Since his election, Modi has been vocal in expressing the view that China, Japan and Russia are important partners for India and consequently has sought to deepen bilateral relations with them. With Modi already having met Xi Jinping and Vladimir Putin, it was imperative for the US to engage Modi too. The Obama administration, which was keen for Kerry to meet the new Indian leader, asked for the scheduled venue of the Indo–US Strategic Dialogue to be moved from Washington DC to New Delhi. Speaking to the media during his trip, Kerry even addressed the controversial visa ban on Modi by describing it as a decision taken by the previous government and not by the Obama administration.
Kerry’s visit to India, however, was more than just about increased diplomatic engagement between the world’s most populous democracies. The Indo–US partnership faces significant hurdles. Modi’s focus on reviving the Indian economy is a powerful impetus for the two countries to improve ties. The Obama administration hoped that Kerry’s visit would address issues relating to India’s protectionist economic policies that have made it difficult for US companies to invest more widely in India. During his trip, Kerry said the US wished to see trade with India expand to US$500 billion a year.
There is great potential, but there are also considerable obstacles. Increasing investment in infrastructure, growing the manufacturing industry, modernising the military and attracting more foreign investment will not only help Modi revive the Indian economy but will also offer lucrative opportunities for American businesses. New Delhi’s decision to raise the limit on foreign direct investment to 49 per cent in the insurance sector, and to open up the defence sector to foreign investment, has been welcomed by American investors. On the other hand, liability laws relating to nuclear trade and the bilateral investment treaty are obstacles that must be resolved for the Obama–Modi summit in September to offer any significant results.
Further complicating matters, India recently torpedoed the WTO’s Trade Facilitation Agreement. An accession protocol for the agreement, which had been agreed upon by world leaders including by India’s former government, had to be ratified by all signatories by 31 July. But New Delhi vetoed the trade deal claiming that the WTO failed to provide India with a suitable alternative to India’s policy of offering food subsidies and maintaining large stocks of food. India’s U-turn on the agreement cast a shadow over Kerry’s visit and led the US to remark that India’s decision sent a ‘confusing signal’.
The Obama administration is also looking for more robust Indian participation in the Asian security structure vis-à-vis China. This may prove to be difficult as Modi is looking to chart his own partnership with Beijing based on a thriving economic partnership and is unlikely to take an overtly anti-China stance. In his former role as chief minister for Gujarat, Modi achieved a significant level of Chinese investment in his state.
The road ahead could be rocky, but Kerry’s decision to come to New Delhi was a signal to India that improving ties continues to remain a priority for President Obama. India’s ability to withstand international pressure at the WTO coupled with its clear displeasure over the National Security Agency spying revelations should be taken by the US as a signal that the Modi government will not necessarily maintain the strategic stance of the previous UPA government. The Obama administration should take India’s decision at the WTO as an indication of Modi’s style of leadership. Unlike his predecessor, Manmohan Singh, the US must realise that Narendra Modi is an independent thinker who is not afraid to go against the general consensus of his party.
Before leaving for India, Kerry aptly described the Strategic Dialogue as a ‘potentially transformative moment’ in India–US relations. Both countries must recognise the strategic and economic opportunities they represent for each other. For India, it is beneficial to develop stronger strategic ties with the US as it will leave New Delhi better equipped to deal with the repercussions of the growing Pakistan–China partnership or failure by India and China to resolve their border disputes. Improved economic ties with the US will also help Modi revive the Indian economy and thereby maintain domestic popular support.
Having recognised the pivotal role New Delhi can play in Washington’s rebalancing strategy, it is imperative that President Obama offer certain strategic and economic concessions to India. These could include pushing for a permanent seat for India in the Security Council, abandoning potential reforms in his immigration bill that would significantly reduce the number of work permits issued to Indians, and adopting stronger measures to control terrorist activity in Afghanistan after the US withdrawal. These measures could help bring the momentum back into the India–US partnership.
Harshita Kohli is an Associate Research Fellow with the US Studies Programme at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University.