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Economic ties between Minnesota and India promise to be a busy two-way street

Dr. Bruce Corrie
Courtesy of Dr. Bruce Corrie
Dr. Bruce Corrie

India has been on Gov. Tim Pawlenty's mind for a long time. I remember his first day in office in 2003. As we visited with ethnic entrepreneurs across the metro area, he asked me to put together a concept paper on India. I was pleasantly surprised that he wanted to make India a priority.

Now that the Minnesota trade delegation has returned from India, how are we to assess its achievements? Should we look for signed mega-deals or new contracts for local businesses?

These are popular ways to justify high-profile trade missions, but they will not do justice to something truly historic for Minnesota.

Abraham Lincoln described a deep bond that connects us to the Founding Fathers — sharing the moral sentiment embodied in the Declaration of Independence. This same bond is shared between the United States and India, because the moral sentiment of the American Declaration of Independence is found reflected in India's Declaration of Independence in 1930.

It is within this shared perspective one has to view future relationships with India.

Through the eyes of Gov. Pawlenty and the trade delegation, Minnesota got its first formal glimpse of economic ties with India. Trade with India has a lot of potential and is growing fast; equally important, however, is the possibility of investment flowing from India to Minnesota. The hard work follows — translating those contacts into meaningful relationships.

Benefits for both of us
Could increased economic ties benefit both Minnesota and India?

Again, history provides us an important insight. Since independence, India had a state-controlled economy and was repeatedly lectured by American policy leaders and academics on the virtue of the American model of the market. They urged India to remove state controls and adopt the free market model to escape from what they called the low "Hindu rate of growth."

The American model is built on the concept of gains in specialization in production. Henry Ford indicated the benefits of such an approach on a large scale. Specialization in turn led to outsourcing of those activities that could best be done elsewhere.

The implicit understanding in adopting this model is that a country would need a continuous cycle of investment in people and technology to reap the benefits of the model and to help those people hurt through this process.

India did adopt the model and was a quick study. India discovered it could specialize in a certain stage of production — back-office work, for example — and benefit by offering these services. American companies agreed, and theyalso discovered potential in serving India's middle-class market, which is greater than the population of the United States!

So it is not surprising to hear from some members of the Minnesota trade delegation about efforts to expand into India.

There is another dynamic process occurring through this economic activity: The companies in India that partnered with American companies began to learn about American management practices and markets. As these Indian companies prospered, they began to think of expanding and/or exploring investments in the United States. Some of these Indian companies are a new phenomenon — multinationals originating from poorer countries.

 

New phenomenon benefits Minnesota
One can see these two trends in Minnesota in the presence of the Indian multinational TATA or in the investment of the company Suzlon in wind energy in Minnesota. The most dramatic example is the investment of more than $1 billion by Essar Steel on the Iron Range, an area of Minnesota that badly needs new investment and providing jobs to Minnesotans.

This latest economic wave between India and Minnesota reveals that the possibility of mutual economic gain is real.

However, for this to work well, both Minnesota and India need to remember the important condition for the economic model — continuous investment in people and technology. Neither India nor Minnesota should forget the people being left out or hurt by the process. If they do, the system will unravel with negative impacts for all.

So it was good to see members of the trade delegation focusing on social sectors in India. Minnesota has deep roots there, with people working on building India from preschool education to medical care. On the other hand, pastors and nuns from India minister to Minnesota congregations and those needing assistance. There are an increasing number of families adopting children from India — Minnesota's future residents. The sister-state agreement with Haryana in India — the ancestral home of state Sen. Satveer Chaudhary — is also a noteworthy accomplishment of the trade mission to India.

Minnesota is also home to more than 30,000 Indians. These new citizens and residents have added much to life in Minnesota in areas ranging from political office to medical care. They also have one of the highest per-capita incomes in the state, with buying power of close to $1 billion dollars and own firms that employ hundreds of Minnesotans.

There is also a new largely untapped area that we in Minnesota are exploring — knowledge. To this end, we have launched the "Knowledge Exchange" — a platform to bring the various players in the knowledge sector together to explore possibilities. This idea emerged after we invited Sam Pitroda, chair of the National Knowledge Commission of India, to visit Minnesota and explore how our institutions could help build the knowledge infrastructure of India. This area has the potential to be our next source of comparative advantage, globally.

An image that captures the essence of the India trade mission is one of first lady Mary Pawlenty wearing an Indian sari — an apt metaphor of what this journey will bring to Minnesota and India.

Dr. Bruce P. Corrie is a professor of economics and chair of the undergraduate business department at Concordia University in St. Paul. He also is author of ethnictrends.info. He can be reached at corrie@csp.edu.


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