In the 20th century, it was often argued that there were three main limitations to the development of bilateral ties between India and the United States of America (US). These were India’s focus on nonalignment, its closed economy, and growing nuclear program. From the US’s end, there was a lack of a need to foster a relationship with India. The US-India partnership began growing in the late 20th and early 21st centuries.
With the world moving from bipolar to unipolar, after the disintegration of the erstwhile Soviet Union, India needed to start focusing more on the West, especially considering the 1991 LPG Reforms. Much of this period was spent repairing and resolving the differences between the two countries — especially in context to India possessing nuclear weaponry, the United State’s relationship with India’s neighbour, Pakistan, and more common issues like China and Terrorism.
Despite US interests growing in India, post the ‘91 reforms, India’s nuclear program was still a major issue of contention. In 1998, when India conducted nuclear trials under the Vajpayee administration, the Bill Clinton administration imposed sanctions on India. These were later reversed by the Bush administration between 2001-2009, the Bush administration went ahead to create a nuclear cooperation agreement with India — the 123 agreement signed with Prime Minister Manmohan Singh — lobbying the US Congress, International Atomic Energy Agency, and the Nuclear Suppliers Group to allow trade in India.
The benefits of this new phase in the relationship were seen across the board, with Indian exports to the US increasing by 260% and US exports to India increasing by 470%, between 2001 and 2008 (Figure 1). India also began to allow greater Foreign Direct Investment during this period.
With the US grappling with a post 9/11 world, terrorism also became a common issue between both nations, with the United States passing the PATRIOT Act, and India passing the Prevention of Terrorism Act, within a short period of one another in 2001. India also assured full support for the United States post the attack, including offering military security.
In November of the same year, cooperation initiatives were announced between both states primarily on counter-terrorism and cyber terrorism. Dialogues were established for the transfer of technology for dual-use (for both civilian and military purposes). Both nations’ focus on security was evident in the number of Defense and Arms deals that took place, with India purchasing radar systems, aircraft self-protection systems, Sea-King helicopters, an amphibious transport dock (that has since been used in India for several rescue missions, besides its more conventional uses), and the Hercules military transport aircraft, among others. If anything, this was a sign of the United States’ growing trust and respect for India, with India’s geopolitical position, being neighbours with Pakistan, Afghanistan and China, giving it importance.
At the same time, the Atal Behari Vajpayee government held its ground on several issues. This included refusing to pledge Indian troops and weapons to fight alongside the United States in Iraq and Afghanistan. With the United Progressive Alliance replacing the National Democratic Alliance there were concerns regarding the impact on the IndoUS relationship. However, it can be argued that the most significant period of overhaul took place during the UPA-Manmohan Singh era, both in terms of the relationship with the US and India’s position in the world.
U.S. Trade in India: Balance of Trade
In 2005, President Bush and Prime Minister Singh announced the ‘India-US Joint Statement’, that improved and reformed India-US relations on economic, energy, environmental, developmental, non-proliferation, security, technology and space fronts. This Joint Statement led to the India-US Civil Nuclear Agreement -the 123 Agreement. The agreement made India the only country with a known nuclear program to conduct nuclear trade and commerce with other countries for civilian purposes.
With President Bush recognising India as a ‘responsible nuclear state’, the effort the United States made to ensure acceptance of the Agreement by various parties showed their focus on retaining India as an ally, especially to keep India and Iran distant. In this period, the United States continued the Clinton administration’s policy to engage with India and Pakistan independently.
But, the 26/11 terror attack in India and several other terrorist attacks that were caused by Pakistani nationals, led to India demanding that the United States act on and denounce Pakistani actions. Apart from the Nuclear Program, there was also the Energy Security Dialogue in 2005, the New Framework for the US-India defence Relationship, and the sale of Heavy Transport aircrafts, heavylift helicopters and anti-tank combat helicopters. India has been an important market for the United States when it comes to the sale of arms and military equipment.
Major developments in US-India defence trade
In 2009, the Obama administration came into power in the United States. With Obama clearing the export of more military equipment, the United States became one of India’s top three military suppliers. In the same year, India and the US also launched the US-India Partnership to Advance Clean Energy (PACE) on November 24, 2009, enhancing cooperation on Energy Efficiency, Clean Energy and Climate Change. Within the Obama administration, there was consensus about the importance of India.
The Chairman of the Joint Chiefs of Staff of the United States, Mike Mullen, stated that “India has emerged as an increasingly important strategic partner” and the US Undersecretary of State Joseph Burns stated “Never has there been a moment where India and America mattered more to each other”.
In the year 2010, four working groups were organised in the areas of Non-Communicable Diseases, Infectious Diseases, Strengthening Health Systems and Services, and Maternal and Child Care.
President Obama also visited India and addressed a joint session of the Indian Parliament, during which he backed India’s bid for a permanent seat on the United Nations Security Council.
Total US arms FMS clearances
However,the leaking of CIA documents by Edward Snowden that revealed that US intelligence agencies had been authorized to spy on the then Gujarat Chief Minister and current Prime Minister, Narendra Modi, showed that there were ups and downs in the India-US relationship. This was not the only incident. In 2013, India demanded that the United States respond to revelations that the Indian Embassy in Washington had been targeted for spying. Similarly, in 2014, U.S. diplomats were summoned by the Indian Ministry of External Affairs to address the allegations that the US National Security Agency was spying on Indian individuals and political entities.
However, these controversies mark small ripples in otherwise smooth sailings for India and the United States. The two nations continued to collaborate and deepen their partnership in the education, energy, and defence sectors. The first commercial deal was signed during Prime Minister Singh’s visit to the US to meet President Obama in September 2013. By 2017, the US exported USD25.7 billion worth of goods to India and imported USD48.6 billion worth of Indian goods which included IT services, precious stones, and textiles, among others. Apart from this, the -IndiaUS foreign direct investment (FDI) is small, but it grew during the Obama Era. This was in part due to the FDI reforms that allowed India to improve its business environment, which included raising foreign equity caps for insurance and defence. The US had concerns about existing investment barriers, only heightened by new limitations on how platforms like Amazon could conduct business. For the US, adding to the FDI barriers issues, was India’s weak regulatory transparency along with India’s localization policies. While two-way US-India FDI led to both increased employment in the US and exports in various sectors, US FDI still raised concerns of offshoring.
US-India- Foreign Direct Investment
As India welcomed a new government, with the election of Prime Minister Narendra Modi in 2014, the tide turned. In 2015, Prime Minister Modi said US investment in India had doubled and promised to reduce bureaucratic red tape and improve the ease of doing business in the country.
When US President Barack Obama visited for India’s Republic Day in 2015, he pledged USD4 billion in investments and loans to further establish the strategic partnership between the two countries. USD1 billion was pledged to finance exports of ‘Made in America’ products to India. The U.S. Overseas Private Investment Corporation lent USD1 billion to small- and medium-sized enterprises in rural India. Prime Minister Narendra Modi received the additional USD2 billion towards realising the potential of renewable energy.
President Obama and PM Modi have previously deliberated on issues of energy and climate change. After a meeting between Modi and Obama on the sidelines of the UN general assembly meeting in 2015, India announced its own goal for investments in the sector of carbon emission reduction. Modi was one of Obama’s leading partners at the Paris Agreement meet in December 2015.
In January 2017, Peter Lavoy, the Senior Director for South Asian Affairs at the U.S. National Security Council declared that the partnership between India and the United States under Barack Obama’s administration had been “incredibly successful”.
“I can tell you quite definitively that due to our partnerships, several terrorism plots were foiled. Indian lives and American lives were saved because of this partnership”, he added.
Under Modi’s governance, foreign policy acquired the traits of greater risk-taking and willingness to ‘agree to disagree’ with partners, which went on to serve the IndiaUS relationship well as President Donald Trump was elected in 2017. PM Modi first visited the US in 2017 to meet with Trump, and then again in 2019 when they reaffirmed Indian-American ties, with an emphasis on increased military cooperation with the initiation of the Tiger Triumph exercises. President Trump’s consequent visit to India in 2020 was an important reaffirmation of the India-US strategic partnership.
Increased closed ties between India and the US can be attributed to trade and foreign investment, convergence on issues of global security, the US’ backing of India in the United Nations Security Council.
Better representation on investment and trade platforms such as the World Bank, India’s inclusion in multilateral export control groups, and the use of technology-sharing arrangements to invest in joint manufacturing were also beneficial areas where the US and India showed each other support.
With India’s concerns over China’s growing presence in South Asia and the Indian Ocean increasing, and the US seeking to counter China’s growing global influence, India and the US have reached a level of strategic convergence on the need to counter China’s role in the Indo-Pacific region. A groundbreaking decision made under the Trump administration was to make India a major defence partner. This was also followed by the decision to sell to India topgrade military advanced predator drones.
While China issues have been a point of convergence for the two nations, India’s historic decision to procure four S-400 Triumf surface-to-air missile defence systems from Russia proved to be contentious as it ignores Trump’s Countering America’s Adversaries Through Sanctions Act or CAATSA. Thus, the United States threatened India with sanctions over India’s decision to buy the S-400 missile defence system from Russia.
Despite attempts at diplomatic workarounds, India could be subject to US sanctions for this decision.
Despite differences in the trade relationship, progress has been made towards the completion of ‘phase one’ of an India-US trade agreement. The US is India’s largest trading partner, with bilateral trade in goods and services totalling USD142 billion in 2018.
On 3 August, 2018, India was granted the status of Strategic Trade Authorisation-1 (STA-1) by the US. This was an historic move, which allowed the export of high-end technology products from the US to India for both civil and defense purposes.
The supply of US nuclear reactors to India has been a topic of debate between the two countries for over a decade. One main roadblock has been India’s noncompliance of liability laws with international standards, which require that accident costs be borne by the operator, and not the maker of a nuclear power station.
In March 2019, after years of contention around the issue, the two countries signed an agreement to strengthen security and civil nuclear cooperation, which included building six US nuclear power plants in India.
2019 and 2020 have been important years for both nations. With elections taking place, the risk of the Covid-19 pandemic, and the subsequent economic slowdown, there has been no better time for relations between the two nations to foster and improve.
The United States sees a unique partner in India for the South Asia region.
For India, as it witnesses border skirmishes in the area it shares with both China and Pakistan, having the support of the United States is important as the world and the global economy enter the most challenging part of the 21st century yet.
Shiv Sehgal is the Director of Polstrat, a political consultancy
Inputs by Shreya Maskara, Sitara Srinivas, Devashree Somani
