India’s foreign policy ambitions have waned. With no big ideas implemented, the last few years have seen the India-US relations transform into a mundane series of empty platitudes and routine conferences. The last three months have been witness to this trend, with diplomats humiliated, India’s aviation safety questioned, the World Trade Organization complaints on the solar plans filed by the US, attacks on pharmaceutical quality and, more recently, Congressional hearings on market access. With the Devyani Khobragade episode exposing lingering fault-lines, along with a mundane agenda, this rhetorically opulent trading relationship clearly lacks gravitas. More ominously, a purported investigation by the US Trade Representative’s office into intellectual property rights protection and domestic producer preferences, potentially leading to trade sanctions, has led to fresh tensions, with visas apparently refused. The ‘swing state’ and its ‘natural partnership’ are seemingly out of steam.
Trade needs to drive this relationship. A shared belief in democracy and a common vision for Asia will not be enough to deepen it. Despite a deteriorating regulatory climate, and unpredictable policy turns, 2013 trade figures have been positive, forecasting a record high of $64bn (US Census; +$20bn in India’s favour). However, with a steeply declining growth rate (4.8% in Q3), long-term projections about its market attractiveness, along with residual strategic potential, will decline. Policy changes, on both sides, are immediately required.
Regulatory and bureaucratic hurdles matter the most. Aggressive tax collection, through a retroactive application of rules, needs to be contained. Covering a fiscal deficit by chasing out investors is the hallmark of a kleptocracy. Free trade, with incentives to bolster innovation and intellectual property protection, and clear tax regulations will draw FDI, with the negotiation of a bilateral investment treaty, a potential signal. The US immigration reform Bill, while semi-comatose, needs to address India’s IT industry’s concerns. The industry, while improving the efficiency of the US economy, has become a hallmark of the benefits of globalisation and an emblem of India-US partnership. Talent movement barriers in this business model will benefit no one. Full membership for India in the Asia-Pacific Economic Cooperation (Apec), along with a potential inclusion in the Trans-Pacific Partnership over the long term, will lead to increased economic cooperation and regional integration.
Sectoral cooperation can be boosted. Defence cooperation between us, without high-technology export controls or intrusive end usage monitoring, can be a catalyst. Enabling the export of the advanced aviation components could help modernise our strained air force with American firms potentially partnering in India’s naval expansion, assisting with the development of maritime capabilities in carrier aviation and nuclear propulsion. With India now the largest defence export market for US firms, local production will matter. Talk on joint defence research and production needs to translate into on-ground reality, as opposed to protracted negotiations on defence offsets. India will not be a long-term military cash-cow. With our energy deficit, a liberalisation of US LNG exports to India, as opposed to a case-by-case basis (Cheniere with GAIL), will help provide an export market for cheap shale gas, while addressing India’s power needs and reducing our collective dependence on volatile energy producers. Our limitless urbanisation needs can be met through infrastructure investments by US firms, backed by financing from the US government. Imagine an industrial corridor, stretching from Delhi to Kolkata, across Uttar Pradesh and Bihar, with metro railways, airports, industries and power plants, built through public–private partnerships.
We will continue to have some differences. Preferential market access and providing incentives for production in India, particularly in sectors like solar energy and information and communications technology (ICT), are necessary for cultivating budding firms and building support ecosystems. Our agriculture and retail sectors still employ millions; introducing free trade and competition from foreign providers at a rapid pace will hurt their meagre earnings. Our economy’s evolution will take time.
Radical terrorism still stalks us, while a lingering trust deficit hinders. Terrorism in India continues to emanate from Pakistan, with the Lashkar-e-Taiba unbeaten and growing. Counter-terrorism cooperation must be institutionalised, with the US-India Homeland Security Dialogue and the state department’s Anti-Terrorism Country Assistance Plan being welcome forums. Joint engagement with Pakistan is critical, despite deep disillusionment. It must be pulled back from the brink. Afghanistan too must be stabilised, through a partnership with Iran. The departure of Nato troops leaves behind a fragile State bedevilled by civil war and exposed to the execution of ‘strategic depth’ policy by its neighbour. The pace of this withdrawal, along with residual forces left behind and military aid provided to Afghanistan, will be a critical determinant of Afghanistan’s political stability. The Taliban must not be allowed to return to full power.
America pivots to Asia while India looks east. China’s rise is good for Asia, with increasing free trade shorn of mercantilism a common interest. We share common concerns about its recent extralegal and expansive claims in the South China Sea and Arunachal Pradesh. India’s territorial integrity must be unequivocally supported by the US, vis-à-vis China. The US does not need to shoulder Atlas’ burden alone, promoting freedom of navigation – India can be a net provider to regional security.
These relations need to be transformed. While worries about its unconstrained power abound, its relative decline should concern us more, particularly in our neighbourhood. A partnership with the US is indispensable to regional peace, security and prosperity, but it must also cater to India’s needs and aspirations. We need to move beyond rhetoric to substance. India’s rise requires a conducive and realistic American partnership. It’s time for a renewal.