WASHINGTON, Aug 12: India is now the new China for high investment returns and the United States is beginning to see it as important an ally as Israel, says a recent investment report.

Dr George Friedman, chairman of Stratfor, the world’s largest privately held intelligence company, is quoted in this report as saying that the recent Indo-US deal demonstrated a sea change in American thinking about India. President Bush’s decision to give New Delhi access to American nuclear technology for civilian uses despite India not being a signatory to the nuclear non-proliferation treaty, indicates that Washington is willing to help India become a major world power despite differences over its nuclear programme, he notes.

The report, which includes comments by the world’s key experts on US policies and South Asian affairs, argues that the Indo-US deal has “put India in the big league.”

Analysts are quoted as saying that Washington is not merely trying to placate New Delhi over the question of the US re-arming Pakistan, but wants a durable strategic partnership.

India’s access to nuclear technology would have “palpable consequences for the pace of Indian expansion,” says Ashley J Trellis of the Carnegie Endowment for International Peace, an American scholar of Indian origin who played a key role in drafting the new US policy for India.

Mumbai-based business strategist and former top banker Pradeep Saxena says that American businesses find India a useful place to be, to export and to invest in. “The US has been seeing a great potential in India — especially in the services sector,” he adds. “The difference now is that they are seeing it also as a base for manufacturing. That’s the real story,” says Mr Saxena.

In 2004, US merchandise exports to India rose by 22.6 per cent over 2003, and imports by 18.4 per cent. More than 50 per cent of US Fortune 500 companies now outsource some of their information technology needs to Indian firms. Indian businesses, too, are increasingly investing in the US.

The India-US economic relationship is beginning to look a little bit like the US-China one. Experts say it is in the economic area that India could be a counterweight to China.

For a generation, China was where the smart money went. “It is no longer that place, except in the minds of the nostalgic and delusional. But India could well be,” says Dr Friedman.

With Sino-US relations deteriorating “fairly rapidly,” having an economic alternative in India gives the US leverage with China on a host of issues, he says.

But, the report also notes that foreign direct investments to India are still nowhere near China’s, which gets 13 times what India gets.

Quoting from a recent study by AT Kearney, a leading firm of business consultants that advises some of the world’s top business groups, the report observes that most multi-national corporations preferred China for its market size, government incentives, infrastructure and macro-economic climate.

But unlike India, China’s banking sector is in deep crisis. Calling it “technically insolvent”, Professor Dr Yasheng Huang from the Sloan School of Management, and Professor Tarun Khanna from the Harvard Business School, say in a joint research paper that it’s “the biggest source of worry.”

Then there is the Indo-China border issue. “China does still intrude in India’s strategic calculations very strongly,” says Dr Sridharan. Recent events in Bhutan where China is trying to get it to cede some border territory area attest to this, the report argues.

India would also like to continue to improve its relations with China while gaining the sort of material benefits from the US that could see it becoming a major world power militarily and economically, the report concludes.