"Perceived impact of Obama visit to India”
The year 2015 cannot look more promising for India-U.S. ties with American President Barack Obama accepting the unprecedented invitation to attend the Republic Day celebrations in January2015 as the chief guest. By doing so, he will also become the first sitting President to visit India twice.
Although the bilateral ties between the world’s oldest and largest democracies are back on track after overcoming major hiccups in 2013-14, Obama’s visit will give it fresh impetus and sense of strategic direction. Much water has flown under the bridge since the arrest of Indian diplomat DevyaniKhobragade in New York in December 2013, which worsened further with an anti-India stance adopted by the influential corporate sector.
The first half of 2014, in particular, saw a chill in India-U.S. ties that was reminiscent of post-Pokhran nuclear tests when Washington imposed stiff economic sanctions on the country. Having moved beyond that diplomatic stalemate, Modi-Obama meet during the Republic Day celebrations should set the tone and tempo for furthering relations on multiple fronts.
The first and foremost would obviously be trade and economic ties. From last two-three years, there has been a palpable decline in investor sentiment and interest in Indian economy. The new BJP dispensation under Prime Minister NarendraModi leadership has raised the expectations on growth front.
Not surprisingly, his visit to the U.S. in September 2014 has brought back the fizz to Indo-U.S. ties. During his visit, trade deals around $40 billion were inked. That top U.S. industry leaders made a beeline to meet Modi during his visit shows that India generates significant interest. Stronger economic ties are essential to developing a relationship that is deep and resilient enough to tide through rough patches.
Few irritants, however, remain in bilateral trade ties, particularly vis-à-vis India opening up its economy. U.S. companies would like to see sectors like multi-brand retail, insurance, defense, and banking opened. Despite India allowing FDI in multi-brand retail, U.S. companies like WalMart are not exactly happy with sourcing norms. Also, difference in approach towards intellectual property regime and its implementation persists. U.S. pharma companies have been at the forefront of anti-India lobby voicing their most vociferous opposition to Indian generic drug making companies.
On the trade front, U.S. has run a persistent trade deficit in goods with India, which has jumped from $3 billion to $19 billion in 2013. But, trade frictions are easing. In November 2014, the U.S. and India held their first round of formal trade talks in four years. This followed on the heels of a successful U.S. push to overcome unrelated Indian objections to the $1 trillion landmark Trade Facilitation Agreement — the first multilateral agreement to be concluded since the World Trade Organization was created 20 years ago. If eventually ratified, the TFA will reduce the costs and administrative burdens associated with moving goods across borders.
Going forward, both countries would aim to build momentum vis-à-vis a bilateral investment agreement. Both countries have been working on for a decade. India will have to reset foreign investment ownership ceilings placed on many Indian sectors, which are too low to lure investors and involve corporate restructuring. U.S. should support India’s entry into the Asia-Pacific Economic Cooperation. While recent tax rulings in Indian courts have favored foreign companies like Vodafone and Shell, there is a need to relook at tax laws and possibly a more liberalized regime.
The most significant outcome of President Obama’s visit and presence as the chief guest at the Republic Day ceremony should be in defence and strategic ties. A new 10-year defence framework with the U.S. is likely to be finalized and will replace the existing agreement of June 2005.
The new defence framework will outline a series of exchanges between Indian and U.S. officials, including regular meetings between service and non-service defence personnel, the updated ‘Defence Trade and Technological Initiative,’ upgraded military and naval exercises, as well as ‘knowledge partnerships’ between the National Defence universities in both countries. Already, U.S. State Department and Pentagon officials have been visiting New Delhi for the past few weeks.
U.S.-India-Japan trilateral talks as part of the “Asia dialogue” have been going on for weeks with reports suggesting Australia showing interest and expanding it to quadrilateral talks. Indo-U.S. ‘Malabar’ naval exercises held annually along with Japan have already become an avenue for strategic cooperation, particularly in the context of growing Chinese presence and influence in the Indian Ocean region.
India would like to give boost to its Make in India campaign during the visit by signing some agreements under Defence Trade and Technological Initiative. Countries like U.S., Japan, and other European Union members Germany, France, and the United Kingdom could transfer technology to India and help build a high technology driven military-industrial manufacturing base, which could create millions of jobs.
A lot of synergy exists in defence production and the visit should take forward engagement at the level of private sector between the two countries in the sector. As it is, India permitting 49% FDI in defence sector should at least help kickstart some initiatives although companies like Boeing and Lockheed Martin would prefer full ownership.
Another dampener in enhancing Indo-U.S. nuclear strategic ties has been the liability clauses, which have stalled progress on civilian nuclear deal signed in 2005. Basically, the 2010 Civil Liability for Nuclear Damage Act put unlimited liability on both nuclear reactor and component suppliers in case of an accident. In 2011, the government announced new rules that cap the liability on suppliers, both foreign and domestic, to 15 billion rupees.
Overall, despite making significant improvement in bilateral ties, vast scope for tapping the full potential of relations exists. Terrorism is an area where the two countries need to expand the existing scope of ties. While there has been an increased emphasis on sharing of information and intelligence, a recent telephone call recorded between the perpetrators of Mumbai 26/11 and their masterminds in Pakistan by western intelligence agencies failed to warn India. With the threat from Islamic State staring at Europe, the U.S. and India, there is a need to devise a common strategy to counter the global terror group’s nefarious plans and propaganda. On cyber-front, both countries face increasing threat from hackers from China and other jihadi elements.
A paradigm shift in India’s relationship with the U.S. and all other major powers has already taken place. The country, especially under the BJP dispensation, has distanced itself from the non-alignment sentiment to deal with all powers. National interest and primacy of growth is defining the agenda. This shift augurs well for Indo-U.S. ties and Obama’s visit may take it to next level of partnership.