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US-India Leaders’ Agenda: Aligning Their Visions for the 21st Century

October 2014 Lead Bullet

President Obama’s meeting with Prime Minister Modi next week could turn out to be a pivotal moment in US-India relations.  While the two countries have often been called “natural partners” due to complementary strategic interests and the fact that they are both large, diverse capitalist democracies, the relationship has never quite lived up to its potential.  Progress on US-India relations made little progress in the wake of the financial crisis when the leadership in both countries focused inward to address urgent economic issues, and in recent years the relationship has been further strained by a series of diplomatic mishaps (see inset below for the history of the strained US-India relationship).  After five years of slowing growth in India, and without any material reform progress under the previous Congress government, Mr. Modi’s recent emphatic election and the promised change in direction for India’s political and economic outlook represents a potential inflection point for the two countries’ relationship.  There are a number of critical issues on the bilateral agenda including, among others, boosting trade and investment, defence cooperation, and political and multilateral issues where there is significant scope to deepen cooperation.  Indeed, securing meaningful progress on many of these issues will be the only way to ensure a successful summit between the countries.  To go beyond the usual discussion on a long list of issues, and for the meeting to be pivotal, Prime Minister Modi and President Obama would need to define a new strategic relationship that has the potential to define the geo-political balance of power for this century.  The bet to define the global balance of power would recognise that America does not have to be what most political analysts have assumed is a power in transition to the East.  The lens through which both parties would need to see the world would first and foremost recognise America as the enduring world superpower on the verge of becoming energy independent, with a resurgence in its industrial base and a knowledge economy which will retain primacy overall other countries.  Secondly, both would need to see that India’s massive challenges combined with its huge untapped potential given its political system, resources and people assets and Mr. Modi’s huge ambition make India a land of great opportunity.  Lastly both would recognise that China is now internally focused on consolidating power, cleaning up the working of its economy by purging corruption, and that this is leading it to reverse the trend towards a more open information society[1] which will put on hold any material progress in creating the next wave of growth.  However, the clock is ticking on Mr. Modi’s window of opportunity and as President Obama knows well, huge expectations can create their own problems and may well have some very personal insights to share on the challenges of translating an historic electoral victory into actual change.  If there is a meeting of minds between the two nations on these three key geopolitical realities, the India-US relationship could well define our times.

 

The US-India Agenda: Renewing The Rise of America and Securing India’s Rise

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Reconciling Missions

Rather than defining the bilateral relationship as the sum of several interlinked but ultimately tactical economic and political initiatives, President Obama and Mr Modi have the opportunity to create the foundation for a strategic partnership that will unfold and develop for decades to come.  Doing so will require the leaders to acknowledge each other’s fundamental priorities (and limitations) and build a relationship around the achievement of their respective goals with the other’s support.  In such a strategic partnership, India and the US would have the ability address issues in a holistic and long-term manner rather than in a simply transactional fashion.  For President Obama, the ultimate mission for the meeting is to secure India’s support in ensuring that the 21st century remains an American one.  For Mr Modi, the mission should be to secure India’s economic and political rise by effectively leveraging, if not tying it, to the most dynamic engine of growth in the world and thereby placing a bet on the continuing rise of America.  By recognising and reconciling each other’s missions, India and the US can establish common ground and the framework required to structure their partnership priorities effectively.

The basis of the potential strategic partnership also implies agreement on a number of additional terms of engagement: firstly, while the partnership will seek to be comprehensive, it will not be ubiquitous in the sense that there will be areas where the partners agree to disagree rather than work together.  Second, the partnership will of course not be exclusive and both countries will continue to work with all available nations to progress their respective aims. And thirdly, that the intensity of collaboration may ebb and flow over time given events, but that the strategic framework of the partnership is enduring.

 

US-India Relations Since Indian Independence – A History of Missed Opportunities, In Very Brief

US India relations

The importance of the meeting next week is to establish one of the critical elements in making the 21st Century the ‘American Century’ which also requires it to also be the century of India’s economic and political rise into the league of world modern superpowers.  Nothing in the last two decades has set the agenda for this to be possible.  Notwithstanding the long history of mistrust of each other’s intentions (see above) and the recent stagnation, the last two decades have seen a steady advance of US-India relations through the efforts of successive administrations on both sides, culminating in the Quotelandmark 2005 Civilian Nuclear Deal, which promised to end the embargo on nuclear fuel for India’s energy program and brought the country into the fold of “responsible” nuclear powers.  The Nuclear Deal became the platform on which the countries announced a strategic partnership that sought to significantly broaden the scope of their bilateral cooperation.  Indeed, in 2008, the newly-elected President Obama hosted Prime Minister Manmohan Singh for his first state dinner and on his visit to India in 2009 announced to the Indian parliament his support for a permanent seat for India at the UN SecurityCouncil, something New Delhi has long coveted.  Since then, however, implementation of the Nuclear Deal has been slow due to legislative challenges on both sides and important related measures such as Security Council reform have not been executed.  These challenges (as well as domestic issues on both sides) have distracted senior political attention and prevented meaningful progress in several key areas such as trade, defence cooperation, and multilateral coordination on big geopolitical issues (such as sanctions on Iran or Russia)with the US and India increasingly finding themselves at odds.  The change of leadership in India provides a unique opportunity to re-energise these bilateral relations.  As Bill Antholis of Brookings says, “Where real legislation is required, Modi still will have to come to terms with the upper house of parliament, which represents the enduring authority of states” (Inside Out, India and China (Brookings Institution Press, 2014), something President Obama knows too well.

 

Key Issues for the Leadership Agenda

While the countries have over time proposed collaboration on a large number of issues (which have been discussed and dissected by experts), we focus on ten priorities across economic issues, defence and security issues and political issues, as well proposing potential goals for the countries’ leadership to work towards to define the strategic nature of the bilateral relationship.

Economic Issues


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Defence and Security Issues

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Politics and Diplomacy

 

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Summary of Three Strategic Partnership Priorities

The breadth of the bilateral issues agenda provide a range of option from which Mr. Modi and President Obama can identify another strategic policy which helps to meaningfully deepen the US-India relationship.  Given the current circumstances, we believe that there are three potential policies which can act as vehicles for deepening US-India cooperation across a number of areas simultaneously.

Final

 

Conclusions

The success of Mr. Modi and President Obama’s meeting hinges on both leaders recognising how their long-term visions of their own countries’ place in the 21st century are inextricably linked to each other’s success.  Far from being mutually-exclusive, America’s continued pre-eminence in the world and India’s economic and political rise are indeed both necessary to maximise the probability of each.  This fundamental reality appears to have been lost in the history of misunderstandings between the two countries.  Given this reality, both leaders need to leverage the current window of opportunity by making it a pivotal moment for US-India relations and prioritising initiatives which provide clear long-term strategic benefits to both.  Both leaders must also recognise that their respective domestic issues as well as the geopolitical developments which have arisen in the last few years have fundamentally altered the risk-reward trade-off such that neither party need be hostage to the events and assumptions that defined their past relationship.  Instead, India and the US can focus on building a truly win-win strategic partnership for the future.  Clearly, a few investment deals and piecemeal progress on some non-controversial areas will not be enough to revive the partnership.  For the relationship to be at the right level, the leaders will need to find a breakthrough agreement which aligns their visions along the lines of China’s US-backed accession to the WTO in 2002.  In India’s case, the only precedents are the Security Council seat or the Nuclear Deal – however, they will need to ensure that they also have a plan in place to implement it – lest it meet the same fate as these initiatives.  Pinning hopes on the Security Council seat may also be a sure bet for failing to cement the relationship.  The pragmatic and deliverable answer lies in the combination of economic and political measures as described in the ten agenda items in this paper.  .  Some early symbolic and confidence-building measures will also be required to create a friendly context and generate public support for the partnership

Finally, both leaders will need to be sensitive to not just their own constituents, but other countries who will be impacted by the partnership – most notably China and Russia.  Neither country will want to let go of their existing relations (and for India its past debts to Russia) in the hope of a closer US-India partnership.  Nevertheless, given the urgency of reviving relations, this may well be a risk they have to take.  While the promise of a strong US-India partnership is obvious, with clear strategic benefits for both sides, it is important that both leaders recognise that a failed summit may effectively result in a “lost decade” of opportunity in US-India relations precisely at the time when India needed to re-ignite its growth engine and US supremacy was being gradually challenged by a rapidly-growing China exerting its influence.

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[1] Notwithstanding the recent success of the Alibaba mega-IPO which is one of the few exceptions to China’s limits on the free flow of information

[2] Calculated on the basis that average annual FDI into China between 2000 and 2013 is US$5bn – the number India must aspire to attract; Source: US Bureau of Economic Analysis

[3] Another key difference between the two is the direction of trade: whereas India runs a USUS$135 billion trade deficit with China, it has a USUS$16 billion trade surplus with the US indicating a clear need to focus on the US relationship in order to drive exports; Source: Indian Ministry of Commerce

[4] This target was proposed by Nancy Powell, the outgoing US ambassador to India in her farewell speech last month

[5] Source: US Bureau of Economic Analysis

[6] India is the fourth largest energy consumer in the world after China, the United States and Russia; Source: US Energy Information Administration (EIA)

[7] Source: “Kashmir Militant Extremists”, Council on Foreign Relations, July 9, 2009

[8] Defined as either the largest importer or the largest destination of exports

[9] Source: Stockholm International Research Institute

[10] Russian arms imports to India from 2009 – 2013 totalled US$15 billion.   The target defence trade figure of US$10bn between India and the US is calculated assuming India will reduce its dependence on Russian arms imports, while increase defence trade with the US (currently US$1.5bn)

[11] Mr. Modi’s defence ministry has yet to articulate formal procurement policy but has highlighted advanced fighter jets, combat helicopters, artillery, drones and electronic warfare systems as their key priorities – all areas in which US companies can become key suppliers.  It has also made a commitment to cut down the currently high levels bureaucratic red tape in the procurement process (Source: Indian Express, Jul-2014)

[12] China and Russia in contrast have been adept at aligning with each other to prevent any consensus on issues which they oppose (such as sanctions on Russia) from emerging

[13] For example, while the legal merits and manner in which the Indian consular officer was arrested can be debated, the alarming fact was that the US State Department did not know about the investigation and arrest until after the fact and no coordination mechanism existed for the US to alert the Indian authorities and prevent this issue from escalating into the public sphere

[14] For example, the leaders could leverage the large expat populations – the 2mn people of Indian origin living in the US or the 100,000 US expats in India