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#4466, 28 May 2014
Modi-fying Indo-US Relations
Shreya Upadhyay
Research Intern, IPCS
Email: vini.shreya@gmail.com

The UPA’s commitment to transforming Indo-US ties lost steam in its second term due to several economic, defence and diplomatic issues. What impact would Narendra Modi's election as Prime Minister have in altering the strained relations between the two countries?

The Modi-US Personal Equation
In an attempt to reach out to Modi, US President Barack Obama invited him to the White House while congratulating him on his landslide victory in the current Lok Sabha elections. This ‘U-turn’ in US’ approach to Modi, whose visa was revoked in 2005 for his alleged inaction or complicity in the 2002 Gujarat Hindu-Muslim riots, reflects a pragmatic desire in Washington to closely align itself with the new leadership in Delhi.

The US has been accused of being slow in forging better relations with Modi. US Ambassador to India Nancy Powell, who recently resigned without completing her term, held her first meeting with him only in February 2014. This was dubbed by many as “too late to be effective.” Worse, the day she met him, the State Department declared that the visa policy towards him remained unchanged. The UK had effectively lifted the ban on Modi in October 2012 while the US ban was necessarily lifted only after Modi was designated to be the Prime Minister.

In the last thirteen years, Modi has worked closely with Japan, visiting the country five times, and China, on three occasions. He has also collaborated with Middle Eastern investors and officials. Although Modi had in an interview declared that relations between two countries cannot be determined by incidents related to individuals, they are bound a play a crucial role in the new administration's foreign policy, with speculations that Modi is likely to favour his relationship with these partners. It is being speculated that Japan and China may be the first two trips that Modi would make after assuming office. He is likely to visit the US only in September for the UN Summit.  

Indo-US Trade under Modi
Modi has been a favourite of business leaders at home and abroad with promises to restore rapid economic growth, saying that there should be “no red tape, only red carpet” for investors.

Experts have drawn parallels between Modi and Thatcheron the basis of being “market oriented.” In a Financial Times’ opinion piece, Gurcharan Das wrote that India of today is similar to Britain of the later 1970s with high inflation, declining growth and high fiscal deficits. “Britain yearned for a strong leader then, and in Mrs Thatcher it got one. In Mr Modi, Indians, too, have chosen a strong leader. His Thatcherite rhetoric of “less government and more governance” resonates with the aspiring young middle class.”

Modi's success on the economic front hinges on how effectively he would be able to implement the next phase of market-centred reforms. The BJP in its election manifesto talked about easing the rules of doing business by setting up business facilitation centres and making the government accountable for delays and delivery of services.

The US-India Business council (USIBC), which comprises of Indian and American companies, has already released a comprehensive wish list - 'Way Forward Agenda 2014-2015' - which seeks bilateral trade of US$500 billion per year. The action plan includes resolving outstanding issues related to the civil nuclear deal, e-commerce and insurance, etc. The USIBC has also reiterated its call to open India's multi-brand retail sector. However, the BJP in its manifesto clearly stated its stand against the FDI in multi-brand retail, dashing the hopes of scores of foreign supermarket groups waiting to invest in India.

Defence Relations
Modi has often alleged that India’s defence procurement and the higher-level management of its defence policy have both suffered grave reverses under the UPA and that conventional military capabilities must be reformed. The BJP manifesto raised the issues of self-defence, civil defence, shortage of personnel, technology, streamlining bureaucratic processes, research, and private sector involvement in defence. It also promised greater FDI in defence. As of now, India allows 26 per cent foreign ownership in defence, and proposals to exceed that limit are considered only for state-of-the-art technology. 

Ashley J Tellis of the Carnegie Endowment for International Peace writes that the Modi government should give a go ahead to acquire US military equipment, especially by closing those contracts that are close to completion. This will help in improving the combat capabilities of the Indian armed forces. There are also hopes that the proposed Defence Trade and Technology Initiative (DTTI) that is currently frozen will spur greater technology transfer and military modernisation if completed.
For the Pentagon, India has a geopolitical value in the context of a rising China. Protecting the sea lines of communication in the Indian Ocean, through which global trade and energy flows, makes India a valuable strategic partner. The US is thus planning extended naval cooperation with India in the Western Pacific region, which was put on the back burner during the UPA’s term.

As Modi takes charge of the next government, the US is bound to remain an essential partner for India. Even though the relationship lacks the rhetoric of warmth and romance, it remains grounded in solid economic and security interests. 

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