Keeping the U.S.-India Partnership Strong

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During a speech before the joint session of the Indian Parliament three years ago, President Obama effusively praised growing bilateral ties, saying that "with India assuming its rightful place in the world, we have an historic opportunity to make the relationship between our two countries a defining partnership of the century ahead." Unfortunately, the president's meeting today with Indian Prime Minister Manmohan Singh at the White House lacked the same enthusiasm.

Leaders in both countries acknowledge the relationship has lost momentum, rightly noting that India's economy has cooled, various bilateral initiatives remain stalled and U.S. claims of Indian trade violations are on the rise. The challenge for U.S. policymakers and lawmakers moving forward is to prevent these impediments from defining the broader strategic relationship.

Certainly, the transformation of U.S.-India relations — unthinkable decades earlier — has led to unprecedented levels of diplomatic, economic and security cooperation between the two countries. Bilateral trade since 2000 has increased nearly fivefold to approximately $100 billion. Foreign direct investment levels, once memorably described by a former U.S. diplomat as "flat as a chapatti," reached $24.7 billion in 2011. And U.S. defense sales to India have surpassed $8 billion since 2008.

Yet perhaps more impressive is the "new normal" of frequent government-to-government interactions. Singh's visit on Friday marked his seventh meeting with a sitting U.S. president.

The trouble is that major hurdles still exist. In Washington, a growing number of U.S. businesses complain about a pattern of discriminatory economic policies in India. This includes — but is not limited to — "buy local" provisions favoring Indian companies, intellectual property rights and market access restrictions. Moreover, India's stringent law on nuclear liability is the last major obstacle to American companies benefiting from the 2008 U.S.-India civil nuclear cooperation pact, a landmark agreement that reopened the door to nuclear commerce that had closed after India exploded a nuclear bomb in 1974. News reports indicate U.S.-based Westinghouse Electric Co. could soon announce a preliminary deal that "would lay the groundwork for a nuclear plant [in India] using the company's reactors."

In New Delhi, lawmakers worry that America's withdrawal from Afghanistan will create a safe haven for extremists in South Asia, and that the U.S. Senate-passed immigration bill raising fees on H-1B visas for highly skilled workers will disproportionately impact Indian companies. There are also occasional rumblings about perceived closeness between the United States and China, a fear that was heightened during President Obama's California retreat with Chinese President Xi Jinping in June.

While these important issues should be resolved as soon as possible, it would be a mistake for both nations to view the broader U.S.-India relationship through the prism of short-term diplomatic transactions. Instead, political leaders should recognize the extraordinary economic and security benefits that would come from a truly cooperative relationship that proactively addresses regional and global challenges.

The task will not be easy. The United States and India are both vibrant democracies where elected leaders face diverse — and often critical — constituencies. But during the early years of the Bush administration, policymakers properly assessed that a healthy and prosperous India, guided by common principles of freedom, justice and open markets, was an end in itself. Naturally, India's economic rise would yield benefits over time, such as increased trade and investment opportunities. But one of U.S. policy's larger goals was for India to become a more closely-aligned geopolitical partner. 

The trouble is that India's lackluster economic growth seriously undercuts these prospects. In 2012, India's economy grew at just 5 percent, the lowest level in nearly a decade. According to the Asian Development Bank, economic growth in 2013 will remain below 6 percent, in part due to the "sluggish progress in pushing through badly needed structural reforms." While New Delhi has recently taken incremental steps to attract foreign investment, leaders have yet to implement — or even propose — the major economic reforms necessary to restore investor confidence.

Even if India continues to experience lower than expected growth, the broader U.S.-India partnership should continue to mature. In the short term, there are various actions policymakers and lawmakers in the United States can take. 

First, Washington should reiterate to New Delhi the U.S. business community's concerns about India's business climate. India's economic paralysis not only hurts U.S. companies, but, more importantly, fails to lift millions of Indians out of poverty.  

Second, policymakers should press forward to finalize a Bilateral Investment Treaty, or a BIT, with India. While a BIT would provide U.S. and Indian companies with various legal protections and a more predictable investment climate, it could also open the door to much more. As the German Marshall Fund's Dan Twining suggests, "the treaty itself is less an end than a means to an eventual free trade agreement."

Third, Washington should continue look for more ways to build up Indian military capabilities. India's military modernization efforts are an opportunity not only to increase bilateral exchanges and training, but also to boost U.S. exports. Indeed, news reports indicate that New Delhi is looking to purchase six additional C-130 Hercules medium lift aircraft, as well as a range of heavy-lift and attack helicopters.

Finally, the United States can work with international partners to bring India into the Asia-Pacific Economic Cooperation forum. As former Assistant Secretary of State Kurt Campbell wrote in July, "the U.S. is better off working with [India] inside an established framework committed to easing the burdens of doing business and promoting common commercial practices."

Manmohan Singh's visit to the White House — perhaps his last as India's prime minister — is a reminder of how far this once distant relationship has come. To be sure, temporary setbacks or momentary disagreements will continue. The task ahead will be to overcome these near-term challenges, and ensure that U.S.-India relations become — to evoke President Obama's own words — the "defining partnership" of the 21st century.

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