Deepening the Indo-US Strategic Partnership | 07 Nov 2024

India-US Relations are entering a new phase with the recent election of the 47th US President. The bilateral relationship, which has been a cornerstone of India's foreign policy, encompasses strategic areas including defense cooperation, technology transfers, and energy partnerships. This transition in US leadership presents both opportunities and challenges for India's strategic interests, particularly in areas of defense, trade, and regional diplomacy.

What is the Significance of the United States for India?

• Economic Partnership: The US has retained its position as India's top trading partner in the January-July 2024 period with bilateral goods trade surpassing $72 billion and Indian exports growing 9.3% to $48.2 billion.
  • The economic interdependence spans sectors from IT services to pharmaceuticals, with significant potential for expansion in emerging technologies and manufacturing.
• Strategic Defense Cooperation: US-India defense partnership has evolved from a buyer-seller relationship to co-development and co-production of military hardware.
  • The cooperation extends to maritime security in the Indo-Pacific, counter-terrorism, and intelligence sharing.
  • QUAD partnership has strengthened bilateral defense ties.
  • U.S.-India defense trade has grown from near zero in 2008 to over 20 billion USD in 2020. Also, India has signed all four foundational defense agreements (LEMOA, COMCASA, BECA, ISA) with the US.
• Technology & Innovation: US remains critical for India's technological advancement, particularly in semiconductors, quantum computing, and AI.
  • The U.S.-India Global Digital Development Partnership seeks to unite U.S. and Indian private sector expertise and resources to promote responsible digital technology adoption across Asia and Africa.
    • Silicon Valley continues to be a major hub for Indian tech talent and startups.
• Energy Security: US has emerged as a significant energy partner for India, helping diversify its energy sources away from traditional suppliers.
  • According to the World LNG report 2024 by International Gas Union (IG), released earlier this month, the US supplied India 1.8 MT LNG in the pre-pandemic period (2019) and the quantity increased to 3.86 MT in 2021.
  • Cooperation in renewable energy technology is advancing India's clean energy goals.
    • The United States and India are collaborating to mobilize $1 billion in new multilateral financing through the International Bank for Reconstruction and Development (IBRD) to support projects, including the expansion of India’s domestic clean energy supply chain.
• Geopolitical Balance: US partnership helps India maintain strategic autonomy and balance China's regional influence.
  • Collaboration in Indo-Pacific strategy through QUAD provides diplomatic leverage.
    • Exercise Malabar, which began in 1992 as a bilateral naval drill between the United States and Indian Navy, has evolved into a key multilateral event
  • QUAD initiatives committed $50 billion for Indo-Pacific infrastructure development over five years.
• Healthcare & Pharmaceuticals: Covid-19 pandemic highlighted the crucial healthcare partnership between nations.
  • India's pharmaceutical industry relies heavily on US market access while the US benefits from affordable Indian generics.
    • Indian pharma companies supply 40% of US generic drug demand.
  • Initiatives like the Indo-U.S. Health Dialogue have yielded tangible results in disease surveillance, pandemic preparedness, and antimicrobial resistance.
• Space Cooperation: NASA-ISRO collaboration represents a growing dimension of bilateral ties. Joint satellite missions and space research enhance both countries' space capabilities.
  • Joint NASA-ISRO NISAR mission worth $1.5 billion scheduled for 2024. Space situational awareness agreement enables sharing of satellite data.
  • NASA's Deep Space Network (DSN) helped ISRO in communicating with Chandrayaan-3.
• Education & Human Capital: Educational exchanges create long-term bilateral bridges through knowledge transfer.
  • The Indian diaspora in the US contributes significantly to both economies. Over 200,000 Indian students in the US contribute $7.7 billion annually to the US economy.
    • Also, in 2023, the leading recipients of remittance from US was India ($125 billion)

What are the Key Issues in India-US Relations?

• Trade Tensions: Persistent trade disputes over tariffs, market access, and intellectual property rights strain bilateral economic ties.
  • India's protectionist measures and US demands for greater market access create friction.
  • Digital services tax and data localization policies remain contentious.
  • India has a trade surplus of $36.74 billion with the U.S. in 2023-24 that is a concern for the US.
  • India has regularly been listed on the 'priority watch' list in the Special 301 Report, highlighting ongoing concerns about IP protection, enforcement, and market access for American intellectual property stakeholders.
• Strategic Autonomy vs. Alliance Expectations: India's independent foreign policy, particularly regarding Russia, Palestine and Iran, creates tensions with US strategic objectives.
  • US expectations of alliance-like behavior clash with India's all-alignment approach.
  • Defense purchases from Russia remain a point of contention.
    • 65% of India's weapons purchases of more than $60 billion during the last two decades
    • Despite CAATSA threat, India proceeded with the S-400 missile system purchase from Russia in 2022.
• Data Privacy and Digital Governance: Divergent approaches to data privacy and digital governance create business uncertainties.
  • India's data localization requirements affect US tech companies' operations. Different standards for digital trade and e-commerce affect market access.
  • India's data localization rules affect operations of the majority of US tech companies in India.
• Visa and Immigration Issues: Restrictions on H-1B visas affect Indian IT sector and professionals.
  • US concerns about visa overstay and immigration fraud lead to stricter policies. Work permit delays affect business operations.
  • India's top seven IT services companies saw a 56% decline in their usage of the H-1B visa over the last 8 years.
  • Reports from U.S. Citizenship and Immigration Services (USCIS) indicate that over 1 million Indians are awaiting green cards, with some facing wait times of up to 50 years due to annual quotas and per-country limitations.
• China Factor: Different approaches to managing China's rise create strategic uncertainties.
  • The US has expressed that it is shifting its policy on China from decoupling to de-risking. US expectations of Indian role in the Indo-Pacific sometimes exceed India's capabilities and interests. Economic dependence on China affects both countries' strategic choices.
  • India-China trade reached USD 136.2 billion in 2023 despite tensions.
• Climate Change and Energy Policy: Disagreements over climate change commitments and responsibilities persist.
  • US pressure for faster transition conflicts with India's development needs. Energy security concerns affect climate policy alignment.
  • India recently called for developed countries (including US) to provide “at least” $1 trillion per year in climate finance to developing countries from 2025 for taking required actions to face the challenges of global warming.
• Agriculture and Food Security: Disputes over agricultural subsidies and market access affect trade relations. Different approaches to GM crops and food standards create barriers.
  • WTO disputes over agricultural issues strain bilateral ties
  • WTO members, including the US, have raised questions on India's $48 billion farm input subsidies for 2022-23.
  • While mustard oil is an integral part of Indian foods, it has been banned in several places like the US due to erucic acid.

What Future Prospects can India and the US Explore to Strengthen Their Partnership?

• Defense Technology Partnership 2.0: A revitalized defense partnership focusing on next-generation technologies represents a critical opportunity for both nations.
  • The establishment of joint research centers specializing in AI in Warfare, and hypersonics would create a foundation for technological sovereignty.
  • Fast-track approval mechanisms for defense technology transfers could overcome current bureaucratic hurdles, while joint production facilities in India would align with Make in India objectives.
  • This enhanced partnership could significantly reduce dependence on traditional defense suppliers while fostering indigenous capabilities.
• Strategic Supply Chain Resilience: Building resilient supply chains has become imperative in the post-pandemic world.
  • The focus should be on developing alternative supply routes for critical minerals and rare earth elements as India joins the US-led Mineral Security Network, reducing dependence on single-source countries.
  • Joint semiconductor manufacturing initiatives in India could address global chip shortages and reduce dependence on China while creating high-skilled employment.
  • Dedicated industrial parks for US companies relocating from China would facilitate investment, while standardized supply chain security protocols would ensure reliability.
• Energy Security Cooperation: The energy sector presents significant opportunities for bilateral cooperation.
  • Long-term LNG supply agreements with stable pricing mechanisms could enhance energy security for India while providing market access for US suppliers.
  • Joint renewable energy projects, particularly in solar and green hydrogen, would support climate goals.
  • Joint energy storage research and production facilities would address critical infrastructure needs, while clean energy startup funds would foster innovation.
• Digital Economy Framework: Digital cooperation represents a frontier for bilateral relations.
  • Developing common standards for data privacy and cross-border data flows would facilitate digital trade while protecting consumer interests.
  • Joint certification systems for digital security products would enhance cybersecurity.
  • A bilateral fintech regulatory sandbox could promote innovation in financial services.
• Healthcare Partnership Enhancement: Healthcare collaboration has gained new significance post-pandemic.
  • Joint vaccine development and production facilities would enhance global health security while leveraging India's pharmaceutical capabilities.
  • Telemedicine infrastructure connecting both countries could improve healthcare access in remote areas.
  • Joint research programs focusing on tropical and emerging diseases would address global health challenges.
• Climate Action Collaboration: Climate change presents an opportunity for meaningful bilateral cooperation.
  • A joint carbon trading mechanism could help both countries meet their emission reduction targets while creating economic opportunities.
  • Bilateral green technology transfer frameworks would accelerate clean technology adoption.
  • Joint climate-resilient infrastructure projects could demonstrate practical solutions.
• Educational and Research Integration: Education partnership needs evolution beyond traditional student exchange programs.
  • Joint degree programs in strategic sectors like AI, quantum computing, and biotechnology would create a specialized workforce for future industries.
  • Research centers of excellence focusing on emerging technologies under US-India initiative on Critical and Emerging Technology (iCET) could drive innovation while addressing local challenges.
• Strategic Regional Cooperation: Regional cooperation must adapt to evolving Indo-Pacific dynamics.
  • Joint infrastructure projects in strategic locations would enhance connectivity while providing alternatives to China's BRI.
  • Trilateral partnerships with countries like Japan, Australia, and France could create synergistic benefits.
  • A joint maritime security framework would ensure free navigation and trade flows.
• Cultural and Soft Power Exchange: Cultural ties need institutional frameworks. Joint media production platforms would create content reflecting shared values.
  • Programs for traditional knowledge preservation in both countries would protect cultural heritage.
  • Bilateral sports development initiatives (like the recent ICC T20 World Cup 2024 in America) would engage more youth.

Conclusion

The US-India relationship is a multi-faceted partnership with immense potential. While challenges persist, areas like defense, technology, and trade offer significant opportunities. By addressing trade disputes, fostering trust on strategic issues, and collaborating on global challenges, India and the US can elevate their partnership to new heights, benefiting both nations and contributing positively to the global order.