, a decision taken by the previous US administration but not lifted by Obama until after Modi’s election.
Yet there is perhaps no Indian prime minister who connects with the American dream in terms of life-forging experience or national aspiration more than Modi. His rise from lower caste origins, the son of a tea-stall vendor, to the top job may be the stuff of Indian soap opera, but it also could have come straight from Hollywood. His success in winning such a huge mandate from a wide cross section of the Indian electorate, whatever baggage he carried from the Hindu nationalist right, is a heart-warming story of the triumph of a social underdog over the political establishment — a story that resonates well in America.
As curtain-raisers to this week’s events in New York and Washington, US Secretary of State John Kerry and US Secretary of Defence Chuck Hagel visited Delhi last month, proclaiming India as an ‘indispensable partner for the 21st century’ and the visit as a ‘transformative moment’ in the relationship.
Yet there is much still to be sorted in India’s relationship with the United States. Ostensibly, Modi’s ambitions to boost the Indian economy could be a powerful kick-start to improving Indo–US ties. But despite the aspirations of its new leadership, India’s commitment to economic openness is coming from way behind and the Obama administration, like most of the international policy community, remains deeply disaffected by India’s protectionist economic policies which continue to make it difficult for US companies to invest and do business more widely in India. The goal of US$500 billion bilateral trade a year, declared on the Kerry visit, will remain a pipedream unless India changes policy direction more sharply than Modi has been able in his first 100 days.
As C Uday Bhaskar puts it, ‘The US may not be able to make any large fiscal commitment to Modi, as Japan’s Prime Minister Shinzo Abe and to an extent China’s President Xi Jinping have been able to during their recent meetings with Modi. However, given the size of the US economy and the complementarities with India, the Obama–Modi meeting may yield fruit on the issues of trade and technology transfers. Indian red-tape and complex bureaucratic procedures do not make India an attractive business destination and it remains to be seen how Modi will be able to convince his interlocutors, both US corporate and political leaders, that India is now moving from “red tape to red carpet”, as Modi put it in Tokyo’.
There have been modest moves to lift investment restrictions — the decisions to raise the limit on foreign direct investment to 49 per cent in the insurance sector and to open up the defence sector to foreign investment have been welcomed by American investors — and there is great potential through increasing investment in infrastructure, growing the manufacturing industry, modernising the military and attracting more foreign investment. But it has been, perhaps understandably, a slow start. Progress towards the bilateral investment treaty which the United States wants will not be easy nor will it be easy to resolve issues over liability laws relating to nuclear trade.
The Modi government’s torpedoing the WTO Trade Facilitation Agreement has seriously damaged international confidence in its ‘Made in India’ strategy. Reneging on its commitment to implement the WTO’s Bali deal on trade facilitation is seen by some in India as a tough assertion of domestic over foreign priorities but in the international policy and business communities it’s universally seen as a betrayal of the promise of a more coherent national development strategy. In American diplomatic language, it was a ‘confusing signal’; feelings underneath the diplomatic language are close to unprintable.
Also commenting on Modi’s visit, Sourabh Gupta urges India to re-join the global consensus on multilateral trade. ‘When Prime Minister Modi greets President Obama (tomorrow)’, Gupta writes, ‘he should convey that India will withdraw its hold on the trade facilitation agreement protocol with immediate effect….(and) that New Delhi will embrace a good faith effort to finding a permanent solution to the public food provisioning impasse on the Bali timeline — while reserving the option to inject pressure points on the multilateral trade system if the inverted, and unjust, features of the Uruguay Round Agreement on Agriculture are not revised’.
The Obama administration is also trying to mobilise Indian participation in the Asian security arrangements as a counterweight to China. This is likely to be difficult for two reasons: it will be difficult to reconcile with Modi’s pluralist diplomacy; and US objectives themselves remain unclear. Modi has made it clear that China, Japan and Russia are important partners for India and has sought to deepen bilateral relations with them. The structure of India’s growing if awkward relations with China were on full display when Xi Jinping paid an unusually early visit to Delhi last month. Modi is looking to chart his own partnership with Beijing based on a thriving economic partnership and is unlikely to take an overtly anti-China stance. In his former role as chief minister for Gujarat, Modi achieved a significant level of Chinese investment in his state and the Xi visit promises to up that across the country. The United States wishes to re-establish its ‘influence’ in Asia but for what purposes, apart from muscling up to China, is not entirely clear.
There is much in Modi’s vision of an India that can look out and compete in the world in which the United States can rejoice. A subtle conception of US diplomatic interests would also sensibly include India’s finding its way with China as well as the other major economic powers in Asia in that. And his US visit and the G20 summit in Australia next month are important opportunities for Modi to articulate a coherent and comprehensive development vision and a policy framework that outlines his policy priorities and the measures that he will take to boost international confidence in the future of the Indian economy.
Peter Drysdale is Editor of the East Asia Forum.