Central & South Asia

The Curious Case of US-India Relations

Narendra Modi and Barack Obama


February 13, 2016 23:50 EDT

India and the US have remained estranged for too long due to ideological reasons, but there is a greater overlap of interests than meets the eye.

In a recent interview, US Ambassador to India Richard Verma mentioned how both “countries need each other more than ever for economic betterment and enhancing security.” This assessment underscores the fact that a quarter-century after the collapse of bipolar world order, there is a gradual and sustained deepening of US-India relations, underpinned by changes in the global geopolitical landscape, especially in Asia, which has emerged as the economic center as well as home to the most troublesome flashpoints over recent decades. This cementing of ties between Washington and New Delhi has emerged amid a greater realization in both these democracies about the increased alignment of interests.

What is intriguing, however, is the ease with which the strategy of defense is progressing on one hand, and the slow development of economic and trade agreements on the other. This unevenness is something that leaders in India and the United States need to address.

Defense Strategy

On the strategic front, the emerging geopolitical realities have brought the two countries together. Most prominently, the growing might and belligerence of China in East Asia have led both India and the US to agree that their interests in the region are best-served by cooperating. While there is no case for a joint effort toward containment of the Middle Kingdom, Washington and New Delhi feel that preservation of the current balance of power is the key to enduring peace in the East Asian theater.

So, even as the US puts into practice its pivot to Asia strategy, India is forging closer military relations with US partners in the Asia Pacific, namely Japan and Australia. India has been more vocal about the Chinese threat to peace in the South and East China Sea, with potentially dangerous ramifications for some of the busiest sea lanes in the world. While India does not want the US to draw down its presence in Afghanistan, and frowns at American willingness to have greater Chinese involvement in the country, it feels that its overall regional interests are best-served with greater cooperation with Washington.

Another crucial region where India and the US are coming together is the Indian Ocean. While India has traditionally held primacy in the area because of its locational advantages, there is growing Chinese assertiveness in the region as Beijing positions its naval assets to protect economic interests in Africa and Latin America. In order to preserve the region’s peace besides keeping sea lanes open, the US and India feel compelled to cooperate. It is also important to counter terrorist threats in South Asia and the Persian Gulf.

It is in wake of these realities that the Joint Strategic Vision for the Asia Pacific and Indian Ocean Region, which India and the US signed during President Barack Obama’s visit in 2015, is remarkable because for the first time, India came out so openly in endorsing the American stand in the South China Sea. The document underscored the growing security relationship between the two countries and was followed by two other materially important initiatives: the Defense Technology and Trade Initiative (DTTI) and the new ten-year Framework for the US-India Defense Relationship. Together, these have enhanced the defense relationship from principle to operational levels, involving sale and transfer of technology for advanced weapons and platforms such as aircraft carrier and jet engines.

But even as military and strategic relations look promising, there are limitations that emanate from the basic difference of approach to the relationship. The US has been accustomed to having alliance-based formal security arrangements with defined shared approaches toward collective security. Washington’s alliances with NATO members or Japan and Australia are based on this very approach. India, on the other hand, is not interested in getting entangled with the collective security paradigm. It does not want to tie its security interests with any other country and, as such, would like to keep security cooperation with the US at less than an alliance level. Moving forward, the two nations will have to continue to work within this parameter.

Barack Obama

Barack Obama © Shutterstock

Economic Relationship

Unfortunately, however, there is no such structural aligning of interests that could force the two countries to come together in the economic arena. If anything, there is frustration among American investors about the inability of the Indian government to put in place key second generation reforms. That fact that important reforms like the Goods and Services Tax (GST), the land acquisition bill and financial sector amendments are stuck adds to the psychological distress of potential investors— notwithstanding the substantial jump in foreign direct investment (FDI) and bilateral trade numbers.

The Indian government, which came into power on a broad reformist agenda, has found it tough on most economic reforms, primarily because of the Swadeshi (indigenization) push of the ruling Bharatiya Janata Party (BJP), but more importantly because it does not have enough support in the upper house of parliament to push through unpopular reforms.

In light of this, upcoming state elections in India will be crucial for the BJP. The party is not comfortably placed in most Indian states, which further complicates the country’s reform agenda.

The powerful protectionist bogey is also not allowing the government to surge ahead with regional free trade agreements (FTA), which have become so important thanks to the snail-like progress at the World Trade Organization (WTO). Those few trade arrangements that India has entered—whether with Japan or the Association of Southeast Asian Nations—have been lackluster at best and have not resulted in any radical jump in trade numbers. The FTAs with the European Union and trade talks with Canada are also stuck, mostly because of the unwillingness of New Delhi to allow greater market access. Therefore, the goal of $500 billion bilateral trade, which is terribly short on specifics, seems like a pipedream. Added to this, the model Bilateral Investment Treaty (BIT), released by India a couple of months ago, does not inspire confidence as it leaves critical issues like most favored nation (MFN) undefined.

However, there is a broad consensus in the US that an economically powerful India is in the interest of America. It is, therefore, important that India gets integrated into global trade without delay. As such, even with fewer commonalities between economic interests of the two countries, the US needs to push for India’s inclusion in crucial bodies like the Trans-Pacific Partnership (TPP), Trade in Services Agreement (TISA) and the Asia Pacific Economic Community (APEC).

Where Now?

Then there are irritants at bilateral levels that have created problems. For example, the hefty increase in the H1B (worker) visa fee by the US and sending Indian students back from America have soured opinions in India. Addressing these issues will require regulatory work on Capitol Hill, which is as troublesome as that at Raisina Hill. But policymakers in Washington need to understand what improved business relations between the two countries will bring to American companies in the long-run. Not only is India a huge goods and services market, but it is also home to potentially the biggest startup industry and cheapest high quality pharmaceutical manufacturing base in the world. Both offer unrivaled business potential for US investors.

Further, smoother business ties have the potential to spillover to a closer military-industrial tie up between the two countries, as India allows greater private sector participation in defense production—a trend that has already started.

India and the US have remained estranged for too long because of ideological reasons. However, in a changing world order, there is a greater overlap of interests that promises higher dividends for both players. Not only will it benefit over 1.5 billion people, but also the international community. The joint expertise and capabilities of the two largest democracies in the world can further global endeavors in areas like climate change, freedom, democracy and human rights.

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.

Photo Credit: Narendra Modi / Frederic Legrand – COMEO / Shutterstock.com

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