India in US scheme: Market, not ally
by Virendra Parekh on 19 Nov 2010 2 Comments
Words of praise and assurances for India; guns and dollars for Pakistan. That has been the time-tested policy followed by successive American presidents, including Barack Obama. India is a huge market for American goods, services and capital. Pakistan is a strategic ally always willing to prostitute its location and resources, including Army, to do America’s bidding if the price is right. America has been trying hard to cast India in that role, but with limited success. Hence the tilt. This may sound cynical, but it helps understand the nature of US policy in the sub-continent.


High-flown rhetoric and media hype apart, the recent visit of US president Barack Obama does not depart much from the old framework. On the economic front, Americans clinched deals which will fetch them billions of dollars and thousands of jobs. On the political front, Mr. Obama welcomed India’s “emergence as a major regional and global power” and asserted that US relations with India would be one of the “defining partnerships of the 21st century”, besides giving vague assurances regarding a permanent seat on the UN Security Council, Pakistan-exported terror, etc. India was duly praised for being a vibrant democracy, land of Gandhi’s birth, etc.; Pakistan was promised additional military aid of $2 billion on the eve of the visit. 


On the whole, Obama has reason to feel satisfied with his India visit. He came here with an explicitly stated purpose: to open Indian markets for American goods and services to create jobs in the US. The importance of the mission had been underlined by the severe drubbing Obama’s Democratic Party received in US Congressional elections just days before his departure. We now have it from the horse’s mouth: “We believe that the visit has achieved everything that we’d hoped for,” US State Department spokesman P J Crowley said.


The US is keen to sell India defence equipment and its lobbies are working overtime on this. India has indicated “preliminary agreement” to purchase 10 C-17 Globemaster heavylift cargo planes for the Air Force. As Obama said, these planes will enhance Indian capabilities and support 22,000 jobs back in the US. This deal is part of the $5 billion worth of defence equipment India is set to acquire, including C-17 transport aircraft, 150 ultra-light howitzers and Harpoon missiles. Besides, US companies have sealed deals worth $10 billion that would create 50,000 jobs back in the US.


Talking of jobs, Obama showed surprising understanding of Indian sensitivities. True, he made it a point not to visit Bangalore. Just recently, his administration raised taxes for US companies indulging in outsourcing and jacked up sharply H-1B visa fees, hitting Indian companies hard.


But while here, he said an outsourcing-centric view of the Indian economy is a “caricature”, that outsourcing itself is a “bogey” he has not raised. He did not join issue with Indian Prime Minister Dr. Manmohan Singh when the latter said “India was not in the business of stealing American jobs”. Nor did he succeed in getting any indication from India of relaxing restrictions on foreign direct investment in sectors like retail trade, aviation or insurance.


What explains the turnaround? One answer is: hard economic facts. In the last seven years, American exports of goods and services have grown from $7 billion to $27 billion. Further, the trade relationship is broadly balanced. And that’s not all. Indian companies are now the second-fastest-growing investors in the United States and now support about 57,000 jobs there. In contrast, China has a massive trade surplus with the US and keeps its currency artificially low. These facts, known earlier, seem to have sunk in now.


Very significant from India’s point of view is the US decision to change the membership rules of multilateral export control regimes, as also to relax controls on export of dual-use technologies and remove Indian organisations from the Entities List. As a result, Indian organisations like ISRO and DRDO will no longer need to have a licence for import of some hi-tech items. These decisions mean a lot to India. The availability of advanced dual use technologies gives an edge to India over China, both in security-related and civilian sectors.


The US decision ends the anomaly of America calling India a “strategic partner” on the one hand and treating it in a manner akin to Pakistan and North Korea on the other. At the same time, it will also help exports of high-technology products from the US as India is a huge market for them. It remains to be seen how this promise will be implemented since some sections of the US Administration are prone to be obstructive on such issues.


India should welcome the prospect of joining organisations like the Nuclear Suppliers Group, Missile Technology Control Regime, the Australia Group and Wassamaar Arrangement. Membership in these organisations benefits us as India will have a say in determining global export controls on sensitive dual use technologies.


Most importantly from the US standpoint, Mr. Obama has dangled the bait of a permanent seat on the UN Security Council. He knows this can keep India compliant for a long time. If you read what he actually said (“I can say today, in the years ahead, I look forward to a reformed United Nations Security Council that includes India as a permanent member”), he has not indicated when (if ever) and how (if at all) he wants to go about it. The problem with India’s permanent membership of UNSC is not lack of support from US but opposition from other claimants like Germany and Japan, and adversaries like China and Pakistan. In any case, UN reform efforts have been stalled for years.


On issues which really matter to India and where US can make a real difference, Mr. Obama has not advanced an inch from the old position. Kashmir issue is for India and Pakistan to settle he said, but made an offer to mediate (which India rebuffed through silence). So why keep referring to it? He said terrorist “safe havens” within Pakistani borders are “unacceptable” and asked Islamabad to bring terrorists behind the Mumbai attacks to justice. Will Pakistan pay heed? Is America in a position to force it?


India matters to the US in the long run. India’s democratic traditions, talent and industry of its people and its vibrant economy make it an indispensable partner for any superpower.


But right now, Pakistan has a stranglehold on an America desperately looking for a face saver in Afghanistan. For all its perfidy, Pakistan provides the only route for US arms, materials and personnel into Afghanistan. Pakistan alone can broker a deal between Afghan Taliban which can enable US to declare victory and withdraw from Afghanistan. Right now Obama needs Pakistan much more than India.


The same goes for China. He badly needs China’s cooperation to address the massive imbalance in America’s foreign trade, especially its trade deficit with China. So it is futile to expect Obama to back India against Pakistan and China. If he is looking forward to a win-win future for all four countries, overcoming existing disputes and recriminations, let us wish him luck.


Given this background, India should be relieved Obama showed pointed indifference to the stone-pelting separatists of Kashmir valley who had been preparing for months for his visit, gave no quarter to the likes of Arundhati Roy, and did not preach human rights in dealing with Maoists. This can be attributed to quiet spadework by Indian diplomats and the relative decline of American power.  


There is another aspect which adds tension to Indo-US relations. As a rising power, India seeks greater strategic autonomy in its dealing with US and other countries e.g. Iran and Myanmar. Unlike NATO members or client states, India can not and will not toe the US line. This independence does not endear India to the US. So, while there are an increasing number of areas of mutual interest offering scope for consultation and cooperation, there will always be differences and irritants. The two countries are at best working partners, not allies. Recognition of this reality can facilitate better ties by curbing unrealistic expectations. 


The author is Executive Editor, Corporate India; he lives in Mumbai

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