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After the long winter

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India’s relations with America, which were on the downturn during UPA-2, witness a thaw with secretary of state John Kerry’s visit, but much ground remains to be covered.

By Seema Guha


US Secretary of State John Kerry’s two-day visit to India for the fifth round of strategic dialogue did not result in any big bang announcement. But nobody expected it, considering that the relations between the oldest and largest democracies in the world were in the doldrums all through the second term of the Manmohan Singh-led UPA government.
This was Kerry’s first engagement with the new establishment in India. It was more in the nature of both sides sounding out each other on where they want the relationship to head. By all accounts, Kerry’s meeting with Prime Minister Narendra Modi was excellent. Modi’s emphasis on opening up of the economy to generate jobs and his talk of improving the infrastructure was exactly what the US wanted to hear. The upbeat mood was somewhat dampened by India scuttling the WTO agreement in Geneva, but otherwise the message from New Delhi was positive.

Commenting on the first encounter between the Obama administration and the new Modi government, Naresh Chandra, former ambassador to the US, said: “There was not much substance in the Kerry visit, apart from setting the stage for much more productive relations in future. The two countries observed the necessary formalities and the US reiterated its commitment to forging strong economic and political ties with India. But both sides will have to work hard to get things in place ahead of Narendra Modi’s September visit to Washington.”

All about arms

The US is obviously doing its bit to revive the relationship, which floundered in the last couple of years. Close on the heels of Kerry, came Defense Secretary Chuck Hagel. This turned out to be a much more substantive visit. Hagel pushed for reviving the moribund Defence Trade and Technology Initiative (DTTI), which would result in joint production of military hardware and joint research for new technology. The Americans are keen to sell Javelin anti-tank guided missiles to India. The anti tank missile deal, if it comes through, will be worth around $2.5 billion. But India remains skeptical about the promise of technology transfer. There will be hard negotiations on the table before any defence deal is wrapped up.

Joint defense production went nowhere when the ever-reluctant AK Antony was defense minister. Arun Jaitley, defense and finance minister in the NDA government, has already indicated that FDI in defense procurement will be raised to 49 per cent, to allow foreign companies collaborate with their Indian counterparts and set up units in India. But according to Naresh Chandra, this is not enough. He says that unless FDI is raised to 51 percent, and the foreign vendor has controlling rights, no company will be willing to sell high-end technology to India. He explains that for any American company, it will make little difference, whether it is 21 or 49 percent, unless FDI is raised to 51 percent.

 JUNE 8, 2007 - Heiligendamm : Prime Minister Manmohan Singh and US President George W. Bush share a light moment while posing for a photo at the G-8 Summit in Heiligendamm, Germany on Friday. PTI Photo by Atul Yadav
JUNE 8, 2007 – Heiligendamm : Prime Minister Manmohan Singh and US President George W. Bush share a light moment while posing for a photo at the G-8 Summit in Heiligendamm, Germany on Friday. PTI Photo by Atul Yadav

The government has also set a quota for local procurement. Indian private players, however, are not really experienced in this business. It would take time for Indian companies to pick up the threads so it may be a good idea to be a little flexible here. Though the US keeps grumbling abo-ut India not buying enough from American companies, in the last 10 years, New Delhi has bought over $10 billion worth of military ware from the US.

Past baggage

“John Kerry’s visit helped to repair the damage of the past and focused attention on the future, where some important forward looking deals will be announced following the Modi-Obama summit in September,” says Lalit Mansingh, former foreign secretary, who tracks India-US ties closely. How much ground was covered will be evident during Prime Minister Narendra Modi’s first official visit to Washington for a summit with Presi-dent Barak Obama this September. All of this is still work in progress, as the two sides begin nego-tiations on defense, nuclear power, clean energy and defense off-set. More trade and American investments will be an important component of the ties.

Much will depend on how much political baggage the BJP is able to shed from its days in the opposition and how far America is willing to accommodate India’s concerns. Iro-nically, the BJP-led NDA government of former prime minister Atal Bihari Vajpayee was responsible for a paradigm shift in ties with the US. The UPA took forward what the NDA had begun and transformed relations with the signing of the India-US civil nuclear deal.

The BJP, while in opposition, took a decidedly anti-American posture and was one of the main sponsors of the tough new Nuclear Liability Law, which has prevented US nuclear vendors from setting up plants in India. So focused was the BJP then in scuttling every move of the Congress, that the party forgot that it could one day be in the treasury benches.

The US will certainly want the Modi government to amend the Liability Law, so that American companies can benefit. After all, if it were not for George Bush, India would have remained a nuclear pariah. But amending the law will open the BJP up for criticism, considering the party was vehement in its opposition to the nuclear deal signed by the UPA. Perhaps Modi will go for reinterpretation of the law, get the attorney general to look into it and give a verdict which will allow US nuclear companies to do business with India. The law will have to be made investor friendly. That might take time.

Nuclear relations

India will be pushing for its promised entry to the Nuclear Suppliers Group (NSG), the Missile Technology Control Regime (MTCR), the Wassenaar Arrangement and the Australia Group. All of this was part of the promise made when the nuclear deal was signed, but considering that India did little to promote American nuclear vendors, there was not much enthusiasm in Washington to bring India on board. Besides, unlike the neoconservatives who filled the Bush administration, there was much disquiet among Obama’s Democrats on India getting into the non-proliferation regimes without signing either the Nuclear Non Proliferation Treaty or the Comprehensive Test Ban Treaty. With better political relations between Obama and the new Modi dispensation, all this may gradually fall into place. In the joint statement released at the end of the strategic dialogue, the two sides noted: “Secretary Kerry reaffir-med the United States’ support for India’s membership in these groups and welcomed India’s recent decision to ratify its Additional Protocol with the IAEA. The two leaders supported an early conclusion to these efforts.”

Visa tangle

The visa issue is high on India’s list of priorities. If changes are made to accommodate India’s IT professionals, it will go a long way in reassuring New Delhi that the US is serious about improving ties with India.

Speaking of visas, it is now evident that as prime minister, Narendra Modi will not let the fact that he was not allowed entry to the US after the 2002 Gujarat riots affect ties. He cannot afford to let the past haunt his vision for the future. Modi, like other senior leaders of the BJP, realizes the importance of improving ties with the US, which, despite talk of its waning powers, remains the world’s only super power.

“India needs to get its relations with the US right. Once this is done, the rest will follow,” says former Indian ambassador to Washington Ronen Sen. “It gives us leverage and elbow room at the global stage,” he explains. Whether it is China, Pakistan, the neighbors or the EU, the signal goes out from the US, which still remains the world’s super power. It is therefore important for New Delhi to put all its efforts to get things working with the US.

The hope that India’s economy is turning around and may in the next few years accelerate to at least seven to eight percent, is reviving American business interests. “The US business is again seeing India as a trillion dollar economy and is eyeing the huge market India provides,” Mansingh says.

“Prime Minister Modi wants to kick-start growth; he knows that without foreign investments jobs cannot be created. He understands the imperatives perfectly and with a brute majority in Lok Sabha he may be able to do much more without being hampered by criticism of coalition partners,” the former foreign secretary explains.

The Americans are looking to invest in India’s infrastructure and speed up defense ties. The mood on both sides is optimistic, but India will have to show flexibility. As Naresh Chandra advises: “The important thing is for India to realize that the US likes to cut deals; we have to give some to get some.”

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