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24 September 2015, Gateway House

Modi’s American journey

Even though the U.S. has made a long-term bet on India, its impatience with the Modi government continues to grow. Although the prime minister could signal India’s leads on issues internet governance, climate change and trade, U.S. might not come out impressed by the speed of Modi’s India.

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Prime Minister Narendra Modi’s second visit to the United States must show that India can take the lead on major issues of the day and put substance in the declaration that it has graduated from a balancing to a leading power.

Ears around the world had perked up recently when a senior official spoke about India being a leading power at a public event. The India watchers were intrigued and hopeful, especially in the U.S. capital where both the Democrats and Republicans have repeatedly said they have made a long-term bet on India.

To add to the positive rhetoric, Vice President Joe Biden this week said the U.S. wanted to be India’s best friend, adding that India’s rise is good not just for Asia but the whole world.  The word “rise” is always a reminder of another country’s rather emphatic ascent on the world stage – China – although the feeling invoked by India is definitely different.

Interestingly, Modi is in the U.S. at the same time as Chinese President Xi Jinping and is somewhat eclipsed. The U.S. press, which covered Modi’s first visit last year with a mixture of curiosity and enthusiasm, has largely ignored him so far. But that is the nature of the game. Modi is now a known quantity and unless he announces a dramatic shift in India’s policies, he is one of the many leaders streaming through New York for the UN General Assembly.

But the press has paid attention to Modi going west – to the Silicon Valley and his high-octane visits to the technology companies such as Google, Facebook, Tesla and Adobe. His visit to the hub of innovation is aimed at rallying the big names to be a part of the new initiatives starting from Digital India to StartUp and StandUp India.

Xi grabbed the headlines immediately as Chinese companies announced their plans to buy 300 Boeing jets worth $38 billion and also set up an assembly plant in China. India’s approval of a $3 billion deal with Boeing for Apache and Chinook helicopters timed for Modi’s arrival seemed small but then China represents 20% of Boeing’s international market.

India can’t match China’s financial clout to keep the U.S. businesses firmly on its side. Their advocacy of China to the U.S. government is key in shaping Washington’s policies. But what India can do is to create a more inviting environment so long-term business investors like David Cote, CEO of Honeywell, don’t say, “Indian bureaucracy is stultifying. It is as if you took the British bureaucracy, doubled it and added 10 times more people” even as they praise Modi’s new initiatives.

Modi should signal India’s leadership on defining issues of the day – internet governance, climate change, trade, terrorism – when he meets President Barack Obama next Monday. The rules of the new game are being written as we speak and India’s stance is largely to say “no” or hide behind Russia and China on many of those issues.

Modi can counter a growing sense among Americans that his government is long on the talk and short on the walk. His visit, which began Wednesday in New York, was preceded by the first combined Strategic and Commercial Dialogue (S&CD) where the two sides renewed their commitment to work together over a wide array of subjects. But the American impatience, especially on trade, was clear.

U.S. Commerce Secretary Penny Prtizker repeated no less than three times over two days that India was only the 11th  largest trading partner and 18th largest export market for the U.S. Things haven’t lived up to their enormous potential. Her complaints ranged from India’s archaic bankruptcy law to lack of commercial courts for speedy resolution of disputes.

Nirmala Sitharaman, minister of state for commerce and industry, along with key Indian industrialists tried hard to show that changes were indeed taking place both at the federal and state levels. Sunil Bharti Mittal talked of how he was literally being pursued by state bureaucracies to invest such was the competition after Modi’s policy to let the states fight for federal largesse.

But they had no good answers on the big picture – what is India doing to cope with or counter the surge towards U.S.-led mega trading pacts on either side of the Indian peninsula. The Trans Pacific Partnership (TTP) and the Transatlantic Trade and Investment Partnership (TTIP) will eventually bring together most of the world’s trade and GDP under their domain. They will set the standards and terms of trade.

India’s exclusion and trade isolation could cost up to $50 billion a year once TPP gets going and trade diversion to favoured partners becomes a reality, according to a new report by the Peterson Institute for International Economics in Washington. The report recommends that India sign a bilateral investment treaty (BIT) with the U.S. without further delay, get into the Asia Pacific Economic Cooperation (APEC) forum and then eventually into TPP. The current BIT draft is seen by Washington as tepid.

The thinking in New Delhi remains that TPP is not happening any time soon so no point worrying about it.

On climate change, another issue being pushed hard by Obama administration, India is slowly coming around to accepting that it must make have an understanding with Washington before the Paris meeting. Secretary of State John Kerry pushed climate change hard in his remarks at the conclusion of the Dialogue.

If all goes well, Modi may announce an even more ambitious plan at the UN summit on climate change this week. A report in Business Standard said that India might announce that 40% or 350 gigawatts of its power will come from wind and solar energy by 2030.

It would constitute a 35% reduction in greenhouse gas emissions from 2005 levels and will constitute its Intended Nationally Determined Contributions or INDCs under the Paris agreement. Currently, India’s commitment is a 20-25% reduction below 2005 levels by 2020.

The third big area where western powers and China are grappling with difficult future scenarios is internet governance. Days before Xi’s arrival in the U.S., reports said that China and the U.S. were about to conclude what could be the first “arms control” agreement in cyber space, committing the two countries not to attack each other’s infrastructure in peacetime.

Indian reaction to U.S. discomfort with China has been one of satisfaction but lately it is moving to adjust its stance on the entire gamut of issues presented by internet governance and cyber security. The multilateral arrangement under the UN is not making progress, while the U.S. is leading the charge with a multi-stakeholder model.

At the recent dialogue, External Affairs Minister Sushma Swaraj announced a Track 1.5 dialogue between the two countries to thrash out some of the governance issues. It was a policy shift to engage bilaterally and more intensely with the U.S. India wants a greater role in organisations such as The Internet Corporation for Assigned Names and Numbers (ICANN) and related bodies.

All in all, Modi’s India is moving albeit more slowly than many in the U.S. would like.

Seema Sirohi is a Washington-based analyst and a frequent contributor to Gateway House: Indian Council on Global Relations. Seema is also on Twitter, and her handle is @seemasirohi

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