October 16, 2014

TSG IntelBrief: The U.S.-India Relationship Reinvigorated

• Indian Prime Minister Narendra Modi’s September visit to the United States allowed for the “soft reset” of a strategic partnership that has been in search of greater focus in recent years

• The smiles and handshakes served to ease the anxieties that had been building on both sides and had contributed to increased squabbling in the bilateral relationship

• Mutual frustrations are likely to continue in areas such as intellectual property rights and multilateral trade negotiations, where there has been no reconciliation in the two countries’ largely incompatible points of view

• The U.S. and India share clearly convergent interests in both combating Islamist militancy and in balancing against a rising China

• Although the partnership’s full potential is far from realized, these two geostrategic issues are sufficient to keep the trajectory positive and to sustain widely-held hopes that ties between the world’s two largest democracies will continue to deepen.

It has been more than a decade since President George W. Bush initiated a bilateral strategic partnership with India and more than five years since the Obama Administration formalized engagement under a Strategic Dialogue, with annual fora on the current pillars of the relationship: economic growth, energy, and climate change, defense and counterterrorism, and other global issues.

As leader of India’s right-wing, Hindu nationalist Bharatiya Janata Party (BJP), Prime Minister Narendra Modi was a controversial figure in the United States, having been barred from entry into the country since 2005 due to his alleged role in the 2002 communal riots in his home state of Gujarat that left at least 1000 Muslims dead. However, with Washington witnessing a surge of popular support for his prime ministerial candidacy in late 2013, diplomatic channels to Modi were reopened. By the time of Modi’s May inauguration, President Obama was ready to convey full-throated congratulations to the new India leader and extend an invitation to visit the United States.

Carried by the image of Modi as charismatic and business-friendly, the BJP won a resounding victory in the May parliamentary elections, surprising nearly all observers by winning an outright majority in the lower house, something no single party had done since 1984. Modi’s campaign was all about promises of good governance and renewed economic growth; his party’s strident Hindu nationalism earned barely a mention. Domestically, Modi aims to spur economic growth by increasing exports, boosting investment, and building a stronger manufacturing sector. Despite its lower-chamber majority, the nature of Indian democracy serves as a significant constraint to BJP reform efforts, and Modi’s party is in the minority in most state assemblies, where federalism provides considerable powers.

Modi’s foreign policy has been dubbed “India First”—no surprise for a nationalist—but in this case, “India’s Economy First” might be more apt. His energetic diplomatic outreach to major powers such as Japan, China, and the U.S. is aimed at securing new trade and investment, and in building India’s global brand. Similarly, his engagement with India’s immediate neighbors—including a surprise invite to Pakistani Prime Minister Nawaz Sharif to attend his inauguration (along with other regional leaders)—seeks to raise India’s visibility and engagement, perhaps especially in contrast to that of China, which is increasingly active in the South Asia region.

The U.S. willingness to capitalize on India’s transformative political moment has temporarily sidelined the two countries’ durable differences. The most recent Strategic Dialogue session in July resurrected a bilateral Trade Policy Forum (TPF) that had been moribund for four years. Dialogues on energy and climate change have been given new priority. In August, Secretary of Defense Hagel was in India to push the Defense Trade and Technology Initiative (DTTI), which would transform India into a co-developer and co-producer of advanced military hardware. This comes as an expansion of a defense framework agreement, signed in 2005 and set for renewal in 2015, which has transformed the security relationship into a broad-based partnership. Modi’s September visit to the U.S. was about optics first and traditional deliverables only secondly, but Washington notably committed to a meaningful deepening of bilateral counterterrorism cooperation. Modi’s primary mission was to curry favor with the U.S. business community and secure the Indian diaspora as allies in his domestic projects, and to maintain a spirit of bonhomie.

India caused international consternation in July by blocking a WTO trade facilitation agreement to reduce barriers to trade and for more than 160 signatory countries. India’s grievance was not with the agreement itself, but with a parallel pact that New Delhi saw as a threat to India’s practice of stockpiling food for its poor farmers. India’s rural poor account for perhaps half of the country’s population, and their interests must be reconciled with those of even the most reform-minded central government. However, because India had already negotiated the original terms of the agreement in December 2013, the expected ratification was seen as mere formality. The reversal thus left many in U.S. policy circles sour on India, and seemed a 180-degree shift from what had been expected of Modi’s new government. With one stroke, New Delhi brought the viability of the entire Doha Development Round into question.

The final months of 2014 could provide opportunity to build on the momentum engendered by Washington’s recent high-level outreach to New Delhi. In particular, a successful TPF session would go far in getting plans for large-scale trade and investment back on track. Intellectual property rights (IPR) are likely to remain a sore spot, as fundamental philosophies differ and India supplies a robust generic drug market in Asia. “Big Pharma’s” complaints have brought enough pressure to bear to spark a U.S. Trade Representative’s “out-of-cycle review” of IPR practices later in 2014.

The defense partnership offers perhaps the most fertile prospects for improved relations. India can reap considerable benefits, including high-technology, from the DTTI, and American suppliers are eager to increase their share of India’s market. However, India’s defense establishment is notoriously mercurial, and its insistence on technology sharing makes big-ticket deliverables far from certain.

Despite nontrivial differences in a variety of areas, the U.S. and India continue to share a highly compatible view of regional security. New Delhi’s interests in a stable Afghanistan and Pakistan, and an Asian order not dominated by China, are consonant with those of Washington. So long as U.S. and Indian officials prevent their attentions from straying too far from these core convergences, and can maintain focus on the many benefits to be accrued from the bilateral partnership, persistent frictions will be managed and the course of geopolitics should bring into higher relief the factors behind what many believe is a “natural alliance.”


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