India – U.S. Relations: A General Overview

The highly successful summit meeting July 18, 2005 in Washington D.C. between Prime Minister Dr. Manmohan Singh and President George W. Bush signaled the level of transformation in India-U.S. relations and the establishment of a global partnership between our two countries. The leaders of the two largest democracies in the world, committed to the values of human freedom and rule of law, believe that this new relationship will promote stability, democracy, prosperity and peace throughout the world.

Recent Developments

2. Prime Minister Singh first met President Bush on September 21, 2004 at New York on the sidelines of the United Nations General Assembly session, where he remarked that the “best” in India-U.S. relations was “yet to come”.

3. The tsunami that struck south and south-east Asia in December, 2004, while catastrophic in the victims it claimed, provided an opportunity for the Indian and U.S. navies to work closely together in search, rescue and reconstruction efforts. It underscored the interoperability of the navies of the two countries in a real life situation.

4. Meanwhile, the Next Steps in Strategic Partnership (NSSP) process, first launched in January 2004 was moving forward rapidly, bringing along in its wake greater transparency and predictability in U.S. licensing arrangements for Indian imports of sensitive items and technology, leading to a significant rise in high-tech trade between the two countries. NSSP was successfully completed during the Prime Minister’s visit.

5. The conclusion of an Open Skies Agreement between India and the United States in April 2005, inked by Civil Aviation Minister Praful Patel and Transportation Secretary Norman Mineta added further ballast to the changing relationship. Enhanced connectivity between the two countries in terms of greater flights will provide a boost to trade, tourism and business. The decision by Air India to purchase 50 Boeing aircraft in a deal valued at US $ 6 billion is an important milestone in commercial relations. The Government of India is expected to ratify the purchase soon.

6. Visits to India by Defense Secretary Rumsfeld in December 2004 and Secretary of State Rice in March 2005 gave clear indications that the United States viewed its relationship with India from a strategic perspective thereby providing a framework for greater cooperation between the two countries on a wide range of issues. External Affairs Minister Natwar Singh and Defense Minister Pranab Mukherjee visited Washington in April and June, 2005 respectively raising the level of the dialogue to a higher plane and paving the way for the successful trip by Prime Minister Singh in July. The conclusion of a New Framework for the U.S. – India Defense Relationship by Defense Secretary Rumsfeld and Defence Minister Mukherjee imparts further momentum to bilateral ties.

7. The impact of Hurricane Katrina on ordinary people in Louisiana and Mississippi evoked sympathy amongst the people of India. As a token of our support for the affected people, India contributed US $ 5 million to the American Red Cross and also sent in two plane loads of relief supplies and material.

8. Prime Minister Singh and President Bush, along with UN Secretary General Kofi Annan, launched the United Nations Democracy Fund at New York in September 2005 the two countries being the first to contribute to this initiative to the extent of US $ 10 million each.

9. India and the U.S. recently concluded a Science & Technology Agreement, after several years of negotiation, aimed at boosting cooperation between our scientists and institutions of higher learning. The Annex to the Agreement contains ways of handling IPR issues, which may arise in the course of such collaborative efforts.

10. Treasury Secretary Snow and US Trade Representative Portman were in India recently meeting with representatives of the Government of India, captains of business and commerce, and academicians and economists. They now have a better understanding of the direction of India’s economic growth, the opportunities in the infrastructure and other sectors. India and the U.S. will play constructive roles in the Hong Kong meeting in the Doha Round of global trade talks.

11. India looks forward to welcoming President Bush in India in the first quarter of 2006. That visit will impart even greater momentum to the relationship.

Defense Cooperation

12. The new Defense Framework seeks to chart a course for the India – U.S. defense relationship for the next 10 years that will support the broader global partnership that our leaders seek to create. The new parameters of the defense relationship include cooperation in defense technology, continued joint and combined exercises and exchanges, expansion of defense trade, increased opportunities for technology transfer, collaboration, co-production and R&D.

13. The primary mechanism to guide defense ties is the Defense Policy Group (DPG) led by Defence Secretary on the Indian side and the Under Secretary of Defense for Policy on the U.S. side. The DPG held its 7th meeting November 21-23, 2005 in Washington D.C. Sub-groups such as the Defence Production and Procurement Group, the Military Cooperation Group, the Joint Technology Group and the Senior Technology Security Group report to and provide inputs to the DPG.

14. The armed forces of the two countries have held a number of joint exercises aimed at enhancing interoperability of all the services. An IAF- USAF dissimilar air combat training exercise ‘Cope India 05’ was held in November 2005 at Air Force Station Kalaikunda. Joint exercises involving the navies, armies and Special Forces of the two countries have also been held in the past.

15. During Prime Minister Singh’s visit to the United States July 2005, the two countries had announced a U.S. – India Disaster Response Initiative to build on the successful experience during the tsunami operations of 2004 and to establish an ongoing effort to prepare for and conduct relief operations in the Indian Ocean region and beyond.

Economic Relations

16. India – U.S. bilateral trade grew from US $ 13.49 billion in 2001 to US $ 21.68 billion in 2004. India’s major export products include gems and jewelry, textiles, organic chemicals and engineering goods. Our main imports from the U.S. are machinery, precious stones and metals, organic chemicals, optical and medical instruments, aircraft and aviation machinery. In the first eight months of 2005 trade grew at 23.44%, with U.S. exports exhibiting strong growth of 37.43%.

17. The U.S. is one of the largest foreign direct investors in India. The stock of actual FDI increased from US $ 11.3 million in 1991 to US $ 4132.8 million as on August 2004. FDI inflows from the U.S. constitute about 11% of total actual FDI inflows into India.

18. The U.S. is the leading portfolio investor in India. As on June 30, 2004 U.S. based Foreign Institutional Investors have made a net investment of US $ 10.2 billion of a total of US $ 25.3 billion in Indian capital markets accounting for 40.5% of the total.

19. The U.S. is also the most important destination of Indian investment abroad. Between 1996 and September 2004, Indian companies invested US $ 2080.36 million in the U.S. accounting for 18.7% of total approvals. These investments were made largely in manufacturing and non-financial services.

20. The institutional framework for bilateral economic cooperation comprises a U.S. – India Economic Dialogue co-chaired on the Indian side by Deputy Chairman Planning Commission Dr. Montek Singh Ahluwalia and on the U.S. side by Dr. Allan Hubbard, Assistant to the President for Economic Policy and Director of the National Economic Council. The sub-components of this dialogue are (a) a U.S. – India Financial and Economic Forum led by India’s Finance Minister and the U.S. Treasury Secretary (b) a U.S. – India Commercial Dialogue headed by our Commerce Minister and the US Commerce Secretary (c) a U.S. – India Working Group on Trade co-chaired by our Commerce Minister and the US Trade Representative. The Economic Dialogue has two crosscutting themes in biotechnology and information technology. The IT theme has been expanded to become the Information and Communications Technology Working Group (ICT Working Group) that held its first meeting in Washington in December 2005.

21. In November 2002 a Statement of Principles on high technology commerce was issued which established the High Technology Cooperation Group (HTCG) aimed at furthering hi-tech trade including trade in dual-use goods and technologies. This group led by the Foreign Secretary of India and the US Under Secretary of Commerce convened its 4th meeting in India November 30 – December 1, 2005. Comprising of two distinct parts, government-to-government meetings as well as a public-private forum, the HTCG meeting had a session on strategic trade and break out sessions on IT, biotechnology, nanotechnology and defense technology.

22. Prime Minister Singh and President Bush established a CEO’s Forum prior to their meeting in Washington July 18, 2005. Envisaged as a brains trust of business leaders from the two countries, the CEO’s Forum is expected to come up with recommendations of how to raise the levels of economic interaction between India and the U.S.

23. In July 2005, Prime Minister Singh and President Bush established a U.S. – India Agricultural Alliance to focus on promoting teaching, research, service and commercial linkages. The initiative visualizes cooperation in academic research and partnership programs. India’s Ministry of Agriculture and the US Department of Agriculture are working out modalities of this program.

Cooperation in Energy

24. India and the U.S. launched a new Energy Dialogue in May 2005 aimed at increased trade and investment in the energy sector. The co-Chairs of this mechanism are Dr. Montek Singh Ahluwalia, Deputy Chairman, Planning Commission on the Indian side and Mr. Samuel Bodman, Energy Secretary on the U.S. side. A Steering Committee has also been formed to supervise the work of the Group headed by India’s Foreign Secretary and the US Under Secretary for Energy Efficiency.

25. Five working groups have been formed covering the areas of : (a) oil and natural gas (b) electric power (c) coal (d)energy efficiency, renewable energy and new technologies (e) civil nuclear power. The working groups have finalized their terms of reference and are now moving to achieve their goals which include, strengthening mutual energy security and promoting stable energy markets; advancing understanding of efficient generation, transmission, distribution and use of electricity; developing and deploying clean energy technologies and energy conservation practices; dialogue and action on issues associated with civilian uses of nuclear energy.

26. During Prime Minister Singh’s visit to Washington D.C. July 2005, President Bush told the Prime Minister that he will work to achieve full civil nuclear energy cooperation with India as it realizes its goals of promoting nuclear power and achieving energy security. Appreciating India’s strong commitment to preventing WMD proliferation and as a responsible state with advanced nuclear technology, President Bush felt that India should acquire the same benefits and advantages as other such states. He said he would seek agreement from Congress to adjust U.S. laws and policies, and the U.S. would work with friends and allies to adjust international regimes to enable full civil nuclear energy cooperation and trade with India. Prime Minister Singh in turn conveyed that India would reciprocally agree that it would be ready to assume the same responsibilities and practices and acquire the same benefits and advantages as other leading countries with advanced nuclear technology, such as the United States.

27. The leaders agreed to establish a working group to undertake on a phased basis the necessary actions to fulfill these commitments. The working group is co-chaired by the Foreign Secretary of India and the US Under Secretary of State for Political Affairs. The working group met in India in October 2005 and is scheduled to meet in Washington in December 2005 and perhaps again in Delhi in January 2006.

28. India has been invited to join the International Thermonuclear Experimental Reactor (ITER) project as a full partner. This decision was taken in December 2005 at the ITER negotiations meeting at Jeju, South Korea. The U.S. strongly supported India’s application. ITER is the experimental step between the latest studies in plasma physics and future electricity producing fusion power plants.

Cooperation in Science & Technology

29. The recently signed S&T Agreement between India and the United States is expected to provide a fillip to S&T cooperation and expand relations between the S&T communities of both countries. The Agreement visualized cooperation in areas such as basic sciences, space, energy, nanotechnology, health and IT. The Agreement also establishes IPR protocols and other provisions necessary to conduct active collaborative research.

30. India and the U.S. have also agreed to enhance joint activities in space cooperation including in-space navigation and in the commercial space arena. There is a U.S. – India Joint Working Group on Civil Space Cooperation that discusses joint activities. The Indian Chandrayaan – 1 mission to the moon in 2007 will launch two U.S. instruments. Work is also in progress to include an Indian astronaut in the U.S. astronaut working out program.

31. Despite the bulk of the sanctions on Indian entities and organizations having been removed over the past few years, Indian scientists working in cutting edge technologies and areas continue to find it difficult to obtain visas to the United States. India has brought this to the attention of the U.S. authorities.

People-to-people Ties

32. The 2 million strong Indian American community in the United States has been growing in affluence and political strength and has developed into a force for closer and stronger ties between their adopted country and their nation of origin. Their active cooperation and interaction at different levels with the Government of India as well as with the U.S. Administration provides a bridge between the two countries.

33. Cultural ties between the two countries are largely driven by the private sector. Indian music, dance, art and literature is widely appreciated in the United States. Indian cuisine is a favorite with many Americans and Indian films are reaching out to wider audiences here. Efforts are currently underway to spread Indian culture to a more popular level as well as ensuring that Indian artists are able to perform at mainstream theatres and halls.

34. Students from India continue to flock to the U.S. especially for higher, University level education. India is now the number one country sending students to the U.S. reaching approximately 80,000 in 2004 surpassing China for the second straight year.

The Future

35. Prospects for establishing a strong partnership between India and the United States are bright given the common values shared by the two nations of respect for individual liberty, rule of law and democracy. President Bush awaits a very warm welcome in India when he visits in the first quarter of 2006.