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Deepening the U.S.-India Partnership

State dinner for President in India

SOURCE: AP/Charles Dharapak

Members of the U.S. delegation stand during the playing of the U.S. national anthem during the state dinner for President Barack Obama and first lady Michelle Obama hosted by India's President Prathiba Patil and her husband Devisingh Ramsingh Shekhawat at Rashtrapati Bhavan in New Delhi, India, Monday, Nov. 8, 2010. From left are: Press Secretary Robert Gibbs, speech writer Jon Favreau, National Security Adviser Tom Donilon, senior adviser Valerie Jarrett, Commerce Secretary Gary Locke, Agriculture Secretary Tom Vilsack, Treasury Secretary Timothy Geithner, U.S. Ambassador to India Tim Roemer and wife Sally.

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U.S. policymakers working to advance American interests are currently confronted with profound political and economic volatility around the world. Since the 2011 Arab Spring, countries in the Middle East have been undergoing rapid political change. The European Union is grappling with an economic crisis whose resolution will have a significant impact on our own slow recovery.  China has begun to flex its economic and military muscles outside its immediate region after three decades of sustained growth. And Al Qaeda and affiliated terrorist groups continue to plan and conduct deadly attacks, particularly in South Asia, Africa, and the Middle East.

Now more than ever, the United States needs friends in order to effectively navigate and respond to these shifting dynamics.

The U.S. role as a world leader for more than half a century has been undergirded by established alliances with countries around the world. In the coming decade there is one partnership that may be more critical to U.S. economic and security interests than any other: the U.S-India alliance. India is a vitally important geo-strategic partner for the United States. India’s economy, democratic values, military capabilities, and technological prowess make it an indispensable ally now and in the future. As Vice President Joe Biden puts it, “My dream is that in 2020, the two closest nations in the world will be India and the United States. If that occurs, the world will be safer.”

Skeptics of this partnership, however, hold out little hope that the United States and India can bridge key differences or produce anything consequential for either U.S. or Indian interests. They point to many significant barriers that limit progress in the relationship, including India’s protectionist foreign investment policies, India’s military alliance with Russia, and an unwillingness in New Delhi to move on international trade and climate negotiations. These critics contend that at best this relationship has failed to produce anything of importance, and at worst India has proven to be an unreliable and even obstinate partner.

The recent record proves otherwise. The Obama administration has made slow and steady progress over the past four years in deepening the relationship with India and delivering important results. On trade and investment, for example, the Indian government has finally begun to open its market to U.S. investors with a series of reforms that, if fully implemented, could be some of the most significant Indian market liberalizations of the last decade. Once an off-shoring and out-sourcing destination for U.S. companies, Indian companies have turned the tables and are now investing heavily in the United States, with billions of dollars spent on information technology, manufacturing, and more. Indeed, bilateral investment and trade is likely to surpass $100 billion this year, a tenfold increase since 1995.

In the security sector, too, cooperation on counterterrorism and intelligence sharing has never been closer. Joint military exercises and training occur with increased frequency. India conducts more joint exercises with the United States than any other country. In addition, the Indian government has bought more than $8 billion in U.S. military goods, potentially signaling a move towards closer synchronization between our respective militaries.

With regard to recent diplomatic and security decision points, the United States and India have moved forward with a shared agenda to approach global challenges. Indian oil imports from Iran have been substantially reduced. The Indian military has begun training Afghan security forces. Indian officials have sought openings, where possible, to build stronger ties with Pakistan. The Indian government supported U.N. Security Council resolutions on both Iran and Libya. And India pledged economic assistance to the Burmese political transition despite their previous objections to U.S. sanctions on Burma’s military regime.

There is no question that many significant differences still remain between the two countries.  But quietly and deliberately, President Obama and Prime Minister Manmohan Singh have found ways to bring the two countries closer together in countering common threats and creating new economic opportunities.

The next administration, whether Democratic or Republican, can build on this progress. Three key areas are ripe for further development.

  • Energy and the environment
  • Infrastructure development and investment
  • Defense and homeland security

Let’s examine each in turn.

Energy and the environment

India is starved for energy, made acutely clear when nearly 700 million people were recently sent into darkness for almost 48 hours after large portions of the country’s energy grid experienced cascading failures earlier this summer. Burdened with shortages in available coal and gas, India has been forced to import energy at high prices.

In addition, water has been critically depleted. Water tables, particularly in the North, are at a historic low. While India needs power for people to live their daily lives, significant energy resources will also be required to maintain the 8 percent annual economic growth needed to lift some 400 million people out of poverty over the next two decades. India’s energy production needs will quadruple over the next 20 years to expand access and reliability while powering India’s growing economy.

The consequences of climate change, meanwhile, have ravaged India, as hundreds of millions of Indians’ livelihoods are dependent on climate-sensitive sectors. Monsoon rains have been unpredictable, and when it does rain, it rains harder for shorter periods of time, increasing flooding but doing little to alleviate drought conditions. Temperatures have also climbed, shrinking Himalayan glaciers and creating shortages in the rivers below. Tensions over water between India and neighboring countries are on the rise. As a result of energy shortages and weak crop yields, India’s rural population has continued its migration into the cities, putting additional pressure on power, sanitation, and infrastructure resources in India’s already overtaxed urban areas.

A number of joint initiatives have been launched on clean energy, low carbon growth, climate, and a range of related topics. The U.S.-India Partnership to Advance Clean Energy is the umbrella initiative tying together U.S.-India cooperation on clean energy research and deployment. The United States and India are also collaborating with energy and environment ministers of the world’s major economies in the Clean Energy Ministerial to promote policies and programs that encourage low-carbon energy production and consumption.

While these collaborative efforts have contributed to a richer global discussion on climate issues, more can be done to strengthen this focus. The United States and India could further advance cooperation on climate and clean energy through the development of a joint U.S.-India platform for open innovation in clean energy. Open innovation involves using new strategies to link disparate research and thinkers through virtual collaboration platforms, innovation prizes, and intellectual property rights strategies. These strategies can be powerful tools in accelerating the adoption of clean energy technologies, as an upcoming report from the Center for American Progress by Andrew Light and Arpita Bhattacharyya details. They demonstrate how clean energy could use the same model that information and communication sectors used in the development of the Internet, computer operating systems, hardware, and software.

As a recent Council on Foreign Relations/Aspen Institute India report recommended, the United States could also provide greater support to India’s attempts to combat deforestation through the United Nations Collaborative Program on Reducing Emissions from Deforestation and Forest Degradation; fund a joint U.S.-India innovation center to “provide clean energy services to the poor focused on creating a bottom-up framework for accommodating the local needs and conditions of Indian citizens”; and collaborate with India to pressure international organizations and forums to place a greater focus on financing for climate change.

The United States needs to build on its important clean energy work with India and make equally important commitments to work in related areas, particularly with regard to water security. Finding clean water is still a major challenge for much of India’s population. Water has become a regional security issue as well, as the need for access to clean water in India and neighboring countries grows more acute. Water security should be elevated within the U.S.-India strategic dialogue, and it should become a more prominent focus of foreign policy between our two countries.

There are a range of other environmental challenges confronting India, including air pollution, sanitation, and rapid urbanization. Many of these problems can be partly addressed through increased investments in infrastructure.

Infrastructure investment

Indian leaders have announced that as much as $1 trillion in new infrastructure would be needed over the next five years to accommodate the demands of what will soon be the most populous country on the planet. Virtually every sector—transportation, sanitation, telecommunications, education, and housing—requires significant additional resources and attention. New cities must be built, and some 600 new universities are required. Airports, subways, highways, and ports all must be constructed or renovated to accommodate the growing population.

Yet U.S. companies continue to be frustrated over India’s closed market, the byzantine regulatory system, and uncertain funding for high-risk ventures. Indeed, the Indian government has acknowledged it will not have the budget available to fund the available projects, and has pushed developers to explore “public-private partnerships” for funding—theoretically a good idea, but quite difficult to launch in practice.

Moreover, India’s federal system, which divides authority for procurement projects between national and state governments, has confused and frustrated U.S. firms attempting to navigate through India’s convoluted bureaucracy. India’s status as a global economic power will depend upon its ability to create a modern infrastructure, reduce the rural-urban divide and respond to the needs of its rapidly expanding population. Integrating U.S. companies into development projects will be in India’s interests but the barriers to investment and cooperation must come down.

Defense and homeland security

Indian restrictions on U.S. defense and homeland security investments remain too strict, inhibiting trade, investment and joint manufacturing between U.S. and Indian companies and keeping many U.S. companies on the sidelines. But some progress has been made, and the trend line is moving in a good direction. After being denied the contract for India’s advanced fighter aircraft in 2011, U.S. aerospace and defense companies are making some gains in this sector. The Indian government has purchased more than $8 billion in military equipment from U.S. companies in the past decade, more than $5.3 billion of which took place in the past two years alone.

But clearly work needs to be done. Secretary of Defense Leon Panetta appointed Deputy Secretary of Defense Ashton Carter to lead an export reform and defense procurement review to jump start U.S.-India defense trade. The Indians need to undertake a similar commitment at defense sector reform to open up the market to U.S. companies and loosen the restrictions related to foreign direct investment and defense offsets. Additionally, both countries should work toward the possibility of cooperative research and development, and co-production where possible.

Similar reforms in the homeland security sector are warranted as well, where the confusion and divisions between the federal and state governments, not to mention the stifling bureaucracy, has deterred U.S. homeland defense firms from fully competing there. As Deputy Secretary of Defense Carter said in India this past summer, “our shared challenge in the next year is to find concrete areas to step up our defense cooperation” and “to knock down any remaining bureaucratic barriers in our defense relationship and strip away the impediments.” That is the right challenge and it is one where progress can continue to be made.

Conclusion

Clearly there is a wide range of areas in which the U.S.-India partnership can be advanced. These three areas presented here are worthy of further development. But it is important to keep in mind that the bilateral relationship has quietly, steadily, and carefully been built up over the past four years by like-minded leaders who recognize the critical nature of this alliance. Engagement at the top levels of government have set in motion the painstaking work by diplomats, development specialists, military officials, and civilian experts of all stripes to make the necessary linkages that pull two nations together (not to mention the millions of people-to-people relationships that have brought our nations closer and have delivered huge benefits for each country).

As written in a previous paper from the Center for American Progress, there will likely be few home runs in the coming years in the U.S.-India relationship. Those waiting for another game-changing achievement like the civil nuclear agreement, for example, are likely to be disappointed. But this shouldn’t stop smaller and less public efforts where gains can be made. Again, while we highlight defense, environment, and infrastructure as three vital areas for focus, the next administration may find other sectors where progress can be made. The key is to continue making progress, even incremental, wherever and whenever possible.

Richard Verma and Caroline Wadhams are Senior Fellows at the Center for American Progress.

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