US and India: A New Page in Bilateral Relations


The BJP’s assumption of power offers an opportunity to revive US-India ties by focussing on building cooperation on defence, security, economy and trade, counter-terrorism, and other issues of mutual concern. The key for both countries is to remain focussed on the larger strategic picture, while managing expectations of the day-to-day relationship, insists Lisa Curtis

If there ever was a time to expect US-India relations to improve, many would say it is now. The new Bharatiya Janata Party (BJP) government led by Prime Minister Narendra Modi has promised to open the economy to private foreign and domestic investment, improve the GDP growth rate, create jobs for the rapidly growing youth population, and quicken the pace of India’s defence modernisation.

This agenda could facilitate the expansion of US-India ties and open opportunities for the US to draw closer to India, especially on defence and security issues. New Delhi and Washington share many strategic objectives, whether they involve countering terrorism, maintaining open and free seaways, or hedging against China’s rise.

The key for both countries is to remain focussed on the larger strategic picture, while managing expectations of the day-to-day relationship. The Obama administration and the Modi government should count on irritants arising in the relationship, but they should seek to handle the problems carefully and discreetly in ways which must not threaten their fundamental strategic understanding.

Unfortunately, the manner in which the US arrested Indian diplomat Devyani Khobragade in December 2013 and India’s overly-chagrined reaction to that arrest threatened to derail a decade of progress in Indo-US relations.

Moving Forward, Not Looking Back

The BJP leadership has demonstrated it wants to move beyond Devyani Khobragade, just as the US has signalled it will not harp on the 2002 Gujarat riots issue, over which Modi had been stripped of a US tourist visa in 2005. When asked about the issue in New Delhi during his visit to India from July 30-August 1, US Secretary of State John Kerry highlighted that it was not the Obama administration that made the visa decision. Kerry left no doubt that Modi would receive a warm reception when he visits Washington in September.

Managing Disagreements

It is heartening that both sides are interested in turning a new page in relations, following several years of lacklustre engagement under the second Manmohan Singh government. However, their ability to keep the positive momentum going and manage disagreements is already being tested.

Developed and developing countries alike, including the US, expressed disappointment about India’s recent obstructionism at the World Trade Organisation (WTO), where a deal on global trade facilitation collapsed on New Delhi’s refusal to back it. India’s objections centred on unrelated concessions it sought concerning its subsidisation and stockpiling of food. US officials said India’s WTO stance undermined the image of India as a dynamic economy open to global trade and investment.

Foreign investors were initially optimistic that Modi’s election would help turn around the Indian economy, which has suffered from growth rates below five percent two years in a row. Modi’s track record of making Gujarat one of India’s most investor-friendly states when he served as its chief minister sparked confidence that Modi would prioritise reviving the economy and encouraging private sector growth.

Some of this optimism may temper following the breakdown at the WTO. Scepticism among international investors was already reactivated following the July 10 presentation of the Indian budget, which did not go as far as many anticipated in opening up the economy, adjusting fiscal imbalances, and cutting subsidies.

Promise in Defence Sector

Apart from economic and commercial ties, the area in which the relationship may prosper the most is defence. The BJP’s election manifesto highlighted the need to modernise India’s armed forces and fast-track defence purchases.

With many key defence acquisitions stuck in the bureaucracy of the Defence Ministry over the last eight years, the Indian military has shortages of ammunition and gaps in its air defence capabilities. Nine billion dollars worth of defence tenders were cancelled mid-way through the procurement process during the tenure of former Defence Minister AK Antony.

Moreover, the BJP seems less reticent than its Congress party predecessors to speak candidly about the challenges of a rising China. While not mentioning China specifically, the BJP’s manifesto commits to a ‘special emphasis on massive infrastructure development, especially along the Line of Actual Control (the disputed border between India and China) in Arunachal Pradesh and Sikkim.’ Modi called on China to abandon its ‘expansionist attitude’ while on the campaign trail in February. The BJP’s willingness to acknowledge external security challenges could facilitate closer defence cooperation with Washington.

The Modi government has already demonstrated a commitment to the defence sector by raising defence spending by 12 percent to over $38 billion for the fiscal year ending March 2015. The government’s commitment to raise foreign direct investment caps in the defence sector to 49 percent, up from the current limit of 26 percent, is also encouraging. This should provide greater incentive for US defence companies to invest in India and give them a stake in helping India develop its defence industrial base – a long-held, but so far elusive, Indian goal.

In its manifesto, the BJP made special mention of the need to refurbish India’s navy. A series of mishaps on Indian submarines and ships over the past year have raised questions about India’s ability to achieve its naval ambitions.

The most serious problems have occurred with its Russian Kilo-class submarines. There was an explosion on one in August 2013 that killed 18 officers and sailors, and a fire on another in February, which led to the resignation of the naval chief.

The problems with the Russian subs highlight the need for India to consider expanding high tech cooperation with the US and reducing its reliance on Russian defence equipment in other areas, if New Delhi genuinely wants a world-class military.

US Defence Secretary Chuck Hagel explored opportunities for deepening Indo-US military cooperation when he visited India on August 7. Hagel has designated Frank Kendall, Under Secretary of Defence for Acquisition, Technology and Logistics, to take charge of the US-India Defence Trade and Technology Initiative, launched in 2012, as a way to break down barriers between the two countries’ defence bureaucracies and enhance defence trade and technology exchange.

The US has signed nearly $13 billion in defence contracts with India over the past several years, including deals for C130-J Hercules military transport aircraft, P-81 maritime reconnaissance aircraft, C-17 transport aircraft, and attack and heavy-lift helicopters.

There have been setbacks in US-India defence ties. India’s decision in 2011 to down select two US companies from a bidding process to fill its requirement for 126 fighter aircraft was a major blow for the US. Another problem has been Indian unwillingness to sign US defence technology protection agreements. The US has tried for several years to convince India to sign the Communications and Information Security Memorandum of Agreement (CISMOA), Basic Exchange and Cooperation Agreement (BECA), and Logistics Support Agreement (LSA). Failure to sign these agreements prohibits the US from exporting certain high technology. The previous Indian government worried that signing the agreements would open it to criticism of getting too close to the US.

Despite the real strategic objectives it shares with the US, India’s hyper focus on preserving its ‘strategic autonomy’ interferes with it being able to take advantage of opportunities for increasing interoperability with the US that would enhance India’s own security.

The US should not be distracted by theoretical debates in India and must continue to try to incorporate India in its commitment to peace and security in the Asia Pacific, as cooperation with New Delhi would help maintain freedom of the seaways and a balance of power in the region that prevents any one country from bullying the others.

Afghanistan and Counter-terrorism

One result of the horrific Mumbai attacks of 2008 was an unprecedented level of counter-terrorism cooperation between India and the US. Investigations of the Mumbai atrocities and India’s interest in preventing further attacks helped to break down barriers to cooperation and bureaucratic obstacles between the two countries’ intelligence agencies. In 2011, the two countries officially launched a Homeland Security Dialogue.

The Modi government’s interest in combatting terrorism offers an opportunity to expand the Homeland Security Dialogue as well as consider ways for Washington and New Delhi to work more closely in Afghanistan to prevent a Taliban comeback.

Don’t Squander Opportunity

The BJP’s assumption of power offers an opportunity to revive US-India ties by focussing on building cooperation on defence, security, economy and trade, counter-terrorism, and other issues of mutual concern. There may be greater openness to cooperating with the US from BJP leaders, who are not beholden to Leftists opposed to closer US ties in the same way as Congress party.

Many argue that the Obama administration will be too distracted with other foreign policy challenges to focus on its relationship with India. However, the reality is that cooperating with India would likely help the US cope with global challenges, especially when it comes to international terrorism and maintaining a stable balance of power in the Asia Pacific.

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Lisa Curtis

Lisa Curtis is Senior Research Fellow on South Asia in the Asian Studies Centre at The Heritage Foundation.

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