This Article is From Sep 24, 2014

What to Expect Beyond the Bling From Modi's US Visit

(Ashok Malik is a columnist and writer living in Delhi)

Beyond the bling and symbolism, the visit to the White House and the address to a sizable gathering of Americans desis, the tribute at the 9/11 memorial and the hyper-busy schedule, what are the substantive outcomes one can expect from Prime Minister Narendra Modi's trip to the United States?

It is here that the story gets cautiously optimistic rather than euphoric. This is not Modi's fault. He inherits a relationship with the US that has been more fraught in the past 12-18 months than at any point in the past 20 years. There are several reasons for this. How many he - and President Barack Obama - can repair and how many the Modi government's immediate priorities will allow him to address are open to question.

There are five points to consider. First, this is primarily a G2B visit - an engagement of the (Indian) government with (American) business. Modi's meetings with corporate CEOs are in a sense more important than his meetings with administration officials. He needs to get the investment cycle going in India. For this he has to reassure American business that India is once more an inviting destination, that there will be no taxation and policy surprises, and that he is genuine about making India a more predictable and efficient investment destination.

True, Modi will arrive in America with a reputation burnished by his achievements in Gujarat. Nevertheless the movement of international capital towards India is not inevitable. His CEO audience will be waiting to hear from Modi, and will watch for, for example, what he says about the intellectual property regime (IPR) in India. In the past few years, IPR problems faced by American companies, largely pharmaceutical companies, have given India a troubling image in Washington, DC.

It is not that India doesn't have a case, but much of this requires conversation. The UPA government refused to talk to the American pharmaceutical industry. The Modi government has already made reassuring moves, and the prime minister will no doubt add to these.

Second, in recent years American investors as well as government officials have expressed concerns about the lack of traction in India's higher education reforms, and in a stultifying nuclear liability law that makes it impossible to undertake nuclear commerce with India. The UPA government promised a lot on this but delivered little. Can Modi make a difference?

In the short run, no. Modi's near-term priority is skilling rather than classic higher education. That is where the jobs and the answers to India's young work-force lie. On higher education, one expects he will pick up the gauntlet later in his term.

On the nuclear liability law, Modi is unlikely to spend his precious political capital seeking to amend it so quickly into his prime ministry. This will be a domestic political minefield. In any case, his focus is on getting coal and gas to spanking new power plants deprived of fuel, and to exploiting India's solar and wind energy potential. There is room for US technology and companies in all of these areas - but nuclear commerce may just be kicked further down the road.

Third, paradoxically Modi can't ignore the nuclear issue altogether. A logical corollary to the India-US nuclear deal is the entry of India into four strategic technology regimes: the Nuclear Suppliers Group, the Missile Technology Control Regime, the Australia Group, and the Wassenaar Arrangement. These regimes cover dual-use technologies and are particularly important for Modi if he wants to make India a serious manufacturing power. They give India access to high technology that can have both military and civilian implications.

Obama is committed to helping India enter this quartet of strategic regimes, but will seek some reassurance on the nuclear liability law, even if informally. Washington's buy-in on a more liberal technology-sharing arrangement with New Delhi is extremely relevant to Modi's plans to develop a military manufacturing industry in India and his emphasis on defence co-production. He would like to showcase this as one of the gains of his visit. News of co-production deals between, for instance, Bell Helicopter and the Bhartia Group would only help.

Fourth, ever since the global financial crisis of 2008, the international trade order has gone into a tailspin. Countries have turned restrictive and their commitment to open trade has faltered. As such, changes in US immigration laws could hurt India's IT industry and IT workers in America. On the other hand, the US is worried about the Modi government's refusal to ratify the World Trade Organisation's Trade Facilitation Agreement (TFA) till it gets an agreement on agricultural subsidies that is to its satisfaction.

It stands to reason Modi and Obama will discuss this, and the Indian prime minister will explain the justifiable fears he has. India has suggested a compromise formula on agricultural subsidies - including replacing the food price reference year of 1986 with the average price for the three most immediate years. Should this go through, a deal on TFA and agriculture is possible by this winter. A lot could depend on the Modi-Obama chemistry.

Finally, there is the political environment in Asia. Coming out of two bruising wars, American doesn't have the stomach for grand strategy and India doesn't have the economy. Even so, the ramifications of the US withdrawal from Afghanistan, the mess in Pakistan and the precedent of what a removal of international troops has done to Iraq are weighing on everybody's mind. That apart, the Chinese incursions in Ladakh and expanding footprint in the Indian Ocean have sent Modi an alarming message.

What this means is Modi and Obama - a prime minister about to end his honeymoon period and a president about to enter his lame-duck phase - will have to seek sharper strategic congruence even if they are not instinctually ready for it. Circumstances have limited their options.

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