'Namobama' Bonhomie and Beyond

Focus

Will President Obama’s visit elevate the Indo-US relationship to next level? Dr Niranjan Sahoo finds out

Never before did the visit of a Head of State generate the attention and excitement as seen during President Barack Obama’s recent three-day trip to India. President Obama’s extraordinary gesture to accept Prime Minister Modi’s invitation to become the chief guest at India’s Republic Day parade raised an unprecedented level of optimism about revitalising a promising relationship that had suffered a huge setback over the last few years. It was expected that the visit would provide a rare opportunity to both the countries to address several contentious issues that had contributed to the rapid erosion of a ‘promising’ relationship.

A glance at some of the key announcements reinforce the importance of the visit that saw hectic parleys between the two countries and their key officials on matters as diverse and contentious as trade, intellectual property rights, civil nuclear cooperation (over the nuclear liability clause), climate change (binding provisions on carbon emissions) and issues surrounding business environment. Even before Obama arrived in Delhi, key officials from both the countries had spent considerable amount of time hammering administrative and operational mechanisms. Both the leaders pledged to take the relationship to a new level and, in Obama’s words, ‘from natural partners to best partners’. Several joint declarations, including the ‘Delhi Declaration of Friendship’ and the ‘Joint Strategic Vision for the Asia-Pacific and Indian Ocean Region’, provided new momentum to the special relationship.

The highpoint of the visit was the breakthrough in the stalled civil nuclear deal that was moribund since 2005. Further, India’s efforts to woo US business groups saw considerable enthusiasm and frank exchange of ideas to strengthen business cooperation between both the countries. While Obama promised investment to the tune of $4 billion to aid India’s renewable energy mission and social security and skills development initiatives, US companies showed huge interest in Modi’s pet initiative ‘Make in India’ and ‘Smart Cities’. Importantly, the visit once again saw the reaffirmation of US support for India’s membership in the UN Security Council and explicit recognition by the US leadership of India’s crucial role in rebalancing the geopolitics of Asia-Pacific and its entry into other important global clubs, including APEC.

At a personal level, the two leaders displayed unusual bonhomie and visible degree of trust and informality. On vivid display was the Indian premier breaking protocol to receive Obama at the airport with a warm hug and Obama returning the favour by calling Modi ‘my partner and friend’. First name references and chai pe charcha added flavour to their mutual admiration.

Notwithstanding the atmospherics and voluminous declarations, the important question is whether any tangible outcome can be expected from this high level visit? Will Obama’s second visit (first by an American president) reinvigorate the relationship between the world’s two largest democracies and take it to a ‘strategic’ level?

Reaffirmation of India’s Global Role

A quick reading of the fine print on key agreements and joint declarations points to the growing US faith in shepherding India to take a greater global role in the changed geopolitics. The release of a “Joint Strategic Vision Statement for the Asia-Pacific and Indian Ocean Region” clearly reconfirms the US recognition of India’s rising profile in the Asia-Pacific region, particularly in the backdrop of China’s unprecedented rise. The statement, which irked China and it’s ‘all weather friend’ Pakistan, is further proof of the growing convergence of interests between the world’s only superpower and a rising power to create a rebalance in the Asia-Pacific region. The more substantive outcome, however, is the explicit recognition by the Obama administration to support India’s entry into key multilateral groupings, especially Asia Pacific Economic Cooperation (APEC) and exclusive Nuclear Suppliers Group. These declarations, however, will have geopolitical effects in the near neighbourhood. It would be interesting to see how China and Pakistan respond to the US intent to partner India.

Nuclear Cooperation: Miles to Go

Obama’s visit was expected to bring a breakthrough in civil nuclear cooperation, which is vital for India’s energy security and America’s private business. Officials negotiating tricky provisions surrounding the civil nuclear cooperation claim to have found a major breakthrough to end the logjam since the enactment of the Civil Liability for Nuclear Damage Act in 2010. While Modi called the breakthrough as the ‘centrepiece’ of a transformed relationship, Obama considered it the most vital ‘breakthrough’ that could take the relationship to a new level. As per the new understanding, while America has agreed to tone down its demands to scrutinise supplies of nuclear fuel to Indian plants, India would dilute the liability clause (clause 46). Since it would not be easy to amend the existing Nuclear Liability Act, India has promised to create a nuclear insurance pool to help American suppliers. While the deal looks positive in many ways, working out brass tacks of implementation and possible threats of civil suit action looms large. In short, rather than a breakthrough, this is a work in progress and demands considerable time and capacities to break the impasse. Companies in nuclear business would like to see a legislative breakthrough on this.

The most noteworthy development, however, was that the US expressed its keenness to support an ‘early decision on India’s entry’ into the four multilateral export control regimes - the Nuclear Suppliers Group, the Missile Technology Control Regime (MTCR), the Australia Group, and the Wassenaar Arrangement. This would facilitate global business with India in the field of nuclear energy. However, these are mere promises and a lot needs to be done, especially in terms of garnering support from other countries.

Business Cooperation: Breaking Mental Inertia

One of the key missions of the Obama visit was to reset business ties that have taken a huge beating in the last few years. Be it Modi’s pet project ‘Make in India’, ‘Smart Cities’ or mission to achieve self-sufficiency in renewable energy, all these initiatives are not possible without US investment and technology. Scores of American companies are exasperated by the country’s business environment, bureaucratic and legal hassles. Did Obama’s visit make any visible difference in this key frontier of cooperation? Notwithstanding the presence of powerful business delegations from both sides, the success has been modest. India could manage to get a modest level of assistance ($4 billion) from the US to firm up its initiatives on manufacturing, renewables, smart cities and social security system. While many US companies showed enthusiasm for prime minister’s flagship ‘Make in India’ project, they are still wary of the existing business environment and constraining provisions such as land, labour laws, bureaucracy and unpredictable tax regime. American investors remain sceptical as many of the actions have to come from state governments. Thus, an ambitious bilateral trade target of $500 billion, a five-fold increase by 2025, will be a tall order, despite a significant turnaround in attitudes among key officials of both countries. A positive takeaway from this short visit is that more and more American companies now recognise the intent of the present government to remove key barriers for business and economic cooperation. However, much would depend on the pace of India’s economic recovery.

Forward March on Defence Cooperation

One area that generated an unprecedented amount of enthusiasm among American businesses was defence and military modernisation. In a major breakthrough, both sides agreed to renew the 10-year Defence Framework Agreement for deepening defence engagement. A notable development was the signing of the Defence Trade and Technology Initiative (DTTI), under which the two sides would co-produce four projects, including the Raven unmanned aerial vehicle (UAV), and the ‘roll-on, roll-off’ intelligence kits, surveillance and reconnaissance module for the Lockheed Martin-manufactured C-130 J transport aircraft. The key challenge is the manner in which enhanced economic cooperation, investment and technology from foreign suppliers can contribute towards the ‘Make in India’ campaign. This is because both the countries want to give a boost to their manufacturing sector in an overall global climate of falling demand. Will the US match the closeness between India and Russia on co-production of weaponry and armaments?

Cooperation on Renewable Energy

While the breakthrough on the nuclear deal might have received maximum attention, the real progress seems to have been made in the frontiers of renewable energy. While Obama pledged support to the tune of $2 billion on this, both leaders agreed to work together to support India’s climate and energy goals by enhancing the share of renewables in the overall energy basket. Several big ticket announcements involving American loans for renewable energy projects, green bonds, and venture capital and pension funds are on the cards after Obama and Modi pledged to collaborate in the area of clean energy to combat climate change.

Progress in Social Security Domain

An area of far reaching, positive implications that has not received due recognition is the progress made on social security. For the first time, the Obama administration has recognised and taken the first step in addressing India’s long-pending demand of signing a Totalisation Agreement. As per the new agreement, Indian workers in the US will receive annual refunds amounting $3 billon (`18,000 crore) as social security contributions they make. This would help millions of software and other professionals to receive social security benefits.

Climate Change and IPR

The US president’s visit was expected to help iron out key differences between the two countries on issues surrounding climate change. While India has agreed to phase down hydro fluorocarbons, or HFCs, under the Montreal Protocol, it has not set any specific goals limiting greenhouse gases, as China has done recently. With no major progress happening on this key frontier, both sides have agreed to promote solar, wind and other clean energies to keep the negotiation alive. Of course, Prime Minister Modi has promised to make climate change his ‘article of faith’ and support a global climate pact to be shaped in Paris this year. Progress has eluded the vexed issue of Intellectual Property Rights (IPR), especially in the pharmaceutical sector. India’s promise to set up an annual high-level Intellectual Property (IP) Working Group is yet to see any positive traction, and while Obama’s visit may have created a positive atmosphere for negotiation, trade issues are still a work in progress.

A cold and fact based analysis highlights that the visit was high on symbolism and less on substance. Americans have not promised any windfall in investment and have not shown any flexibility on trade issues. Disagreements on climate change and IPR issues have not seen any major breakthroughs. American investors are still unconvinced about India’s business eco-system. In short, a turnaround in the relationship would take time and needs exemplary actions from both sides on key areas of concern. Yet, if one considers the level of chemistry created by both leaders in a short period of time, Obama’s visit would prove to be a major turning point in bilateral relations. With Obama looking to leave a rich legacy and Modi eyeing to provide transformational leadership, sticky issues would eventually give way to positive convergence of interests. Of course, the most critical element in the turnaround would be reviving India’s economy, which will be further supported by the changing geo-political reality largely contributed by the unprecedented rise of China and uncertainties surrounding such a rise. Considering the high stakes for US’s pivot to Asia and India’s regional security, a ‘natural global partnership’ seems to be emerging between the world’s oldest and largest democracies. But it is too early to say whether it would turn out to be the ‘defining partnership of 21st century’.

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Diplomatist Magazine was launched in October of 1996 as the signature magazine of L.B. Associates (Pvt) Ltd, a contract publishing house based in Noida, a satellite town of New Delhi, India, the National Capital.

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