Intangibles and deliverables

When they meet, the core challenge before Narendra Modi and Barack Obama will be how best to harness their personal and national goodwill towards each other for positive outcomes that relate to the concerns of the common people

In two days, U.S. President Barack Obama will grace India’s Republic Day celebrations with his presence. Prime Minister Narendra Modi’s invitation to him to do so was not impulsive, though it took Mr. Obama by surprise. It is an affirmation of India’s willingness to invest in its relationship with the United States, and signals India’s belief that the two countries are good for each other. During his visit to Washington last September, Mr. Modi got a sense of the perception of India held by the U.S. leadership — its administration, business, and Congress. Finding positive resonance, he decided to request a return visit from Mr. Obama, who accepted the invitation upon realising its significance.

It is in its intangibles that this visit will be evaluated, not just on the balance sheet of deliverables. “The Obama visit served its main purpose simply when announced,” quipped Ambassador K.S. Bajpai. “It signalled that India can again be taken seriously, and that America is in the forefront of doing so.” Much of what will happen next will depend on India’s economic trajectory and the diligent management of relations by the leadership of the two countries.

A ‘two-way street’

India’s invitation to the U.S. President came at a time when both the International Monetary Fund (IMF) and the World Bank predicted that India is on its way to overtake China’s growth. Indeed, the economic outlook has turned optimistic on both sides, a contrast to 2008-2009, when growth subsided and bilateral relations became ambivalent. With cheaper energy and recovery of manufacturing, U.S. industrial employment has increased. Mr. Modi’s meetings in New York and Washington convinced American businesses about a potential exponential spurt in India-U.S. commercial exchanges and investments.

U.S. mandarins and think tank experts remain somewhat sceptical, however. They insist that any relationship is a “two-way street,” and that a pronounced pro-American affirmation was missing in Mr. Modi’s discourse. During his interaction with the Council on Foreign Relations in New York, Ken Juster reflected these concerns when he asked Mr. Modi about India’s vision for a “strategic partnership” with the U.S., and the potential for collaboration between them to work on regional and global issues. Mr. Modi’s answer got lost in translation. Meanwhile, sections of the Washington élite are trying to muddy the optics of Mr. Obama’s visit by making fun of his lame duck tour to watch a parade, allegedly neglecting his domestic agenda.

“The U.S. government appears anxious about India’s regulatory environment, intellectual property rights protection standards, local content provisions, and the absence of a bilateral investment treaty.”

The bilateral relationship has considerably evolved from the early decades of estrangement, which were punctuated by positive exchanges that did not leave a long-term impact. The Cold War legacy of viewing India as a nuisance is long since over. Mr. Obama looks at India-U.S. ties as “one of the defining partnerships of the 21st century.”

Indeed, there has been a steady transformation of India-U.S. relations from about the end of Mr. Clinton’s presidency. Though modest, bilateral trade has shown a consistent upward trajectory. India is a serious buyer of U.S. weapons, and carries out more military exercises with U.S. forces than those of any other country. There are more Indian students in the U.S. than anywhere else, and the Indian diaspora is nowhere more prosperous than there. Among the great powers, the U.S. has done the most to extricate India from a technology denial regime, bringing the two closer than ever.

Bilateral drivers of the relationship
When they meet, the core challenge of the two leaders will be how best to harness their personal and national goodwill towards each other for positive outcomes that relate to the concerns of the common people.

India and the U.S. need each other because better ties will help create more jobs, growth and development. Within the wide spectrum of the India-U.S. engagement, the areas of defence, energy, and technology hold the greatest promise. The employment-generating “Make in India” effort, focussed on power, communications, electronics, and high-technology engineering, is not for providing shoddy goods for the home market but to make India globally competitive. With the world’s best technology, the U.S. will be India’s preferred partner in this endeavour.

On defence cooperation, the challenge is to utilise the Defence Framework Agreement and the Defence Trade and Technology Initiative to propel co-development and joint production of defence equipment and platforms. On co-production, after initial reticence, India has indicated a willingness to proceed on four of the 17 items on offer, and has presented a supplementary list of 13 more. In the talks thus far, possible agreement is confined to two modest proposals, the short-range UAV Raven and a surveillance module for the C-130 Hercules aircraft. The rest will be considered only “down the line.”

India’s military modernisation cannot be done without proactive cooperation with the U.S. India needs greater deterrence capacity, including a bigger naval presence in the Indo-Pacific. A case in point on what more can be done is underwater drones. These can be used at ocean choke points, such as the Strait of Malacca, which abuts the Andaman Sea, through which a Chinese nuclear attack submarine passed last autumn. Following a joint U.S.-Singapore exercise last October, the U.S. Chief of Naval Operations confirmed U.S.-led underwater surveillance cooperation with Australia, Japan, Korea and Singapore. Can the U.S. help India develop and build undersea and high-altitude drones, or help us lease a nuclear submarine? That could capture the imagination of Indians.

The U.S. government appears anxious about India’s regulatory environment, intellectual property rights (IPR) protection standards, local content provisions, and the absence of a bilateral investment treaty. There is an exaggerated fear of compulsory licensing for pharmaceuticals. India’s exclusion from the Trans-Pacific Partnership negotiations is held as an example of India being a trade outlier.

The U.S. helped resolve India’s concerns about agricultural subsidy, thereby paving the way for the World Trade Organization’s agreement on trade facilitation. India has introduced market reforms in its own interest. Its recovery is being propelled by improved decision-making, targeted deregulation, increased infrastructure investment, and greater business confidence. India remains committed to an open, rule-based international trading regime. To expect it to accept a higher standard on IPR protection, above and beyond India’s existing multilateral commitments, will be unrealistic.

India has counter-concerns about protectionism and the new U.S. immigration law and has mildly protested in WTO discussions against the U.S. “Buy America” legal provisions. The U.S. refusal to negotiate a Totalization Agreement with India really rankles, when countries like Finland and Sweden have concluded such an agreement with India. Indian H-1B workers contribute, by way of “involuntary” deductions, an estimated $3 billion annually to the U.S. Social Security Trust Fund towards pensions they will never receive because their stay in the U.S. will not be long enough.

On climate change, the Sino-U.S. agreement is being held out as an example for India to emulate. China’s current emissions are four times larger than India’s and over twice that of the U.S. Given the wide gap between the emissions of India and China, as also the different levels of economic development, the question of India capping its emissions is premature. India’s focus instead will be on practical cooperative measures on energy efficiency and non-conventional sources of energy, again a key area of India-U.S. partnership.

The bilateral agenda is full and there are clear issues on the table from both sides. While officials have been labouring below-the-radar to untangle some of these, the directions from the leadership will provide breakthroughs over time, as India-U.S. exchanges have demonstrated, most notably on the civil nuclear agreement.

The strategic relationship

If the India-U.S. relationship is to become more robust, there has to be greater strategic entente. This must start with India’s neighbourhood, where the historic policy discordance has abated, but not been fully bridged. On China, though uncoordinated, there is now a remarkable similarity of approach. Both India and the U.S. seek comprehensive engagement with China, are reinforcing ties with countries on China’s periphery, strengthening their own military preparedness, and seeking to revitalise their economies.

In contrast, a telling hiatus has developed in India-U.S. strategic dialogue in other areas of India’s contiguity. It was so earlier in respect of Myanmar, and now on Bangladesh. At the time of elections there last year, China and India found themselves together against extremist and sectarian forces intent on disrupting the polls, while the U.S. seemingly stood on the other side. If the U.S. President were to go by the standard U.S. positions, he might suggest a course for Indian policy towards Pakistan — normalisation of relations, resumption of dialogue, and strategic stability. Instead, he might do better by discussing stability in both Afghanistan and Pakistan about which India has its worries. There is clearly room for a fuller India-U.S. dialogue on security in West Asia and Central Asia, the management of the Indian Ocean, and what U.S. rebalancing in Asia really means in material terms for India and the Indo-Pacific.

The way ahead

India’s fractious democracy and its fundamental asymmetry with the U.S. will constrain its capacity to meet U.S. expectations of full reciprocity. This relationship must be painstakingly built, brick by brick. It can be done with commitment at the highest level, and sensitivity for each other’s concerns.

India-U.S. ties are rooted in common values and in increasingly convergent interests. Necessary and sufficient conditions do exist today for resetting this vital partnership. The ideological polarisation of their domestic politics does not impact adversely on its present and future trajectories. What the two countries need are steady hands to steer a proper course — Mr. Modi and Mr. Obama are preparing the ground for it by their positive narrative.