US waits for economic reforms by new partner India

In the nearly seven months since Obama pressed for stronger economic ties during a visit to India, US firms have struck out in the bidding for an $11 billion jet fighter contract that the president had lobbied for. — File Photo

WASHINGTON: President Barack Obama calls US relations with India a defining partnership of the 21st century. But despite India’s approval this week of a major defense deal, the US still has a hard time doing business with the world’s second most populous nation.
In the nearly seven months since Obama pressed for stronger economic ties during a visit to India, US firms have struck out in the bidding for an $11 billion jet fighter contract that the president had lobbied for.
India has been slow to ease barriers to trade and investment that Washington seeks. It has barred imports of technology for a multibillion-dollar Indian government-backed program to boost production of solar energy. The only notable move toward market opening was in reducing tariffs on sun-dried raisins, cranberry products and pistachios.

India’s Cabinet on Monday approved a $4 billion purchase of military transport planes from Boeing, said an Indian defense official who could not be identified because he was not authorized to discuss the subject. It is India’s largest defense contract yet with a US company, but even that approval was seen as overdue: Obama had announced the deal in his November visit.
”India can’t give a full embrace to the United States,” said Sanjay Puri, chairman of the US-India Political Action Committee, which lobbies in Congress on behalf of Indian-Americans. ”India is pursuing a policy based on the region it is in, who its neighbors are and what its economic interests are, and that will not always converge with US policy.”
As the United States struggles to bounce back from the global economic crisis, Obama has promoted trade, particularly with the booming economies of Asia, as a way to create jobs at home. The United States also wants to expand American diplomatic and security ties across the continent, and sees India, the world’s largest democracy, as a natural partner.
India and the US have come a long way since the Cold War, when nonaligned India tilted toward the Soviet Union and the United States often favored India’s neighbor Pakistan.
India and the United States now share common interests such as combating militants and managing China’s rise as a world power. People-to-people ties are strong, and two-way trade has grown to $46 billion from $25.6 billion five years ago.
A 2008 civilian nuclear deal introduced by President George W. Bush allowed India access to technology from international suppliers it had been denied since it conducted its first nuclear explosion in 1974.
Winning Indian confidence further, Obama has declared support for its ambition to sit as a permanent member on the UN Security Council.
Yet the diplomatic capital invested has been slow to yield dividends.
US suppliers have been unable to capitalize on the nuclear deal, as an Indian liability law virtually excludes firms that cannot count on their home governments to insure them in case of a nuclear accident. And reforms that would improve US access to other sectors of the Indian economy, including agriculture and retail, remain politically unpalatable in India because of the impact they could have on the poor.
While ties have strengthened, the two nations still have differences on crucial international issues, such as opposing stances in negotiations on trade and climate change and on sanctions against Iran. India also eyed US military aid to Pakistan with suspicion, believing arms intended for the fight against Taliban and al Qaeda have been diverted to strengthen Pakistani forces on the Indian border.
India’s failure to select US firms Boeing and Lockheed Martin for the purchase of 126 fighter jets _ a decision unceremoniously conveyed in a letter to the US defense attache in New Delhi _ was a sobering reminder of the limits of US diplomacy. The US said it was puzzled and disappointed, describing it as a missed opportunity to deepen defense ties and share advanced technology.
Ashley Tellis, an India expert at the Carnegie Endowment for International Peace think tank, said as India’s military narrowed down applicants for the contract, it opted for European planes because they had a more advanced design. Factors such as cost-effectiveness and reliability on which the US contenders would have fared better would be assessed only at the next stage of the bidding. To have given America the deal for strategic reasons would have left Prime Minister Manmohan Singh’s government, already hit by corruption scandals, open to accusations of rigging the bidding, he said.
”People drew the conclusion that because the US exerted so much energy in consummating the civilian nuclear agreement, it opened up the path to getting the fighter deal,” said Tellis. ”The process did not allow for that kind of quid pro quo.”
India still holds promise for US defense companies.
The deal for 10 Boeing Co. C-17 transport planes brings to more than $8.5 billion the defense contracts sealed by American firms in India.