Insights and Analysis

U.S-India Relations in 2012

January 18, 2012

By Karl F. Inderfurth

The Economist, in its recent issue “The World in 2012,” gave this thumbnail prediction for India in the New Year: “The Congress-led government is leaking support because of widespread corruption and a patchy economic record… Nevertheless, the government of Prime Minister Manmohan Singh will hold on until the end of its term in 2014 – not least because the opposition Bharatiya Janata Party is equally tarnished. Strong internal growth and foreign demand for India’s services will propel the economy, though the rate of expansion will slow.”

A comparable prediction for the United States in the New Year would be similar, starting with the Obama administration’s own “patchy economic record” and likelihood of slow growth in 2012. Added to this would be the near certainty of continuing, highly partisan battles in Congress and the uncertainties (and risks) associated with a steady stream of foreign policy “flashpoints” from the ongoing military engagement in Afghanistan, to Iran and Iraq, to the Middle East and North Africa.

Moreover, today both capitals suffer from policy gridlock. No significant law has been passed by India’s parliament since the Singh government’s reelection two years ago. None has been passed during the current session of the U.S. Congress, nor are any expected this year. Finally, both countries are moving into political campaign mode, with the run-up to the November U.S. presidential election now in full swing and India engaged in what amounts to a “mini” general election year with a series of big state elections, including Uttar Pradesh, Punjab, and Gujarat.

So what does this portend for U.S.-India ties in the New Year? More to the point, where might there be opportunities in 2012 to advance U.S.-India ties, even as both capitals remain inwardly focused and subject to increasingly dysfunctional politics? Offered below are three New Year’s resolutions and five New Year’s recommendations for consideration in both countries – by those in and out of government – who want to see the bilateral relationship proceed on an upward trajectory in 2012.

Three New Year’s Resolutions

  1. Deepen existing initiatives. With the attention of policymakers in both Washington and New Delhi trained elsewhere, the principal focus in 2012 should be on consolidating and implementing existing initiatives and deepening the relationship for the long term. As Deputy Secretary of State William Burns said recently in Mumbai, this kind of “sustained, steady work at the relationship” can be “equally important” to the dramatic breakthroughs we have seen in recent years. The two countries have some 21 formal dialogues or working groups established, covering every aspect of possible cooperation. In the months ahead, “consolidation” and “implementation” should be the watchwords.
  2. Don’t mistake “not now” for “never.” High hopes were raised, then dashed, by the Singh government’s decision to temporarily shelve plans to open the $450- billion domestic multi-brand retail market to foreign companies. But arguments about protecting small shopkeepers and businesses from the giants like Wal-Mart have also been fought in the United States and are being resolved. Over time, that pattern may also prove to be the case in India, not only with respect to the retail market but also the liability issues that are still preventing U.S. companies from fully engaging India’s civilian nuclear power market. One encouraging sign: India will allow 100 percent foreign direct investment (FDI) in single-brand retail that will pave the way for some foreign companies to set up shop in India. This development may eventually pave the way for multi-brand retail.

Download a PDF of the full article, originally published in the Center for Strategic and International Studies’ “U.S.-India Insight” January newsletter.

Asia Foundation trustee Karl F. Inderfurth is the former assistant secretary of state for South Asian affairs and a senior advisor and Wadhwani Chair in U.S.-India Policy Studies at CSIS. The views and opinions expressed here are those of the individual author and not those of The Asia Foundation.


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