Washington-New Delhi Relations: What Can We Expect?
Following the hullabaloo of US President Barack Obama’s whistle stop tour of Asia in November – the focus of which was primarily on China, Japan, the Koreas and South East Asia – it might be logical to assume that Washington-New Delhi relations have fallen down the pecking order of America’s list of foreign policy priorities. After all, the key takeaway from the regional trip appeared to be the White House’s solitary recognition of China’s place in the new global economic order (with sparse mention, if at all, of India’s future role). Nevertheless, Indian Prime Minister Manmohan Singh’s inaugural, three-day state visit to the US, which kicked off on November 23, should not be regarded as simply a PR exercise, in my view. Closer ties between the US and India would be mutually beneficial for both countries’ long-term commercial and political ambitions in the region, and unsurprisingly, one should expect to see President Obama and PM Singh seek reassurances from one another that both administrations are committed to further enhancing relations.
In this commentator’s view, three key issues are likely to dominate the India-US foreign policy agenda going forward: commercial ties, energy policy and, of course, Pakistan.
Closer Commercial Ties… It is extremely unlikely that we will see a realistic timetable for a comprehensive free trade deal between India and the US anytime soon. Nonetheless, both New Delhi and Washington will be keen to bolster bilateral commercial linkages going forward. The US remains India’s single most important export destination, accounting for roughly 13% of outbound shipments. Moreover, the South Asian economy has provided a welcome, low-cost development hub for many of America’s largest tech companies. However, with India’s US import share likely to exceed US export share before long – and Indian per capita incomes projected to almost treble over the coming decade to around US$3,750 – the long-term emphasis will be on improving the ability of US companies to do business and invest in India. US defence companies, for example, have been lobbying the Indian government to raise the country’s restriction on foreign direct investment in the industry from 26% to 49%. With this in mind, we can expect a greater push from the Obama administration to push for reduced capital restrictions.
Energy & The Environment… In October 2008, the US Senate finally approved the Indo-US civilian nuclear agreement, which would give New Delhi access to nuclear fuel and technology, and help boost India’s power supply. More than a year on, albeit with a change in the Oval Office, and the deal has yet to be implemented. For one thing, the Obama administration is considerably more sceptical on the deal than the previous Bush administration. Moreover, the US is averse to formally instigating the agreement given that India has yet to sign international treaties limiting the test of nuclear weapons and the production of nuclear materials. For its part, India’s parliament has yet to debate a new law which would limit US firms’ liability in the event of a nuclear accident. On the nuclear front, we doubt whether the Indian PM’s visit will see significant progress, but with US companies eyeing India’s potential US$150bn market in power plants, the pressure will be on Obama to act. We are more optimistic about closer relations on cleaner energy, however. While both countries are unlikely to find common ground on the emissions debate, the US authorities have promise a new agreement on clean energy, including a clean technical investment fund to develop low-carbon technologies in India.
The Pakistan Issue… Arguably the most important discussion point going forward will be the issue of the US’s involvement in Pakistan and Afghanistan. The Indian Prime Minister had already turned up the heat on Washington-Karachi relations before his trip, by questioning whether Pakistan’s objectives in Afghanistan were aligned with those of the US – a statement that unsurprisingly has not gone down well with the Pakistan hierarchy. What’s more, the Indian government still feels aggrieved by what is sees as a lack of action by its Pakistani counterparts on bringing those responsible for the Mumbai bombings in November 2008 to justice. As such, New Delhi is likely to express its disappointment in Washington’s failure to fully acknowledge the anti-Indian militancy threat on Pakistani soil.
Regional Map
From our perspective, the Obama administration faces a difficult balancing act. While it sees Pakistan as massively important in fostering a more stable regional landscape, it must be seen to be addressing India’s concerns. The US will also want to play peacemaker between Pakistan and India, given that talks between the two South Asian countries have stalled and that Washington may be looking for an exit strategy on its war in Afghanistan. Therefore, we are likely to see the US attach more stringent conditions to security-related aid to Pakistan, particularly with regards to the clamping down of militant groups such as Lashkar-e-Taiba (which has been accused of last year’s terrorist assault in Mumbai). What’s more, US military and technical intelligence will be offered to the Indian government in its fight against security threats such as the domestic Indian Mujahideen. Even with such concessions, it is difficult to see how the US will continue to appease both sides while New Delhi-Karachi relations remain so frosty. With Washington likely to regard India as a useful counterweight to Chinese influence in Asia, it seems to be that that Obama may be forced to take a harder line on Pakistan going forward in order to allow Indo-US relations to prosper.
