US-INDIA RELATIONS

Prime Minister Narendra Modi’s visit to the US was to all extents a stupendous success. He had a bilateral meeting with President Obama and addressed the Joint Session of the US Congress on 8 June, making him the fifth India premier to do so, the last one being his predecessor, Dr. Manmohan Singh in 2005. This visit, Modi’s fourth to the United States in less than two years has signalled a further strengthening of the bilateral partnership between the two countries in many spheres despite some differences.

The previous year too saw very satisfactory outcomes in US-India relations. Beginning with President Obama’s highly successful visit to New Delhi as Chief Guest at India’s Republic Day celebrations and continuing with a spate of activities during September 2015 that saw PM Modi back in the US (New York) for the second time within a year, the first visit to the Silicon Valley by an Indian PM since Jawaharlal Nehru, the launch of the Strategic and Commercial Dialogue between the two countries, the first US-India-Japan ministerial level trilateral dialogue and a meeting of the US-India Business Forum. The year-end saw India’s defence minister in the US to meet with his counter-part, US Defence Secretary, Ashton Carter, to discuss a range of “proposals for co-production of top-notch military equipment as well as bolstering maritime security, counter terrorism and intelligence-sharing between the two countries.”

The importance of both countries to each other, and more especially as partners for peace and stability in Asia and the Indo-Pacific, safeguarding global commons through deepening cooperation on counter-terrorism, radicalism and cyber security is not lost on either India or the United States. This is amply reflected in the US-India Joint Strategic Vision for Asia-Pacific and the Indian Ocean Regions. Besides this, bilateral issues like defence, trade and commerce are important areas of cooperation and have made remarkable progress during the year.

Defence and DTTI

Defence relations have made impressive gains with the US emerging as India’s largest weapons supplier, overtaking Russia, Israel and France. This has so far been mainly through the US Foreign Military Sales Route but both countries are committed to move from a traditional buyer-seller relationship to “coproduction, co-development and freer exchange of technology” through the Defence Trade and Technology Initiative first proposed in 2012 by Secretary of Defence Leon Panetta, who at that time directed his Deputy Secretary of Defence, the current Defence Secretary, Dr. Ashton Carter, to undertake an initiative to provide increased U.S. senior level oversight and engagement with India. The aim was clear. To look for ways that would eventually include collaboration in “defence technology transfer, trade, research, co-development and coproduction for defence articles and services, including the most advanced and sophisticated technology.”

India’s huge demand for the modernisation of its defence sector along with relaxation of export controls on defence technologies by the US and significant cuts in American defence spending, have led American defence contractors to look for investment opportunities in the Indian market. This could be a win-win situation for both. Co- production and co-development would also provide a large employment base and sustain several thousands of jobs for American companies, while modernising Indian defence industry. Co-production has been the thrust of discussion in all the dialogues between India and the US. The idea of coproduction also resonates well with PM Modi’s ‘Make in India’ initiative to strengthen India’s defence industrial base.

Four technology defence hardware were identified as ‘pathfinder’ defence projects: RQ-11B Raven Unmanned Aerial System; Roll on/roll off kits for the C-130J aircraft; Mobile Electric Hybrid Power Sources; and Uniform Integrated Protection Ensemble, along with cooperation on aircraft carriers and jet engine technology. All of these projects have a stand-alone value and simultaneously lay down the foundation for future co-development and coproduction initiatives. These initiatives were cleared in record time and talks are at an advanced stage now to finally clinch all of these at the earliest. For its part, the Indian government has taken concrete steps to create a proper environment by enacting reforms in the defence sector. One of the first steps in this direction was to increase the Foreign Direct Investment (FDI) in the defence from 26 percent to 49 percent with an option to increase it to 100 percent if the deal involves high-end technology transfer and is approved by the MoD. The investment in the defence sector now has been increased to 100 percent with the latest slew of reforms announced on 20 June 2016.

The government of India has also asked the defence establishment to revisit the over a decade old proposal from the Pentagon that will enable India and the US to grant mutual access to each other’s military bases, refuel and replenish warships and fighter planes and, in a contingency, participate jointly in multi-nation military operations. There is an expectation that this would be achieved through their recent commitment where India and the United States have agreed in principle to sign “within weeks” or “months” a Logistics Exchange Memorandum of Agreement (LEMA) to provide supplies and fuel to each other’s armed forces from their bases. While India is clear that it would not allow the stationing of foreign troops on its soil, it would try to resolve this gridlock by evaluating the importance of signing the foundational agreements in order to further bolster defence cooperation.

Recently, the Indian army announced its decision to buy 16 Sikorsky S-70 Seahawk Helicopters for its multi-role helicopter requirement that is estimated to be worth $1 billion. Defence Minister Manohar Parrikar-led Defence Acquisition Council (DAC) has also cleared the acquisition of four more P8-I long-range maritime patrol aircraft for almost $1 billion that would be used for maritime patrols in the Indian Ocean in the backdrop of growing Chinese naval presence in the IOR. India and the US are also negotiating an $885-million deal for 145 M-777ultra-light howitzers, which will eventually be made in India. India has various other projects in the pipeline with the US. The Pentagon has given license approval for the co-production of two key projects — one for the joint production of an aircraft carrier for India and the other for the manufacture of aircraft engines. The aircraft carrier group has made very good progress and talks are at an advanced stage regarding modalities to be adopted for aircraft carrier cooperation. This is a military to military model of cooperation enjoying political support at the highest levels in both countries and is likely to fructify soon. The Jet engine group on the other hand is about three to four months behind schedule and there are some structural challenges since the IPR for this technology is held by the US Corporate sector and on the Indian side the interlocutor is the DRDO, considered to be an impediment to defence production and modernisation even in India!! The US Department of Defence has only an advisory role and cannot foresee the possibility of an outright transfer of technology by private American companies as desired by the DRDO. This would mean an intervention from the highest quarters and a nonbureaucratic flexible approach by India, perhaps even starting the project from scratch, giving the US manufacturers the option to choose their own partner from among an Indian corporate house and opt for a joint manufacturing model that has advantages for both.

These projects fit in with the Modi’s vision of “Make in India.” Focused working groups to move these initiatives forward have been set up and such successful collaborations have the potential to impart India greater strategic autonomy and prestige in a changing global scenario. But to implement the Indian PM’s positive vision for India, the Indian bureaucracy must shed its inertia and overcome the lack of strategic knowledge and priorities amongst the civilian staff in the DRDO and the MOD. India must not remain bound by history but should recognise the challenges and move forward. Time is an important element in the conclusion of important defence deals and the US too should adopt a ‘quick action’ top-down approach – as was done during the nuclear deal – in clearing projects with India as the US too has a major stake in doing business with India and in ensuring India’s rise.

Asia-Pacific

On September 29, 2015 United States Secretary of State John Kerry hosted the inaugural U.S.-India-Japan Trilateral Ministerial dialogue with Indian External Affairs Minister Sushma Swaraj and Japanese Foreign Minister Fumio Kishida on the sidelines of the 70th United Nations General Assembly in New York. Representing a quarter of the world’s population and economic production power, the three countries highlighted their shared support for peace, democracy, prosperity, and a rules-based international order.

The U.S. rebalance to the Asia-Pacific under the Obama administration, India’s new Act East Policy under Prime Minister Narendra Modi, and Japan’s reinvigorated role as a ‘proactive contributor to peace’ under its premier Shinzo Abe, have all been powerful indicators of the importance these players attach to the region. All three props of the triangle have also been strengthened recently, with positive momentum seen in U.S.-India, U.S.- Japan and India-Japan ties over the past year.

For India, the Look East policy has been a cornerstone of its foreign policy initiatives since the 1990’s when it embarked on its economic transformation. Since then India has been stepping up its engagement with ASEAN and is now recognised as an important economic, political and security player. India’s aspirations to be a global player in the international arena combined with increasing Chinese assertiveness in the South China Sea make it necessary for India to play a more involved role in East Asian geo-politics to safeguard its economic and security interests.India’s Look East policy has therefore become Act East. As India readjusts and revitalises its Look East Policy, it, along with the other Indo- Pacific nations has begun to form the nucleus of middle power coalition building in a region where it has core strategic and economic interests. Areas of cooperation include security dialogues, intelligence exchanges, military capacity building, technology sharing, maritime cooperation and joint naval exercises, agenda setting for regional forums and coordinated diplomatic initiatives.

To bolster its Act East policy, India has embarked upon an ambitious and practical strategy of revamping its naval capabilities and the Indian Navy today is among the top-five navies in the world. India’s naval influence in the Indian Ocean is already significant and has increased greatly in the Indo- Pacific as well as a response to the US Pivot. India has stepped up its joint maritime exercises to include Japan and Australia recently and today its maritime engagement encompasses the major powers, regional actors and even the smaller states of the Indian Ocean littoral besides its engagements in the Indo- Pacific. Thus India’s role in East Asia is complementary to the US re-balance or pivot to Asia.

South Asia and US Pak Policy

While the US-India Joint Strategic Vision for Asia-Pacific and the Indian Ocean Regions showed unprecedented convergence between the two countries, this common vision does not unfortunately extend to the west of India and the true potential of this partnership therefore remains unfulfilled. There are gaps between expectations and achievement—some of them are historical, and some because of divergent perceptions.

India finds it difficult to reconcile to U.S. policy on terrorism and its attitude toward Pakistan. Washington’s overeagerness to accommodate Pakistani demands and perceptions accompanied by an inability or unwillingness to penalise Pakistan, despite the harsh reality of Pakistan’s continued support for terrorism, remains inexplicable to India. While the US seems aware that this tacit support by it has emboldened Pakistan to resist demands to dismantle its terrorist infrastructure, it is reluctant to exert pressure on Pakistan to act firmly against terror. This discrepancy in US policy despite a formal counter-terror cooperation mechanism between India and the United States is puzzling. India is baffled about what precisely are US security interests in Pakistan and why they are so important that the US is willing to disregard India’s sensitivities especially at a time when the US and India are trying to forge convergences in their foreign policy and security interests.

More recently, the US-Pakistan Joint Statement at the end of Pakistan PM Nawaz Sharif’s visit to Washington in October 2015 and the reference therein about India and Pakistan both having “mutual” concerns about terrorism is perplexing. Equally confounding is the lack of a suitable response from the U.S. when just a couple of days before Nawaz Sharif’s visit to the U.S., its Foreign Secretary, Aizaz Chaudhary issued a statement that Pakistan would use lowyield tactical nuclear weapons to forestall any possible advance of Indian troops under New Delhi’s “Cold Start” doctrine. This insolence and American unwillingness to exert pressure on Pakistan over its expanding nuclear arsenal, the continuing Sino-Pakistan nuclear nexus, and the recent announcement of the construction of a China-Pakistan Economic Corridor that will pass through Indian territory, POK, raise the question as to where Pakistan gets this level of confidence from.

US actions demonstrate an element of contradiction in its policy in South Asia. On the one hand the US claims to view the US-India relationship as an important factor in the region to stabilise Afghanistan and sees a ‘commonality of interest” with India to ensure “peace and stability of a democratic Afghanistan,” while at the same time it is facilitating a reconciliation process in Afghanistan with Pakistan’s assistance that limits India’s role and impinges on regional stability and India’s genuine security concerns.

Economic

While trade and investment are an important aspect of the expanding India- US bilateral relations, this has become a contentious issue between the two nations. On the one hand, from a modest USD 5.6 billion in 1990, bilateral trade today stands at $100 billion and efforts are on to increase this five-fold over the next five years. This is an ambitious target but not impossible to achieve given the positive trajectory of US-India relations today. It is in the mutual interest of both to foster closer economic ties with each other. The US is India’s second-largest trading partner and the largest customer base for the Indian software industry. Similarly, the Indian market offers vast scope for US business houses to do business in India.

PM Modi is deeply interested in economic issues – and has a vision to transform India through innovation and development by implementing his ideas of Make in India, Smart Cities, Infrastructure Development, etc. The Indian PM is committed to promoting ease of doing business in India, and while this has so far not shown desired results, measures that have been initiated will soon prove the Government’s sincerity in this area. Areas of cooperation are likely to include investment in infrastructure development, clean energy and R&D – all critical to India’s developmental needs.

To the United States, India may seem to suffer from a restrictive regulatory regime for investors, but the Indian market has significant potential. UNCTAD’s World Investment Report listed India third among the preferred host economies for FDI and the everexpanding Indian market offers attractive business and investment opportunities.

In the aftermath of the global economic meltdown of 2008, India has managed to maintain a fairly robust growth rate at a time when most of Europe is in recession and the US itself is witnessing very shaky growth. The US NIC Global Trends Report has predicted “that in 2030, India could be the rising economic powerhouse that China is seen to be today.” This is important to note. Similarly, Indian business leaders want India to try and negotiate its inclusion into APEC, show its commitment to find a way out of the WTO impasse and look for ways to move forward on the BIT. These are all positive signs and India will continue to engage on these though a firm commitment on any of these issues cannot be expected soon. The US, as the largest economy in the world, can show magnanimity in finding a solution to some of these matters.

Concluding Remarks

Despite challenges, India and the United States are bound by common values, people to people interactions, soft power linkages and a basic understanding of each other that brings a special dynamism into this partnership. It is in the interest of both nations to create a durable strategic partnership, and transform relations into a “defining partnership of the twenty-first century.” While the US must show sagacity and treat India as an equal partner, India too needs to realistically assess its core strategic and developmental interests and make itself sufficiently useful to Washington. The US and India can build a strong partnership while simultaneously advancing their respective strategic goals as there exists a strong underlying commonality of interests to improve bilateral relations and collaborate increasingly in multilateral fora. While there is a lot of goodwill and bonhomie between the two leaders, a sustained effort by the senior officials in both countries is also needed to maintain a continuum as the US readies itself for a new Administration in January 2017.


Dr. Sekhon is a Senior Fellow at the Vivekananda International Foundation, a New Delhi based think tank. She specialises in Indo-US relations, US policy and strategy in the Asia Pacific and regional security challenges.

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