Washington, DC – During the first year of the Modi government, we have seen both our economic and our strategic relationship with India placed firmly back on a positive trajectory. But in many ways, the year focused on “setting the table” for cooperation. For example, two of the most important agreements, the renewed (but not yet released) “Defense Framework Agreement” and the “Joint Strategic Vision for the Asia Pacific and Indian Ocean Region,” expand the scope for what we can do together though have relatively few specific follow-on actions. In the coming year, leaders from both nations will focus on ways to breathe life into the principles outlined in year one.
Here are some specific target goals for May 2016 that will stand as markers for the continued deepening of our economic and strategic partnership:
DTTI Projects: Operationalize at least one of the four Defense Technology and Trade Initiative (DTTI) projects identified in January 2015.
Civil Nuclear Trade: Finalize the insurance product to indemnify nuclear suppliers; whether it will be deemed sufficient by suppliers is another story.
US LNG: Deliver the first US liquefied natural gas (LNG) shipment to India, opening a new source of trade that should help offset the United States’ two-to-one imbalance in goods trade.
BIT Talks: Restart bilateral investment treaty (BIT) talks and hold multiple rounds of negotiations.
FDI Caps: India may choose to liberalize foreign direct investment (FDI) norms in areas such as business-to-consumer e-commerce, brick and mortar retail, and even further increase the FDI cap in defense.
Defense Trade: Clinch new defense deals with India. We have yet to see the Modi government announce a major defense deal with the United States since coming to office.
Defense Offsets: Fulfilling offset obligations in a market with a relatively weak defense industry has been problematic. Later this year, we expect another revision of India’s Defense Procurement Policy (DPP). Additional flexibility in discharging offsets could unlock more trade in this critical sector.
US-India-Japan Trilateral Upgrade: Hold the first minister-level trilateral summit between the United States, India, and Japan, as hinted in the January 2015 Joint Statement issued during President Obama’s visit to India. We must also remain cognizant of possible flash points in the relationship and work to insulate the relationship from possible shocks.
BRICS Summit in July: Russia will host this year’s BRICS Summit on July 8–9. Despite the fact India’s new leaders are trying to make a strong break from nonalignment, the BRICS institutions continue to lurch toward becoming reality. This was evident with the recent announcement that one of India’s top private bankers will take over the BRICS New Development Bank. Any steps taken to deepen India’s partnership with a group led by China and Russia will raise concerns in the United States.
USITC Report on India’s Trade Barriers: In late September, the US International Trade Commission (USITC) is meant to update a previous report looking at changes to India’s trade and investment barriers in the first year of the Modi government. This next version may generate more reproach from Delhi as it will contain criticisms of policies of the current government.
WTO Ministerial in December: This December, the World Trade Organization (WTO) will hold its next ministerial meeting in Nairobi, Kenya. While the agenda is not yet set, our differing approaches to multilateral trade could derail some aspects of our bilateral cooperation.
Totalization Talks: In the January 2015 Joint Statement we agreed to hold talks on a Social Security Totalization Agreement. Yet due to negotiating constraints, such an agreement may not be possible. A continued impasse could cause consternation in Delhi.
This summer will see some important bilateral summits, most notably Defense Secretary Ashton Carter’s first visit to India in his new role, as well as the revamped “Strategic and Economic Dialogue” in the United States. These meetings present powerful opportunities to flesh out the details for how our two countries can cooperate more effectively in the coming years. This is the goal for policymakers in both countries in year two—turning a common strategic vision into reality.
Richard Rossow
Richard Rossow is a senior fellow and holds the Wadhwani Chair in US-India Policy Studies at CSIS.