By Richard Rossow —
The results of India’s national election were released on May 23, and voters have given a fresh five-year mandate to the Narendra Modi-led Bharatiya Janata Party (BJP). While final results are still being tallied, it appears the BJP will win a majority of seats in the lower house of parliament, or Lok Sabha, for the second consecutive election. Relations between the United States and India have been on relatively fragile footing for months. Leadership stability in India will help, but both nations must recall the long-term underpinnings of why this relationship matters and work hard to dodge a range of immediate dangers.
U.S.-India relations have certainly improved since Mr. Modi came to office five years ago. Our two governments have moved ahead on key strategic initiatives such as:
- co-development of defense projects under the Defense Technology & Trade Initiative (DTTI);
- signing long-awaited defense agreements on logistics sharing and communications interoperability;
- welcoming Japan as a member of the annual Malabar naval exercise;
- re-starting meetings of the “Quad,” a group consisting of the United States, India, Japan, and Australia; and
- negotiating a “workaround” to potentially unlock civilian nuclear cooperation.
Our economic relationship is currently at an important crossroad. Relations between Delhi and Washington. have soured due to a range of policy measures in each nation that have attempted to slow imports from the other. And despite an aggressive approach to court foreign investment early in his tenure, in recent months, the Modi government has shown fresh skittishness on foreign investment, notably in e-commerce. However, in real terms, the U.S.-India economic relationship is booming. Annual goods trade just crossed $90 billion for the first time, with U.S. exports to India growing faster than imports. And investment flows continue to move in both directions, bringing employment and building new bridges.
There are immediate dangers on the horizon that could unravel our strengthened relations. Our trade dispute appears on the verge of escalating. The United States has announced its intention to revoke India’s trade benefits under the Generalized System of Preferences (GSP) program. India is considering the implementation of tariffs on a range of U.S. goods to retaliate for the U.S. tariff increases on steel and aluminum. The Trump administration has repeatedly threatened to impose new visa restrictions that could harm Indian technology workers—and their spouses—seeking to work in the United States.
Perhaps most significantly, the United States is pressing India to draw down its energy relationship with Iran and defense relationship with Russia. The threat of U.S. unilateral sanctions looms overhead, which, apart from the direct material impact of the sanctions, would breathe new life into India’s old concern about the “reliability” of the United States as a strategic trade partner.
At the ground level, most of the grievances that triggered these tensions are all quite real. Russia is a destabilizing force, invading European nations, disrupting elections, and publicly murdering dissidents in other nations. The U.S. trade fight with the world has not been particularly well-targeted. India’s new trade barriers will, in the medium and longer term, harm U.S. exports.
However, leaders on both sides must keep in mind that these are short-term bumps that must be avoided, even if they incur some level of political cost. The critical ties that bind us go well beyond the rhetoric of “largest and oldest democracies.”
- The United States is the nation’s most important export market, both for goods and services.
- The United States is a critical source of vital foreign direct investment.
- The United States is a crucial development partner to India.
- And the United States is a growing supplier of essential military technology.
To the United States:
- India is our fastest-growing major export destination.
- India is an emerging source of inbound foreign investment.
- India will become the world’s most populous nation in the next five years, and the world’s third-largest economy (in real terms) in a generation.
- India is one of the world’s largest energy importers—at a time that the United States is expanding energy exports.
- And India is an emerging bulwark of regional stability, in the face of an increasingly aggressive China, as evidenced with the Indian Army’s successful defense of Bhutan’s border from China in fall 2017.
It is imperative that our two governments convene quickly to assess these roadblocks on the horizon and work hard and effectively to ensure the relationship succeeds. While some senior ministers are likely to switch portfolios, the Modi government’s reelection provides critical stability. The issues are well-known; our teams know each other; and our leaders’ outlooks and political confines are fairly understood.
Richard M. Rossow is a senior fellow and holds the Wadhwani Chair in U.S.-India Policy Studies at CSIS.