JOIN USIndia and the US represent a lucrative business opportunity for each other, and the private sector is going to take the lead in escalating business ties.
On the eve of US President Barack Obama’s visit to India on its 66th Republic Day, everyone was sceptical whether the visit would be merely symbolic or have some substance as well. In fact, just a day ahead of Obama’s visit, we wrote on these pages about the hope that Indo-US relations tread a positive path, while cautioning against the difficult terrains of India’s intellectual property rights (IPR) regime, climate change, nuclear liability law and trade and investment disputes, wherein a breakthrough is difficult to come by right away.
Now that the visit is over, it is apparent that it was a success: The Indo-US strategic dialogue seems to be on track and relations at an all-time high.Obama’s speech at Siri fort on the day of his departure has left the Indian audience longing for more.
While no path-breaking announcement has been made on prickly issues, some headway was made on civil nuclear energy, although we will have to wait and watch for seamless nuclear trade/investment.
All we know is that ‘the deal is done’. And as the fine print of more important giveaways on the financial liability and compensation fronts or on legal mechanisms in case of mishaps is not yet in the public domain, any analysis is dubious.
Indian liability law puts a high financial onus on suppliers of reactors vis-à-vis accidents, thus deterring US firms from investing in India’s nuclear energy market.
For now, the Indian side has allayed some fears of US suppliers by conceding some ground; there seems to be some agreement on some form of public insurance for American suppliers. We do know however – and this is a score on the Indian side – that Obama has promised to do away with the intrusive ‘tracking’ clause, which entailed physical overseeing in India of nuclear material provided by the US.
On climate change, there is agreement to cooperate on India’s quest for sustainable development. The rhetoric was high on green energy and the need for all countries to pitch in the global battle against the effects of climate change. Modi said that Obama and he were looking forward to the Paris Climate Change talks, where genuine efforts would be made to reconcile differences while stressing India’s sovereignty.
In a speech, Obama hinted that India’s contributions were on a par with that of developed countries, and seemed to play down the developing country stand of ‘unfairness’ on account of historical pollution trends. It seems that the US will put immense pressure on India to ensure that the Paris Climate Change talks are successful, but it will be difficult for India,as it is a growing economy with substantial developmental needs.
Modi left the IPR question unaddressed, although he promised an ‘open’ business environment and said that India would consider the recommendations of the Indo-US joint working group. But it will be surprising if the two sides see eye to eye on this issue anytime soon, considering the implications of diluting India’s Patent Act on the promise of affordable healthcare in the country, and that the US pharmaceutical lobby is pushing hard for ‘strong’ IPR protection in India.
As a large generic medicine supplier to poor people across the developing world, India must think hard before handing concessions. For India, the positive outcome during this visit includes the pledge from the US for finance worth $4 billion to buttress India’s infrastructure—railways, ports, roads, clean energy power plants and smart cities. Obama spoke of technological cooperation in these sectors. This bodes well for ‘Make in India’, as it will transfer skills and technology to the local economy.
Defence Framework Agreement
What stands out is the renewed Defence Framework Agreement for the next ten years, which entails co-production and development, including technology transfer. It is upto the defence firms to make good of this deal. The two sides also agreed to renegotiate the Bilateral Investments Treaty, which is a good sign, although it will open up contentious issues of its own. Ultimately, though, India and the US represent a lucrative business opportunity for each other and, as such, the private sector is going to take the lead in escalating business ties.
Both sides have begun to tackle the drift in relations between the two countries and India’s policy paralysis, and have shown commitment so far. While the environment seems more conducive than before, painstaking and time-consuming inter-governmental negotiations will of course be needed for policy action on several issues. These include trade barriers and market access issues (particularly, but not exclusively, in the agricultural sector), ideological differences over climate change mitigation, different growth and development challenges that lead to conflicting views on issues like IPR and patents in the pharmaceutical sector.
The same predicament affects issues relating to H1B visa for Indian professionals. Evidently, both sides have a domestic audience to look after, and even please, and as a result political factors will be given due consideration as the relationship moves forward.
Overall, the personal chemistry visible during Modi’s visit to the US in September has improved, and Modi and Obama have given the Indo-US relationship a big boost.
A hotline has also been agreed to among the two leaders. Given geopolitical tensions, India and US need to be together more than ever before. In fact, both the US and Japan rely on India to counter-balance China’s growing dominance and expansionary attitude in the Asia-Pacific. However, a win-win arrangement will only be hard-fought.
(Sahoo is Associate Professor, Institute of Economic Growth, New Delhi; Bhunia is a policy analyst)