Indo-US ties gain strong momentum

While Indo-US relations have developed into a “global strategic partnership” post 2000 when the “Next Steps in Strategic Partnership” (NSSP) was inked, over the last five years the cooperation has attained new heights across the fields of security, energy and technology

February 5, 2019

The economic relationship has deepened and there has been a significant enhancement in people to people contact, education, science and technology, civil nuclear energy, space technology, environment, agriculture and health

Among the important outcomes have been the 2+2 meeting of the External Affairs and Defence Ministers, agreement on principles for the Indo- Pacific region and a decision to further advance the security and defence relationship

A CII survey of 2017 found that 100 Indian companies invested US$17.9 billion in the US creating 113,000 jobs in all 50 states of the US; Leading Indian names such as Reliance, TCS, Essar, Mahindra have set up operations in the US

US investments in India has been estimated at around US$33 billion across several sectors such as manufacturing, services, pharmaceuticals etc. More than 300 US companies in India have reported double digit growth owing to market expansion

Overcoming their hesitations of history, India and US have covered quite some distance in consonance over the last two decades. While Indo-US relations have developed into a “global strategic partnership” post 2000 when the “Next Steps in Strategic Partnership” (NSSP) was inked, over the last five years the cooperation has attained new heights across the fields of security, energy and technology. The economic relationship has deepened and there has been a significant enhancement in people to people contact, education, science and technology, civil nuclear energy, space technology, environment, agriculture and health. There is also a greater convergence of views on international issues such as terrorism, and on the need for a rules-based order in the Indo-Pacific.

The main driver of this change in ties has been a series of high-level visits in recent years. Prime Minister Narendra Modi and former US President Barack Obama had met in 2014 when a vision statement and a joint statement were issued. President Obama had also traveled to India in 2015 as chief guest for India’s Republic Day celebration, during the Delhi Declaration of Friendship as well as the Joint Strategic Vision for Asia Pacific and the Indian Ocean Region were adopted. PM Modi had visited the US again in 2015 on a bilateral visit, and in 2016 for a multilateral Nuclear Security Summit hosted by President Obama, and for an official working visit in June 2016. PM Modi also met US President Donald Trump in June 2017, apart from meetings with US CEOs.

Rising Defence Cooperation

Among the important outcomes of the visits have been the decision to initiate the 2+2 meeting of the External Affairs and Defence Ministers, agreement on principles for the Indo- Pacific region and a decision to further advance the security and defence relationship. PM Modi and President Trump met again in Manila in November 2017 on the margins of the ASEAN summit, as well as at the India-Japan-US trilateral meeting on the margins of the G20 Summit a few months . By the turn of last year, President Trump had signed a new Act to enhance America’s leadership in the Indo-Pacific region, which calls for broadening of diplomatic, economic and security ties between India and US. Today, there are over 50 bilateral mechanisms between the two Governments.

Trade and technology transfer in defence has been an essential pillar of these burgeoning ties. In 2012, with a view to increase the pace and quality of defence cooperation, the Defence Technology and Trade Initiative (DTTI) was launched. This includes a DTTI task force and several working groups, including those on jet engines, Aircraft carrier technology, naval systems, development/production of ISTAR aircraft, mobile electric hybrid power source (MEHPS); intelligence, surveillance and reconnaissance; chemical and biological protection; and next generation protective ensemble (NGPE). In December 2016, a bilateral understanding was reached regarding US export control policy towards India and on recognition of India as a “Major Defence Partner” of the US.

As a result, in July 2018, US moved India into tier-1 of the US Department of Commerce’s Strategic Trade Authorization license exception. This has brought India on par with NATO allies of the US in terms of consideration of eligibility for license free exports, re-exports and transfers, to receive US dual use items controlled by US Department of Commerce and significantly improves high-technology cooperation between India and the US. Previously, a 10-year defence framework agreement was renewed in June 2015. Owing to the growing ties, India has procured more than US$15 billion worth of defence items from the US since 2008. India already has several US military platforms and equipment and a slew of proposals for new acquisitions are in the pipeline.

Major defence agreements signed between the two countries over the last few years include the Logistics Exchange Memorandum of Association (LEMOA) – which established basic terms, conditions and procedures for reciprocal provision of logistic support, supplies and services between the two armed forces (August 2016); Fuel Exchange Agreement (November 2015); Technical Agreement on Information Sharing on White (merchant) Shipping (May 2016), and the Information Exchange Annexe (IEA) on Aircraft Carrier Technologies (June 2016). A proposal from the US for the joint development of India’s next generation aircraft carrier – in particular, the transfer of Electromagnetic Aircraft Launch System (EMALS) technology – has deepened strategic trust.  

During the inaugural 2+2 dialogue in New Delhi on September 2018, both sides committed to strengthen the Indo-US defence and security partnership, and to work together with like-minded partners towards a free and open Indo-Pacific region based on inclusiveness and recognition of ASEAN’s centrality. Herein, the Communications Compatibility and Security Agreement (COMCASA) was signed. A deal between the defence innovation units of the two countries –  the US Defence Innovation Unit (DIU) and the Indian Defence Innovation Organization – on innovations for defence Excellence (DIO-IDEX), has also been concluded. Bilateral military exercises now exceed those with any other country for either nation, and include Malabar, Cope-India, Yudh-Abhyas, and Vajra Prahar.

India also participates in the RIMPAC exercises and in Red Flag exercises which are US led multinational exercises. During the 2+2 dialogue, it was decided to create a new, tri-services exercise, and to start exchanges between the US Naval forces Central Command (NAVCENT) and the Indian navy, underscoring the importance of deepening maritime cooperation in the western Indian Ocean.

US investments in India has been estimated at around US$33 billion across several sectors such as Manufacturing, Services, Pharmaceuticals etc.

Strong Bilateral Trade Base

The US is India’s largest trading partner in goods and services and bilateral trade reached US$126 billion in 2017. In the first eight months of 2018, bilateral trade reported an increase of 18 per cent. In June 2016, PM Modi and President Obama had set a target of US$500 billion of trade in goods and services. Owing to improving ties, the US has emerged as one of the top five investment destinations for India. A CII survey of 2017 found that 100 Indian companies invested US$17.9 billion in the US creating 113,000 jobs in all 50 states of the US. Leading Indian names such as Reliance Industries, Tata Consultancy services, Essar Global, Piramal Group, Lupin, Sun Pharmaceutical, Wipro, Infosys, Larsen & Toubro and Mahindra & Mahindra have acquired assets and set up manufacturing in the US.

Meanwhile, US investments in India has been estimated at around US$33 billion across several sectors such as manufacturing, services, pharmaceuticals etc. More than 300 US companies in India have seen double digit growth year on year in sectors such as Information technology, beverages, agriculture, automobiles, equipment, finance and banking. US majors such as American Express, Amway, Caterpillar, CB Richard Ellis, Cisco, Coca Cola, Colgate Palmolive, Cummins, Dupont, EDS, Eli Lilly, Ford, Franklin Templeton, GE, General Motors, Gillette, Honeywell India, Intel, Johnson & Johnson, JP Morgan, Kellogg India, Kimberly Clark, Kodak, MetLife India, Microsoft, Morgan Stanley, PepsiCo, Ogilvy & Mather, Pfizer, Whirlpool, Xerox Modicorp have reported strong successes in India.

A Trade Policy Forum looks at bilateral cooperation, market access in agriculture, non-agricultural goods as well as services and intellectual property rights. A commercial dialogue, created out of the security and diplomatic dialogue, focuses on promoting joint economic growth, job creation, and prosperity. The two sides also look at standards, ease of doing business and travel and tourism. An India-US CEOs Forum is functional. A bilateral investment Initiative has been set up in 2014, with a special focus on facilitating FDI, portfolio investment, capital market development and financing of infrastructure. Meanwhile, an Indo-US Infrastructure collaboration platform deploys cutting edge US technologies to meet India’s infrastructure needs, including the ongoing “Smart City” initiative.

The United States Agency for International Development (USAID) has sought to team as a knowledge partner for the urban Indian water, sanitation and hygiene (WASH) alliance to help leverage business and civil society to facilitate access to clean water, hygiene and sanitation in 50 Indian cities. To further develop this collaboration, a strategic energy partnership, replacing the erstwhile energy dialogue was established in 2018. The four pillars of cooperation now involve oil and gas; power and energy efficiency; renewable energy and sustainable growth; and coal. There is also a strong commitment to implement the civil nuclear energy partnership. Meanwhile, a Climate Change working Group and a joint working group on hydrofluorocarbon is advancing climate change cooperation.

In November 2014, an agreement between US Exim Bank and Indian Renewable Energy Development Agency (IREDA) was concluded to provide US$1 billion in financing for India’s transition to a low-carbon economy. In June 2016, the two sides had announced finalization of a package to provide concessional finance to support clean energy projects on track, to coordinate US government efforts on clean energy investment in India jointly with leading Indian financial institutions, and to provide liquidity to small scale renewable energy investors. Meanwhile, the Indo US cyber security dialogue examines cooperation in law enforcement, training and capacity building. Additionally, the Higher education Dialogue has laid out the road map for promoting strategic institutional partnerships.

As India undertakes broader defence transformation, US companies are poised to further focus on priority military technologies and joint collaboration. An expanded bilateral maritime partnership that involves transfer of technology to build India’s capacity in the Indian Ocean region will help create a more stable and balanced security architecture, supplementing India’s Act east Policy.