ecosystem has many of its own platforms. But it also has a lot of American platforms. So you know, it's one of the world's largest user bases, if not the largest for Facebook, WhatsApp, everybody knows WhatsApp, Twitter, Instagram, TikTok. YouTube. One of the things I've found really interesting about Indian YouTube, there was a terrific story about a year ago that the Financial Times did about the competition to have the world's number one YouTube channel with the you know, the largest number of followers, and it's an Indian film production—it's a film, song, record label—record, I date myself—it's the Indian film music label, is the world's number one YouTube channel. The people really use YouTube as social media, you know, there's a lot of exchange and comments and back and forth, it's a fascinating thing. These platforms are open, and India's now a big piece of the userbase for many of these open platforms.
But another aspect of that is that you're also seeing the emergence of discussions in India about how to govern the digital space. So about a year ago, India's Reserve Bank put some rules on about where data of transactions needed to be stored, if any transaction took place with India and an external counterpart, somehow that data also needed to be in India somewhere. Data localization has been a very big issue as a result, there's a data privacy bill that is in process now. Will this create an Indian data regime, a privacy regime that looks more like Europe's? Or will it look more like the United States? To me, it looks like they're moving more in a European direction. But the userbase is so large, that it means that India has the ability to start setting its own direction on a lot of these things. And that's what I think the Tiktok story shows us. The way the Indian government took the TikTok decision. I mean, I can't speak to what happened behind closed doors, but it sort of just happened overnight. And they issued a public notification and said, here are a series of apps that are violating our national sovereignty concerns, and they're not going to be allowed anymore. Last month, they did another round of additional apps, some of which were mirrored. But they're very serious about this. And they're serious about the fact that they want to have some control in how the digital economy is governed for Indian users. They don't want to just be a space that, you know, external actors act upon and Indians don't have a role in that decision. So that's what I think you see happening. That's what I think the reason these digital decisions are so important is because you do see a kind of rise of a third and very large economy that is looking to set its own rules on many of these cases.
O'NEIL: Okay, well, we'll keep watching that. Alyssa, thank you so much for this tour de force of all things India and U.S.-India relations, really appreciate it. So thanks from everyone here and for all of you, we'll be back in two weeks, so look for an invitation. We'll see you then. Until then, everybody stay well.
AYRES: Thank you. Thanks for the great questions.