India and the United states will hold their fifth strategic dialogue and the first one since the installation of the new Narendra Modi government in India. The first substantive diplomatic engagement between New Delhi and Washington under the new dispensation in Delhi July 31 will be watched closely not just in the two countries, but also in key capitals of the world. The course of this critical partnership could impact the global agenda on an array of cross-cutting issues ranging from terrorism, maritime piracy and cyber warfare to climate change, clean energy and sustainable development.
In this wide-ranging conversation with Manish Chand, Editor-in-Chief, India Writes Network (www.indiawrites.org), Lalit Mansingh, a former ambassador of India to the US and a former foreign secretary, speaks about the importance of the India-US strategic dialogue, the cluster of bilateral, regional and global issues on the agenda and the visit of Prime Minister Narendra Modi to Washington in September.
(Excerpts from the interview)
Q) This is going to be the first strategic dialogue under the new government in Delhi. What will be the issues on the table, and what is the way ahead?
A) Fortunately, the agenda will be completely new from what it was a year ago. Last year the Americans came up with a long list of grievances, much of which will be met by the policies of this new government and by the announcements in the budget. There will be a happy atmosphere in the meeting and a sense of renewal after nearly two years of worsening ties between the India and the United States.
A) Let’s look at the areas where relations have turned virtually negative over the last two years. First, in the area of economic cooperation and trade. India’s economic performance has dipped considerably in the last two years. American investors were getting frustrated about getting approvals for investment proposals. There were also frustrations that India’s reforms agenda was not moving forward because of the reluctance of the government to take positive decisions. American industry was unhappy with a series of decisions taken by the government, starting with the budget two years ago. They were upset about retrospective taxation, on IPR issues — specially those which affected the pharmaceutical sector — and a series of rules requiring local procurement for joint ventures, which foreign investors, and particularly Americans, found very difficult for compliance. These have been eased in the new budget and announcements of the new government. For instance, foreign investors were asking for a raise in equity cap in sectors like insurance and pension funds, and the government did make an announcement that the cap in insurance would be raised to 49 per cent from 26 per cent. This is big news. Also, the big news is the raising of the cap in FDI investment in the defence sector to 49 per cent. There is going to be a huge opening for American defence companies wanting to set up joint ventures here. The local procurement rules have been held in abeyance. With regard to taxation, the government has announced that retrospective taxation will not be the policy. A number of obstacles have been removed, and we are starting on a clean slate.
All the same, there are still some problems. The foremost issue is the question of nuclear liability law; the Americans want an assurance that their companies will not be subjected to open-ended insurance liability if something goes wrong; this needs to be negotiated. The government must take a fresh look at nuclear liability either in terms of amending the law or in reinterpreting the law.
India also has grievances. India was upset that Americans were considering placing it in the ‘301 category’, which would have caused sanctions to be imposed on India. Thankfully, the Americans have held this in abeyance. Therefore, in the trade and economic cooperation area, we are going to have a more constructive discussion without the irritation of major problems.
An important issue for India is that America should allow the export of shale gas to India. If shale starts to come in from the US, it would offer great relief, especially with the turmoil in the Middle East affecting both oil supplies and oil prices.
Q) India and the US have set out a very ambitious target of scaling up bilateral trade to $500 billion. Do you think that’s a realistic target?
A) I not only think it is realistic, I think it is underplayed. We have reached a level of 100 billion USD in terms of bilateral trade. According to an IMF projection, by 2030, India and the US will both have similarly-sized economies at 30 trillion dollars GDP. 100 billion dollars can not only go up to 500 billion, but it can easily be scaled up to 1 trillion dollars by 2030. So why be less ambitious! I think we should have a target of $1 trillion bilateral trade by 2030.
Q) This strategic dialogue takes place at a time when the region is quite unstable. The Middle East is on fire; closer home, Afghanistan is going through a major transition period. What kind of global and regional issues will the two sides be discussing at the forthcoming strategic dialogue?
A) From India’s point of view, the region around us is causing us a lot of anxiety. First of all, there is a triple transition in Afghanistan: political, security and economic. There is also anxiety about the state of affairs in Pakistan. A major offensive military operation is underway against terrorists in North Waziristan; we don’t know what effect this will have in Afghanistan. Fortunately, the dialogue process has started between India and Pakistan. The strategic talks between India and the US will take into account the resumption of this dialogue. Much more will have taken place when Mr. Modi goes to Washington.
Further, the political turmoil in Israel, Syria, and Iraq is causing anxiety because this is an area of strategic importance to India. India gets its oil supply from these countries, millions of its workers are working there and their safety is a major concern. If the Israel-Palestine issue gets out of control, the whole of the Middle East is going to burn. The Americans have a major role of playing peacemaker, and we expect the Americans to reassure us that our region will be more peaceful and not more turbulent.
You look to the east of India; we have problems with the rise of China and its aggressive claims on Indian territory, incursions across the Line of Actual Control, its cross-military and nuclear cooperation with Pakistan. China is a common factor for both India and the US. There should be a free exchange on the issue of American re-pivot or balance in Asia. Equally, the Americans should understand what India’s position is going to be with regard to the Indo-Pacific area and security.
The BJP manifesto has said that India should get its rightful place in the comity of nations; we have aspirations to join the UN Security Council, and we need the Americans to back their support with concrete action. India also wants to join APEC and eventually the Trans-Pacific Partnership where we need American support. There are four nuclear organisations that India is interested in joining and we need American support for that. So overall, we need the support and partnership of the US to fulfill India’s aspirations as a global power.
Q) India and the US have over two dozen dialogue mechanisms. What makes this strategic dialogue at the level of foreign ministers unique?
A) This dialogue is an excellent idea. We have so many fronts for cooperation with the US; so it is not surprising that some 24 or 27 dialogues at the cabinet minister level have been opened. Unfortunately, in the last five years the decision-making in India could not support these dialogues in moving forward. It is now time to energise these important dialogues in a wide variety of fields, move them forward and make the strategic partnership actually meaningful.
Q) For the second time in a row, New Delhi will be hosting the strategic dialogue rather than Washington. Does it signal Obama’s desire to deepen ties with the new Indian government?
A) The holding of the meeting is a protocol issue. Both India and the US are pragmatic, they want to get the business done. It is the convenience of timing and place. It does not matter if it is India’s turn or America’s, as long as it is agreed upon by both countries. One advantage of meeting in Delhi is that Mr. Kerry will get to interact with the new leadership and get a better feel of the state of affairs. He will be able to reach out to the think tank and business communities and report it to President Obama; so that they are better prepared for the big summit meeting coming up in September.
Q) How different will the upcoming meeting between Modi and Obama in September be, in comparison to the Manmohan Singh-Obama meeting last year?
A) There will be a reversal of roles from the last time to this time. Last time, President Obama was settling into his second term, while Prime Minister Manmohan Singh was virtually lame-duck. This time India has the confidence that it has a leader with a decisive majority in parliament and who will last five years, if not more. This time around, President Obama appears rather lame-duck given his political problems. It’s a different atmosphere with Mr. Modi’s reputation as a man who means business, intends to boost the rates of growth in India, and procure for India its rightful place in the comity of nations. America faces a confident and forward looking prime minister from India. I think it will lead to a good discussion. There are certain areas that require clarity from the American side, and Modi will be able to ask those questions and get answers.
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