As PM plans to meet Obama, declining Indo-US ties need desperate upgrade

As Prime Minister Manmohan Singh prepares to travel to the US to meet with President Barack Obama in September, India has its work cut out to reassure the US administration that it is ready with a plan of action to restore the currently battered relationship to its earlier high.
 
In Washington these days, both in government as well as among lawmakers on Capitol Hill, the mood is polite but tough. ‘What has India done for us since we helped India with the civil nuclear agreement’ is a commonly heard sentence in the corridors of power, and the truth is that Delhi has been both far too distracted or simply incapable of addressing the depth of misperception that currently abounds there.
 

 
In conversations with a variety of sources in the US, including strategic analysts, government officials, businesspeople and political observers, the overwhelming impression is that the India-US relationship is in considerable trouble.
 

The warmth of the relationship since those heady days in 2008 when Ambassador Ronen Sen in Washington persuaded both the Congress party as well as the government in Delhi to go ahead and put its stamp of approval on the Indo-US nuclear deal is significantly missing.
 
The difference between 2008 and 2013, or the journey travelled by Manmohan Singh between his first and second tenures, is the story of a relationship in which both sides have "dropped the ball" at various times and in so doing have contributed to a sense of ennui and worse, disaffection, between the world’s oldest and largest democracies.

 
So even as Delhi insists that it has done "everything it could" to reiterate the importance of India’s most important relationship — including buying US defence equipment worth $9 billion — the over-riding impression is that corporate America, as well as the Obama administration, is unhappy over the lack of market access for American goods and Delhi’s failure to move on the civil nuclear liability rules that will allow US companies to enter the Indian market.
 
So, if Singh wants to reinvent his legacy issues by the time he meets Obama in September, considering it will be likely his last time as prime minister, he must persuade the Department of Atomic Energy (DAE) to move on the rules that will allow private US companies to enter the civil nuclear energy market.

 
Nuclear Power Corp of India (NPCIL) and Westinghouse signed a pact to negotiate an early works agreement to construct a civil nuclear power plant in Gujarat a year ago, but nothing significant has happened since. The US now wants a commercial agreement between Westinghouse and NPCIL that will allow preliminary work to be carried out in areas of licensing and site development.
 
"At the very least, the Indian prime minister must come to the US armed with NPCIL clearances that will allow Westinghouse to go ahead with work in Gujarat as well as open the door for other US companies like General Electric. We want US companies to have the same level playing field as those from Russia and France have," said a US official on the condition of anonymity.

 
A second and much deeper thorn in the flesh is India’s unwillingness to open the market to US goods.
 
The Indian argument remains that it has spent much political capital in opening up multi-brand retail to majority foreign stakes, but had to ultimately compromise and allow states to do what they wanted to.
 
India also continues to dismiss the US argument on prioritising intellectual property rights, research and development and labour best practices in the drug industry by refusing to accept the "evergreening" of patents. Indian officials have said the move towards generics is in the interests of the larger community.

 
But US corporates continue to hark at both restrictive trade practices, as well as the primacy of intellectual property, which they say lie at the heart of the principles of free trade. It was these concerns and lack of market access that drove several US corporates to create a business coalition that put pressure on lawmakers to write to Obama and secretary of state John Kerry to press India to open up its markets.
 
Corporate America is also said to be seriously unhappy about retrospective tax moves by the Indian finance ministry, including the implementation of General Anti-Avoidance Rules, which it believes India is invoking to defray its own budget. "It is on the back of US companies that the Indian government wants to write its budget," one US businessman bitterly told this reporter.

 
There is also some talk in Washington that the US should take India to the World Trade Organization (WTO) for violating free trade rules, and the conversation during the India-US CEOs Forum in Washington DC on July 12, to be led by top corporates like Ratan Tata and Sunil Bharti Mittal, should at least somewhat clear the air.
 
Finance Minister P Chidambaram, Commerce Minister Anand Sharma and Montek Singh Alhulwalia, deputy chairman of the planning commission, will meet their US counterparts a day earlier at a meeting of the US-India Business Council (USIBC). They will also have separate meetings with the US trade representative Michael Froman and treasury secretary Jack Lew, both Obama confidantes. Lew is also the co-chair of the US-China strategic and economic dialogue.

 
USIBC president Ron Somers has been quoted by PTI as saying: "We are looking forward to productive meetings that bring together both governments and US and Indian business leaders to discuss proactive ways to eliminate investment barriers and deepen commercial ties."
 
According to Somers, both sides are expected to identify barriers and restrictive practices that have held back bilateral trade from going beyond the $100-billion mark. Both sides have noted that India-China trade is now touching $66 billion.
 
Several analysts in Washington believe some of these misperceptions can be addressed by a renewed and constant dialogue between India and the US, even if differences will remain. Some say India has simply let things slide since the high point of the Indo-US nuclear deal in Singh’s first term, and even taken the relationship for granted.

 
For example, these analysts point out that instead of writing a letter back to US lawmakers, in which she defended the Indian positions and offered to meet them, India’s ambassador to the US, Nirupama Rao, as well as officials in Delhi, should have simply met their various US counterparts and sought to reassure them.
 
But the fact also remains that the ministry of external affairs (MEA) refused to clear the name of a deputy chief of mission to the US for several months, despite considerable pleading by ambassador Rao, as a result of which there was simply no one to lobby with influential lawmakers on Capitol Hill.

 
Taranjit Sandhu, the diplomat in question who has since been cleared, is being posted in the US for the fourth time — the original source of distress in the MEA — and is soon expected to take up his job. The US is seen as a coveted posting by India’s diplomats and vying for jobs in the US is a favourite pastime.
 
Clearly, Prime Minister Singh has his work out in reinvigorating the India-US relationship with Obama when he meets him in late September, alongside the speech that he delivers at the UN General Assembly. But if he wants to leave a lasting impact on bilateral ties, he could also start with putting the MEA in order at home.