Modi visits USA: High Hopes, Modest Expectations
Newly elected Indian Prime Minister Narendra Modi used the margins of the U.N. General Assembly in September to make his first official visit to the United States. On January 26, US President Barack Obama will visit India.
In late-September when world leaders were knee-deep in the unfolding crises in the Middle East and Americans were eyeing midterm elections at home, newly elected Indian Prime Minister Narendra Modi used the margins of the U.N. General Assembly to make his first official visit to the United States. In an energetic, carefully watched visit, Prime Minister Modi met with President Barack Obama, Vice President Joe Biden, and U.S. Secretary of State John Kerry and also delivered a speech to 19,000 people at Madison Square Garden.
The visit was vitally important to the future of Indian-U.S. ties, and set a positive tone. The two leaders will meet again this month, this time in India when President Obama becomes the first U.S. president attend India’s Republic Day celebrations and the only sitting U.S. president to visit India twice during his administration.
Prior to Modi’s visit, critics expressed concern about a host of issues they saw as holding back the relationship, including India’s close, historic military relationship with Russia; India’s protectionist barriers to foreign investment; and the United States’ cumbersome export-control policies. Substantial progress has been made in all these areas. President Obama and Prime Minister Modi effectively used the September visit to silence the echo chamber of skeptics by showing that they intend to take this partnership to the next level.
Despite a lack of groundbreaking announcements, the two leaders signaled their intent to build a long-term, substantive commitment on a broad range of security, economic and political issues such as: joint efforts to dismantle safe havens for terror networks, aiming to increase bilateral trade from the current 100 billion US Dollar to 500 billion US Dollar, and pledging to use a bilateral task force to jointly approach HFC reductions in international climate negotiations.
Because the national priorities of the United States and India are often in sync, a natural partnership between the two countries often seems inevitable and the fanfare of recent events is bringing optimism to many U.S.-India advocates. But India and the United States still tend to take different - and sometimes opposing - paths, even towards similar goals. At this time, both leaders are focused on the home front: They are trying to deliver for their citizens, who are worried about the future. The United States is continuing an economic recovery that looks strong at a macro level but has yet to adequately improve the lives of average citizens who are working more for flat or lower wages. India is hoping to pull out of a long slump but continuing to see downward pressure on growth. So both leaders need to promote economic growth that benefits the middle class, while meeting the growing demands for resources such as water and energy and simultaneously addressing challenges posed by climate change. Each of these areas offers the potential for strong, sustained Indian-U.S. collaboration that delivers for the U.S. – India partnership and for the people of both countries.
The three areas with the greatest potential for collaboration are climate and energy, defense and global security, and trade and innovation.
Climate and energy
The United States and India can be partners in building clean energy sources to mitigate dependence on the Middle East and to meet growing energy demand while managing their effects on climate change. India dropped an anti-dumping duty of 11 cents to 81 cents per watt on solar panel imports from the United States, China, Taiwan, and Malaysia - a significant step in the right direction to decrease barriers to high-level clean technology for the Indian market. Prime Minister Modi has pledged to bring electricity to 400 million Indians who still lack power by 2019, while improving grid reliability - a key impediment for business in India. In order to do so, he plans to rely heavily on solar technology, which currently accounts for only one percent of India’s energy supply, compared to the 60 percent fueled by coal.
U.S. and Indian companies - in both public and private sector - can partner to build India’s green energy infrastructure. According to solar consulting firm Bridge to India, solar panel installations covering 0.5 percent of India’s land could generate enough power to meet 1.5 times the country’s current annual demand. This kind of infrastructure could provide a long-term solution for India’s energy shortage and could be scaled up to meet the future demand of the hundreds of millions of new customers. If the United States and India address energy poverty by finding innovative ways to distribute energy beyond India’s shaky grid system, the two nations can cross a significant barrier in economic mobility, improve the health and quality of life for millions, and encourage foreign investment and stronger business ties, particularly from the United States. In the September meeting, small but significant steps were taking to address the mutual interest in India’s energy challenge with the Obama administration clearing the path for a 1 billion US Dollar loan from the U.S. Export-Import Bank to help India buy American technology for its clean-energy projects and setting up a new Clean Energy Finance Forum.
Defense and global security
The fundamentals of defense cooperation between the two countries remain strong. Defense sales between the two countries topped 9 billion US Dollar over the past six years - an exchange that was nonexistent a decade ago. Additionally, both nations participate in a number of joint exercises, including India’s first full participation in the 2014 Rim of the Pacific Exercise, or RIMPAC, the world’s largest naval exercise involving 23 nations. The challenge, however, is for India and the United States to think more broadly and deeply about defense and security cooperation.
India and the United States will continue their partnership through the U.S.-India Defense Trade and Technology Initiative, or DTTI. This initiative has the potential to break down bureaucratic restrictions that hinder defense trade and open up possibilities for the two nations to partner on technology production, development, and transfer. The Modi government’s increase of foreign investment caps in the defense sector to 49 percent and Washington’s offers of specific co-production and co-development opportunities show that both sides want to move forward on this front, but more will be needed to make the private-sector investments in India’s defense industry really take off. Most notably, India must reform public-sector defense enterprises by incorporating more private-sector initiatives and relaxing its offset policies to make collaboration and partnership economically worthwhile for more global defense companies. India’s defense sector offers tremendous promise, and the United States is the perfect partner to help India overhaul its outdated military equipment in an economically lucrative way. The nomination of Ashton Carter, who led the DTTI from it’s inception and is deeply familiar with India, to be the next U.S. Secretary of Defense should be welcomed by all who want to see the defense relationship move forward.
As important as progress on the DTTI will be, the renewal and expansion of the 2005 New Framework for the U.S.-India Defense Relationship, which technically expires in 2015, is critical. The apparent decision during the recent visit to leave the 2005 framework largely untouched is a disappointment and missed opportunity. The existing series of forums established in 2005 to discuss key issues of defense trade and procurement, joint military exercises, and critical threats and collaboration are functional, but after 10 years, improvements were certainly possible. An updated framework should have built upon the new normal in U.S. – India security relations and formalized recent innovations, including the DTTI which exists outside the 2005 framework. U.S. – India defense cooperation needs to be streamlined, it should commit the United States and India to more trilateral and multilateral defense cooperation, and it should broaden the areas of cooperation to include emerging threats in areas such as cybersecurity, migration and instability driven by climate change, and international commitments to the freedom of navigation and maritime security.
All of this can still be done, but an announcement by leaders that they want an updated framework agreement would energize the efforts on both sides.
Trade and innovation
A glance at the agenda for Prime Minister Modi’s U.S. trip left no question that he is a pragmatic pro-business leader placing top priority on economic reforms and spurring job growth. Modi has set high expectations to revitalize the Indian economy, and much of his agenda depends on India opening its doors to greater trade and foreign investment. India’s historic economic growth in the early 1990s - the last time the nation formalized economic reforms - was unprecedented, with gross domestic product, or GDP, growth increasing from 1.1 percent in 1991 to 7.5 percent in 1996. Despite the country’s economic downturn in the past few years, the United States and India’s economic relationship remains strong. Over the past decade, a number of Indian companies - such as Tata Group, which employs approximately 19,000 Americans - have invested billions of dollars in the U.S. high-tech, pharmaceutical, and manufacturing sectors, totaling 5.2 billion US Dollar in 2012.
Deloitte reports that India will have the world’s third-largest middle-class consumer market, behind China and the United States, by 2020. Global companies recognize this opportunity and the depth of this market. As Prime Minister Modi sets policies to bring millions of Indians into the middle class through next-generation technologies and innovation, U.S. companies can capitalize on this opportunity. In September, for example, Google announced the launch of Android One in India, a test case for delivering high-quality, low-cost phones to a country with more than 900 million cell-phone users.
The United States can also learn low-cost technology production by looking at India’s maiden Mars orbiter, which made India the first Asian country to reach Mars and the only country to make the journey on the first try. With a price tag of 74 million US Dollar, India’s Mars mission cost a fraction of NASA’s most recent 671 million US Dollar Mars orbiter, which reached Mars three days before the Indian spacecraft. The United States and India should cooperate on data collection and research as their two spacecraft cross paths in orbit around Mars and should look toward greater cooperation on space exploration in the coming years, including on manned spaceflight.
Since the September visit, India and the U.S. managed to address India’s concerns about food security which were set to derail the latest round World Trade Organization negotiations on customs and tarrifs. Prime Minister Modi also announced the formation of a new panel intended to fast-track U.S. investment proposals and address bottlenecks, something vital to Modi’s “Make in India” and “100 smart cities” initiatives which need U.S. technology and investment.
Plenty of difficult issues remain in the U.S.-India relationship: the U.S. immigration reform agenda and the spillover effect on H1-B visa provisions that frustrate American firms and Indian high-tech workers; the stalled civil nuclear deal; U.S. concerns about India’s commitment to intellectual property rights, to name just a few. Skeptics look at these potential roadblocks and suggest the Indian-U.S. relationship will continue to underwhelm. The steps since the visit have been high on style but, especially with the WTO deal, have also shown potential real progress. Prime Minister Modi and President Obama can rise above historic obstacles. To live their new mantra for the relationship - “Chalein Saath Saath: Forward Together We Go” - they each need only plan to deliver economic prosperity, ensure civil liberties, and maintain security for their own people - and then identify how U.S. – India collaboration can help meet those goals.