India-US Relations: Bilateral Ties, Trade, Defense, and Future Prospects

India-US Relations #

To prepare for INTERNATIONAL RELATIONS for any competitive exam, aspirants have to know BILATERAL RELATIONS WITH DEVELOPED COUNTRIES. Here we will study about India-US Relations. It gives an idea of all the important topics for the IAS Exam and the Governance syllabus (GS-II.). India-US Relations terms are important from Governance perspectives in the UPSC exam. IAS aspirants should thoroughly understand their meaning and application, as questions can be asked from this static portion of the IAS Syllabus in both the UPSC Prelims and the UPSC Mains exams. Even these topics are also highly linked with current affairs. Almost every question asked from them is related to current events. So, apart from standard textbooks, you should rely on newspapers and news analyses as well for these sections.

India-US Relations Overview #

• India-US relations have developed into a “global strategic partnership“, based on shared democratic values and increasing convergence of interests on bilateral, regional and global issues.
• Historically, the US. made an ambivalent approach to the growth of India’s power.
  • On the one hand, it valued Indian stability and promoted those aspects that served its larger interests. That explains the US’s generosity when it came to development programs at a time when our political relations were not at their best. When there were serious challenges such as in 1962, American policy makers were actually anxious about our future.
  • But on the other hand, they worked overtime to neutralize our regional dominance and strove particularly hard to ensure some parity with Pakistan.
• The emphasis placed by the new Government in India on development and good governance has created new opportunity to reinvigorate bilateral ties and enhance India-US Relations under the new motto “Chalein Saath Saath: Forward Together We Go”, which was adopted following Prime Minister Narendra Modi’s first summit with President Barack Obama on 30 September 2014 in Washington DC.
• Regular exchange of high level political visits has provided sustained momentum to bilateral cooperation, while the wide-ranging and ever-expanding dialogue architecture has established a long term framework for India-US relations.
• Today, the India-US relations is broad-based and multi-sectoral, covering trade and investment, defence and security, education, science and technology, cyber security, high-technology, civil nuclear energy, space technology and applications, clean energy, environment, agriculture and health.

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Political India-US Relations

• India-US relations are enhanced and frequency of high-level visits and exchanges has gone up significantly of late.
• The recent visit of PM Modi and outgoing US President Donald Trump in the events of “Howdy Modi” and “Namaste Trump” respectively highlighted India’s soft power diplomacy all over the world.
• The outcomes generated by these visits have been instrumental in further strengthening and developing the multifaceted India-US Relations.

India-US Relations: High-Level Dialogue Mechanisms #

• India-US 2+2 Ministerial Dialogue
  • India-US 2+2 Ministerial Dialogue is led by the heads of foreign and defence ministries of India and the US.
  • Three rounds of this Dialogue have been held so far (in September 2018, December 2019 and October 2020).
• India-US Commercial Dialogue
  • The India-US Commercial Dialogue is led by the Minister of Commerce and Industry (CIM) and the US Secretary of Commerce.
  • This was last held in Delhi in February 2019.
• India-US Economic and Financial Partnership
  • The India-US Economic and Financial Partnership is led by the Finance Minister (FM) and the US Secretary of the Treasury.
  • This was last held in Delhi in November 2019.
• India-US Trade Policy Forum
  • The India-US Trade Policy Forum is led by CIM and the US Trade Representative (USTR).
  • This was last held in Washington, D.C. in October 2017
• India-US Strategic Energy Partnership
  • The India-US Strategic Energy Partnership is led by the Minister of Petroleum and Natural Gas 2 and the US Secretary of Energy.
  • This was last held in Delhi in April 2018.
• India-US Homeland Security Dialogue (HSD)
  • The India-US Homeland Security Dialogue is led by the Minister of Home Affairs and the Secretary, US Department of Homeland Security.
  • This was last held in Washington, D.C. in May 2013.

Economic Dimensions of India-US Relations #

• The US is one of the countries, with which India enjoys a trade surplus. Although the trade surplus is reducing with time, it is still at $23.3 billion.
• From 1999 to 2018, trade in goods and services between the two countries surged from $16 billion to $142 billion. In 2019, overall US-India bilateral trade in goods and services reached $149 billion.
• In 2018, the Indian manufacturing trade in the US reached US$50.1 billion for the first time, surging by approximately US$6 billion over the 2017 figures.
• The US has become India’s second-largest arms supplier. India–US defence trade. From nearly zero in 2008, it has increased to over US$15 billion in 2018 enhancing India-US Relations.
• India is poised to order a record 2,300 new planes, possibly from US manufacturers such as Boeing, over the next 20 years.
• India’s import of US crude rose threefold in early 2019.

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India-US Relations: Defence and Security #

• India-US Relations in Defence has emerged as a major pillar of India-US strategic partnership with intensification in defence trade, joint exercises, personnel exchanges, and cooperation in maritime security and counter-piracy.
• India conducts more bilateral exercises with the US than with any other country.
• Some important bilateral exercises enhancing India-US Relations are: Yudh Abhyas, Vajra Prahar, Tarkash, Tiger Triumph, and Cope India.
• Aggregate worth of defence-related acquisitions from the US is more than US$ 15 billion.
• The India-US Defence Technology and Trade Initiative (DTTI) is aimed at promoting co-development and coproduction efforts and enhancing India-US Relations.
• The US has tried to clear all roadblocks in the way of India for making any defence related purchase e.g. India is “the first non-treaty partner to be offered an MTCR Category-1 Unmanned Aerial System” from US.
• Before the present BECA deal (being negotiated), Logistics Exchange Memorandum of Agreement (LEMOA) and Communications Compatibility and Security Agreement (COMCASA) were signed between India and US. This completes a troika of “foundational pacts” for deep military cooperation between the two countries.
• India and the United States cooperate closely at multilateral organizations, including the United Nations, G-20, Association of Southeast Asian Nations (ASEAN) Regional Forum, International Monetary Fund, World Bank, and World Trade Organization.
• In 2019, the United States joined India’s Coalition for Disaster Resilient Infrastructure to expand cooperation on sustainable infrastructure in the Indo-Pacific region.
• The US Senate and House of Representatives have passed an amendment in the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2020 to strengthen and enhance its major defence partnership with India. This will ensure that the US State Department treats India as a non-member NATO ally for the purposes of the Arms Export Control Act.

The Quad

• The informal strategic Quadrilateral Security Dialogue (QSD) that was initiated by Japan’s Prime Minister Shinzo Abe in 2007 was largely in response to China’s growing power and influence.
• Initially, the “Quad” members included India, Japan, the US, and Australia.
• In the Trump years, India signed all the ‘foundational’ agreements with America.
• India also bought billions of dollars’ worth of military hardware from them.
• India resisted converting the Quad into a primarily military or strategic grouping, and is in fact aimed solely at containing China.
• Though Quad is an anti-China coalition, how far it can be successful in containing the Dragon remains to be seen.
• India’s External Affairs Minister has stated, India will not join any military alliance.
• However, given the fact that all the other three, and perhaps five or six in future, are already in strategic alliance with one another and with the US, it is highly likely that India too will be forced to agree to some form of military alliance at a future date.
• But no external power would want to get involved on India’s side in case of major hostilities with China.
• On the other hand, if there is a major skirmish or worse in the South China Sea, the other members of the Quad will expect us to join them in fighting China, in an area far removed from our shores.

India-US Relations: Energy and Climate Change

• The India-US Energy Dialogue was launched in May 2005 to promote trade and investment in the energy sector, and held its last meeting in September 2015 in Washington DC.
• There are six working groups in oil & gas, coal, power and energy efficiency, new technologies & renewable energy, civil nuclear cooperation and sustainable development under the Energy Dialogue.
• Investment by Indian companies like Reliance, Essar and GAIL in the US natural gas market is ushering in a new era of India-US energy partnership.
• An India-US Natural Gas Task Force was also created in 2018. India has started importing crude and LNG from the US from 2017 and 2018 respectively.
• Previously, India has walked with the US from the Stockholm Convention to Paris Agreement, Rio Summit, Kyoto Protocol and Copenhagen Summit.
• The fine balance struck by India and the US culminated in the Agenda 21, raising hopes for a renaissance in the areas of both environment and development.
• US and other developed countries began to default on their commitments and began demanding mandatory cuts from China, India and Brazil during the Berlin negotiations (1995).
• The bilateral civil nuclear cooperation agreement was signed in October 2008. India and the US have a Civil Nuclear Energy Working group on R&D activities which has met ten times and has ongoing projects under R&D collaboration which are reviewed by the Working Group.
• A US company, Westinghouse is in discussions with Nuclear Power Corporation of India Limited (NPCIL) for implementation of a project that envisages six AP 1000 reactors at Kovvada (A.P.). Once implemented, the project would be among the largest of its kind.
• US India launched Strategic Energy Partnership, in 2018, to enhance energy security, bolster strategic alignment etc. Nuclear Power Corporation of India Limited (NPCIL) and Westinghouse Electric Company are looking to finalize the techno-commercial offer for the construction of six nuclear reactors. Also, India has started importing crude and LNG from the US in recent years, with total imports estimated at $6.7 billion — having grown from zero.

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• US left the Paris Agreement
  • The US formally left the Paris Climate Agreement on 4th Nov 2020, three years after President Donald Trump announced his intention to undo what had been seen as a key achievement of his predecessor Barack Obama.
  • During his 2016 presidential campaign, Donald Trump had described the Paris Agreement as “unfair” to US interests, and had promised to pull out of the agreement if elected.
  • So in June 2017, months after his inauguration, Trump announced his government’s decision to quit the accord
  • The US could not immediately exit the Paris Agreement, however, as United Nations rules permitted a country to apply for leaving three years after the accord came into force, i.e. November 4, 2019.
  • The US formally applied to leave on that day, and the departure automatically came into effect on November 4, 2020, at the end of a mandatory year-long waiting period.
  • The elected Democratic President Joe Biden has long maintained an election promise that the US would re-join the Paris Agreement.
  • Joe Biden, who will replace Trump as US President from 2021, has proposed a $2 trillion spending plan that includes promoting clean energy and climate-friendly infrastructure.

India-US Relations in Science & Tech/ Space Cooperation

• The multi-faceted cooperation between India and the US in the field of Science and Technology has been growing steadily under the framework of the India-US Science and Technology Cooperation Agreement signed in October 2005, which was renewed for a period of ten years in September 2019.
• The Indo-US Science & Technology Forum (IUSSTF) which was established by India and the US as an autonomous, bi-national organization in the year 2000 to promote cooperation in Science, Technology and Innovation is playing an important role in strengthening cooperation in this field.
• Both countries also have a long history of cooperation in the civil space arena that includes cooperation in earth observation, satellite navigation, and space science and exploration.
• The India-US Joint Working Group on Civil Space Cooperation regularly reviews the status of cooperation and identifies new areas for furthering space cooperation.
• ISRO and NASA are also working towards intensifying cooperation in Mars exploration, helio-physics, and human spaceflight through relevant working groups between both sides.
• During COVID-19, Indo-US Virtual Networks for COVID-19 were established to provide a platform to enable Indian and American scientists from academia to carry out joint research activities.

India-US Relations and Cooperation on Education

• India and the US have very strong linkages and collaboration in the field of higher education.
• The US is one of the most favoured destinations by Indian students for higher education.
• More than 200,000 Indian students are currently pursuing various courses in the US 

US Reclassification and Its Impact on India’s Trade Status in India-US Relations

• The US has recently removed India from its list of developing countries.
• Under the WTO rules, any country can “self-designate” itself as a developing country.
• But, United States Trade Representative (USTR) employed methodology that excludes countries which have per capita GNI above $12,375 as per World Bank data, or are members of the Organisation for Economic Cooperation and Development (OECD), G20, classified as “high income” by the World Bank or account for more than 0.5% of global merchandise trade.
• India (along with other countries like Brazil, Indonesia, South Africa) was removed from the list of developing countries.
• The US will now consider India as a developed country for the purpose of deciding on trade related practices and duty concessions.

H-1B and H-4 Visas and effect on India-US Relations

• USA has ramped up H-1B denials under the executive order “Buy American and Hire American” and also H-4 visas have been issued at a much lower rate.
• The lottery-based H-1B visas allow US companies to employ foreign workers temporarily in specialised occupations for three years, extendable to six years.
• The issuances are capped at 85,000 a year, but some employers such as universities and research nonprofits are exempt.
• Out of the total H-1B applications in 2018, 74% came from India. Hence, Indian applicants are most affected by the increase in visa denials.
• Spouses of H-1B workers are granted an H-4 visa, through which some have been allowed to apply to work in the US.
• Diaspora and people to people ties affecting India-US Relations
• The Indian diaspora in the US is around 4.5 million which is around 1% of its population. Indian diaspora has become an important soft power in USA, that during presidential elections of USA Indian diaspora finds mention in every political debate.

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India-US Relations: Impact of Biden’s Presidency on India

Economic Impact

Trade

• There are several ways in which the US economy, its health and the policy choices of its government affect India.
• For one, the US is one of those rare big countries with which India enjoys a trade surplus. In other words, we export more goods to the US than what we import from it.
• The trade surplus has widened from $5.2 billion in 2001-02 to $17.3 billion in 2019-20.
• Under a Biden administration, India’s trade with the US could recover from the dip since 2017-18.
• FDI and FPI
  • The US is the fifth-biggest source for Foreign Direct Investment (FDI) into India. Of the total $476 billion FDI that has come in since April 2000, the US accounted for $30.4 billion roughly, 6.5 per cent directly.
  • Only Mauritius, Singapore, Netherlands, and Japan have invested more FDI since 2000.
  • Apart from FDI the US also accounts for one-third of all Foreign Portfolio Investments (investment in financial assets) into India.
• Ending protectionism
  • A Biden presidency may also see a renewed push towards a rules-based trading system across the world.
  • Instead of outright ad-hocism as was the case under Trump — as well as a move away from the protectionist approach that has been getting strong across the world.
• Visa & People to People Relations
  • For instance, how a US President looks at the H1-B visa issue, affects the prospects of Indian youth far more than the youth of any other country.
  • Under Trump, who severely curtailed the visa regime, thanks to his policy of “America First”, India had suffered the most.
  • That could change under Biden, who is unlikely to view immigrants and workers from India with Trump-like suspicion.
• Technology
  • Other points of contention between India and the US are the tricky issue of data localisation or capping prices of medicines and medical devices.
  • These have a better chance of getting towards a resolution as we move away from the radical approach of President Trump to the pragmatism of a Biden presidency.
• Diplomacy
  • Further, under the Trump administration, the US sanctions on Iran severely limited India’s sourcing of cheap crude oil.
  • For an economy such as India, which needs a regular supply of cheap oil to grow fast, a normalization of the US-Iran relationship (and lifting of sanctions) would be more than useful.
  • On China, too, while the US apprehensions are unlikely to be fewer. It is more likely that a Biden administration will help India against China, instead of clubbing the two together.
• Climate Action
  • Biden has promised to re-join the Paris Climate Accord, and this may help countries such as India in dealing with the massive challenges both technical and financial on this front.
• Approach towards China
  • If Mr. Biden adopts a more conciliatory approach towards China, India may find itself in a difficult situation.
  • We do not want China to be permanently hostile to us; it will absorb huge resources, human and material.
  • The strong rhetoric employed in relation to China will need to be tempered.
  • Public opinion which has been worked up against China may make it difficult to do so immediately but the government is efficient in managing and moulding public opinion.
• Approach toward Iran
  • It may be difficult for Mr. Biden to quickly reverse Mr. Trump’s adventurist policy towards Iran.
  • It may not be possible for him, given the domestic compulsions, to readopt JCPOA in its original form.
  • But he will surely, if slowly, engage Tehran in talks and negotiations through Oman or some other intermediary,to reduce tensions in the region.
  • India may be able to buy Iranian oil, and sell our pharma and other goods to that country.
  • The government may also feel less constrained in investing openly in oil and other infra projects in Iran, including the rail project in which Indian Railways Construction Ltd has been interested.

Areas of Contention affecting India-US Relations

• India is a high tariff country – the USA wants these to be reduced and wants India to have a more predictable regime. Although the USA and India’s trade grew by 10 % per annum for the past 2 years it has much more potential.
• Movement of skilled persons – Current US President has always made immigration as an election theme. This rhetoric could sharpen in the election year.
• The Civil Nuclear cooperation deal was signed in 2008. However, because of the nuclear liability law in India and Westinghouse’s bankruptcy, it has not taken off.
• USA and Pakistan relation – theUSA has nuanced its position on Pakistan in the last few months.USA- Pakistan and Taliban deal will be some of the criteria for India to test the USA. Also, Pakistan has consistently lobbied with the USA to mediate between India and Pakistan on the J & K issue. However, India has consistently maintained that India sees no scope or role for third-party involvement on Kashmir.
• ‘America First’ Outlook– It magnifies the susceptibility of the bilateral dynamic to transactional. It has created inconsistencies between ‘Make in India’ and ‘America First’ push to indigenisation.
• Data localization requirements of India and the new e-commerce regulations that have become concerns for the US side.
• USA extraterritorial sanctions – In Trump’s presidency US has imposed several extraterritorial sanctions (CAATSA) targeting Russia and Iran which would have direct ramifications for India.

India-US Relations: Way Forward

• India has to change the nature of its economic and commercial ties with China.
• The areas where the bilateral partnership has the potential of evolving most positively for India relate to health, education and science and technology.
• There should not be any reluctance in developing ties in defence industries, too, but it cannot be forgotten that no country will part with any of its critical technologies.
• But there cannot be a substitute for developing indigenous capacity for India’s needs for weapon systems.
• Despite the historic nuclear deal (2008), civilian nuclear cooperation has not taken off, but the agreement with Westinghouse to build six nuclear reactors will finally bring US nuclear energy on Indian soil.
• In order to counter China in the maritime domain, India needs to fully engage with the US and other partners in the Indo-Pacific region, in order to preserve the freedom of navigation and the rules-based order.
• In international politics, there are no permanent friends and no permanent enemies, only permanent interests in such a scenario India must continue to pursue its foreign policy of strategic hedging.

USA’s New Security strategy (NSS):

• Indo-Pacific region: The document explicitly includes India in its definition of the Indo-Pacific, which stretches “from the west coast of India to the western shores of the United States”.
• Combating China and Russia: They have been termed as “revisionist” powers determined to reshape the world according to their own ideals.
• Budding India Alliance: It promotes a deeper partnership with India and asks Pakistan to crack down on” transnational terrorists” operating from its soil.
• Tilt to Bilateralism: It favors bilateral trade deals over multi-country deals considering the countries are in fierce competition with each other.
• It asks U.N. and international financial institutions to be accommodative of US’s interests rather than being detrimental to it.

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Importance for India:

• It recognizes India as a “leading global power” and “stronger strategic and defense partner” and seeks to increase quadrilateral cooperation with Japan, Australia, and India.
• This assessment is an upgrade from “regional provider of security” in 2015 and one of “21st century centres of influence” in 2010.
• It further supports sovereignty of South Asian countries indirectly referring to Belt and Road Initiative that India has kept a distance from.