Washington’s India Pivot

Abstract

The ascendance of Narendra Modi to the post of India’s Prime Minister comes at a time when Asian geopolitics is in a state of flux. The rise of an assertive China and the resurgence of Japan under Shinzo Abe uniquely positions India as a stable, democratic force that the U.S. and Japan could partner with in order to maintain influence in the Asia-Pacific. India’s rise as a major power promises to transform the Asian security architecture from a purely Asia-Pacific security system to a broader “Indo-Pacific” framework, which includes India. However, settling the sub-continental fronts with Pakistan and Afghanistan will be critical for New Delhi to direct its resources to other regional fronts with China and beyond the Straits of Malacca. It is in this context that both Washington and New Delhi can coordinate their efforts to achieve a common security objective in the subcontinent and support India’s economic rise that complements U.S.’ pivot to Asia. An enhanced economic and security relationship with Washington can bolster India’s engagement with Asia and provide New Delhi an opportunity to be a part of a multilateral hedging system that strengthens its bilateral position vis-à-vis China and its South Asian neighbours. Yet, even as India strives closer to the U.S. and Japan, it will refrain from forging an overt security alliance under a U.S.-led architecture and continue to engage in a hedging policy to maintain maximum freedom of diplomatic maneuver.

Keywords

Narendra Modi BJP United States Barack Obama hedging policy India China Japan Indian Ocean strategic autonomy Asia-pacific

Introduction

The election of Indian Prime Minister Narendra Modi holds potential for a transformational relationship between India and the United States (US). Riding high on a generational shift in Indian electoral politics, which culminated in the spectacular victory of the Bharatiya Janata Party (BJP) in May 2014, the new Indian prime minister signalled his government’s intention to make India the next Asian powerhouse.

Modi’s election came at a time when US President Barack Obama was again asserting American interest in Asia, a move in which India would play an important role both economically and strategically. Significant US objectives in Asia are to benefit from its rapidly growing economies, to manage the rise of China, to contain terrorism and to keep open the sea lines of communication. While the US has signalled its goal of a closer strategic relation with India during the 2005–2008 process of exempting it from the sanctions of the 1970 Nuclear Non-proliferation Treaty, Washington is now interacting with a far more assertive and self-confident government in New Delhi that will shape its ties to Washington within the context of important Indian interests in a productive relationship especially with China and Japan. The question is whether Modi’s ambitious Asian objectives are compatible with those of Washington. Our preliminary judgement is that there is significant compatibility of objectives as long as the US does not push India to abandon its freedom of diplomatic manoeuvre. The US recognises that India, China and the US are now and will continue to be the great powers of Asia—and it is in US interest to insure that India remains a major player for strategic and political reasons. India is a status quo power committed to the democratic process and the rule of law. It is in the American advantage that India be the model of development for the developing world.

The Emergence of a Strong Indian Government

After garnering a single-party majority for the first time in 30 years and scoring massive electoral victories in the subsequent state elections in Maharashtra and Haryana, Narendra Modi may now be the most politically significant Indian prime minister since Indira Gandhi. With strong nationalist credentials, he is committed to revitalise India’s economic strength as a pre-condition for its geostrategic role on the global stage.

But Modi’s ascendance to India’s top political position comes at a time when Asian geopolitics is in a state of flux. Just as Modi is the most powerful prime minister since Indira Gandhi 30 years ago, China’s Xi Jinping has consolidated political power and looks set to emerge as the strongest Chinese president after Deng Xiaoping. China’s meteoric rise in the last decade combined with a significant change in the top leadership positions the country to expand its influence beyond its immediate neighbourhood. Similarly, another Asian giant, Japan, led by Shinzo Abe, is seeking to regain its economic strength and break internal and constitutional shackles to expand its military posture against a rising China. Amid this backdrop, India presents itself as a stable, democratic force that the US and Japan could partner with in order to maintain their influence in the Asia-Pacific, which is increasingly coming under challenge by an aggressive China.

The future of a post-Cold War Asian security order remains uncertain. With questions being raised about America’s slow decline, New Delhi and Tokyo are keen to hedge against American failure in ‘balancing’ China’s growing assertiveness in Asia. Yet, even as India and Japan seek to adopt a multilateral hedge against a rising China, the US will continue to remain a key pillar in any multilateral security and economic framework. It is in this context that Prime Minister Modi’s vision to make India a strong Asian power rests on New Delhi’s ability to leverage its relationship with Washington to not only strengthen its bilateral relationship but also forge new strategic partnerships with Japan and other Asian allies that remain invested in a US-led Asian security system. President Obama asserted the importance of India during the highly successful September 2014 visit of Prime Minister Modi to Washington DC, and again when the president accepted Prime Minister Modi’s invitation to be the chief guest at the 26 January 2015 Republic Day parade in New Delhi, the first for an American president.

The Modi Factor and a More Activist Indian Foreign Policy

The BJP’s landslide victory in the 2014 Indian parliamentary elections marks a tectonic shift in Indian politics. Led by Narendra Modi, the BJP is the first non-Congress political party in India’s history that has won a simple majority on its own. Modi’s success at articulating an economic agenda and turning it into an electoral rallying point that transcends barriers of caste and religion is a new precedent in Indian politics. He has led the BJP in subsequent state assembly elections that has further strengthened his power.

The historic mandate received by Modi and the BJP has not only enhanced prime ministerial authority, which was routinely undermined in the previous regime, but also creates enough elbow room for the prime minister to chart out an innovative foreign policy vision that strengthens India’s geopolitical strength in South Asia and expands its horizons beyond the immediate neighbourhood.

Already, an activist foreign policy strategy seems to be in motion to put his vision in practice. The 26 May 2014 invitation to all South Asian Association of Regional Cooperation (SAARC) country heads for the inauguration of Prime Minister Modi was a clear signal by the new government that India will look to play a leadership role in forging greater South Asian unity as a first step to expand economic cooperation within the region.

The prime minister’s first official foreign visit to Bhutan in June 2014 was a step in this direction. Nepal, which had not received an Indian prime minster for 17 years, was the next stop for Modi. Similarly, the June 2014 visit to Bangladesh by Foreign Minister Sushma Swaraj and India’s decision to surrender its four-decade-old claim to a swathe of the Bay of Bengal (MacAskill and Devnath 2014) in a step towards closer ties with Dhaka outlines the new government’s clear intent to deepen bilateral engagement with neighbours and strengthen India’s position in the subcontinent.

The new subcontinental focus in India’s foreign policy is also reflected in New Delhi’s engagement with Myanmar, just to the east of Bangladesh. The appointment of Gautam Mukhopadhaya, one of the stars of the Indian Foreign Service, as ambassador to Myanmar underscores the importance of the country in India’s larger regional efforts. Forging stronger links and promoting connectivity to Myanmar was the central theme of Prime Minister Modi’s talks with President Thein Sein on the margins of the East Asia Summit in Nay Pyi Taw (Times of India 2014a). The prime minister’s push towards expanding of infrastructure in India’s northeast, promoting connectivity to Southeast Asia, and developing tourism in the region, especially the Buddhist circuit at its core, sets the stage for a new phase in bilateral relations.

While the previous UPA government, which governed India for an entire decade, sought to strengthen relations with neighbours in the subcontinent, its weak leadership with multiple power centres, often with conflicting views, deprived it of political strength to execute a more robust foreign policy approach vis-à-vis SAARC neighbours. This weakness would become apparent when domestic politics in Tamil Nadu hindered India’s foreign policy goals with Sri Lanka (Burke 2013). Similar dynamics in the state of West Bengal and the weakness of the central leadership prevented India from settling the Teesta river water dispute with Bangladesh (Sahgal and Dasgupta 2011). The ascendance of Modi has already changed that dynamic. Against the wishes of the then Tamil Nadu Chief Minister J. Jayalalithaa, the prime minister invited Sri Lankan President Mahinda Rajapaksa to his swearing-in ceremony. In a public speech given to the people of Assam in November 2014, Modi promised to go ahead with the ratification of the land boundary agreement between India and Bangladesh, putting aside regional populism of his own party and the opposition from West Bengal Chief Minister Mamata Banerjee (Mohan 2014). Building a more cooperative relationship on the eastern marches of South Asia is a critical requirement to India’s ‘Act East’ policy. With political authority restored, Modi and his government has moved at breakneck pace to revitalise India’s neighbourhood policy, especially at a time when China has made significant inroads in the subcontinent.

And India’s geopolitical horizons do not end at the Straits of Malacca, but extend beyond into East Asia and the Pacific. Prime Minster Modi’s successful visit to Japan in September 2014 cemented ties between the two countries, deepening economic and investment cooperation while establishing a new architecture for a closer security partnership in the future (The Economic Times 2014a). Soon after in October, Vietnamese Prime Minister Nguyen Tan Dung visited India, securing Indian commitment for joint exploration of oil in the South China Sea, greater defence and military cooperation and infrastructure partnerships (Press Information Bureau 2014a). India, under Modi, is also taking a more confident approach to security relations with Australia. Both Modi and Australian Prime Minister Tony Abbott announced a new framework for enhanced security and military cooperation based on shared values and aimed at defending a rules-based international order (Garnaut 2014). Addressing the parliament in Canberra during his Australia visit in November 2014, Modi called for ‘expanding security cooperation’ and ‘deepening international partnerships in the region’ between the two countries (The Indian Express 2014a).

On the back of a series of high-profile diplomatic and foreign policy efforts in the first few months of the Modi government, it is clear that the prime minister is seeking to intensify engagement with regional maritime powers and revive the Indo-Pacific security architecture, extending across sea lanes of the Indian and Pacific oceans.

From Washington’s perspective, India’s new assertiveness is a positive development. It is hardly a secret that the US would like India to enhance its geopolitical footprint in Asia and support Washington’s own ‘pivot’ towards the region. In November 2012, Former Secretary of State Hillary Clinton had urged New Delhi to ‘play a larger role in Asian institutions and affairs’ (IBNLive 2012). Even before that, President Obama, in his 2010 visit to India, came out in support of Indian membership as a permanent member of the UN Security Council (Wax and Lakshmi 2010).

Asia presents an opportunity that New Delhi has in the past only partially acknowledged. With an assertive China lurking in the background, the urgency to engage Southeast Asian nations and deepen security and economic ties with Japan has become more urgent. This is where Modi’s leadership could make a difference, especially at a time these countries are beginning to question American will to assert itself.

India’s ‘Act East’ Policy: Alignment and Differences with the US

India’s rise as a major power has driven a new phase of integration of South Asian regional security sub-system into the larger Asian framework. With increasing economic linkages between India and Southeast Asia, bolstered by the India–ASEAN FTA signed in 2011, the Asian security architecture is also being transformed from a purely Asia-Pacific security system to a broader ‘Indo-Pacific’ framework, which includes India.

Over the last two decades, India laid the groundwork for enhanced ties to the Southeast and East Asian nations. India’s expanding set of networks with Southeast Asian countries aimed at enhancing trade and economic relations forms a core element of Prime Minister Modi’s Asian outreach. Before his departure to Myanmar for the India–ASEAN summit and East Asia Summit in November 2014, he articulated his vision emphasising that ‘ASEAN was at the core of India’s Act East Policy and at the centre of her dream of an Asian century, characterized by cooperation and integration’ (Press Information Bureau 2014b).

Historically, India has always been the ‘least Asian’ actor in the pan-Asian security system, led by the US. New Delhi abstained from armed intervention in the Korean War, and kept a safe diplomatic distance from the Vietnam crisis. India’s ties to Southeast Asia mainly retained a cultural element. In economic and military terms, New Delhi was largely absent from East and Southeast Asia, except for close ties with the communist government of Vietnam that aroused suspicions among other Southeast Asian states.

As India redefines its self-image and its perception on the back of an emerging economic status, it is pertinent to ask: To what extent does India want to really play on the global stage? For New Delhi, hanging back from engagement with Southeast and East Asia has been a costly failure. It is not without reason that the previous BJP government, led by Atal Bihari Vajpayee (1998–2004), was the first government to engage substantially with the ASEAN Regional Forum. Prime Minister Vajpayee extended the bounds of active Indian diplomacy around the Straits of Malacca, expanding India’s foreign policy horizons beyond the immediate subcontinent.

Over the last decade, New Delhi has gradually increased its military interaction with the US and other regional powers, notably Japan and Australia. Indian defence acquisition from the US has grown exponentially with critical military aircrafts and navy vessels procured through the US Foreign Military Sales programme greatly adding to Indian naval and air capabilities. Big-ticket sales of US high-tech equipment have already exceeded US$ 10 billion in value with India acquiring a range of defence equipment from advanced transport aircraft to tactical strike capabilities, and engines that power India’s Light Combat Aircraft (LCA) (USIBC 2014). The role of the US in leading international efforts to alter international regulatory regimes in ways that reflect India’s national interests has played a critical role in enhancing India’s access to cutting-edge military and space technologies.

Complementing the growing defence ties between India and the US, New Delhi has actively engaged regional neighbours through multilateral military exercises since 2007. On the back of the US’s dominant military role in Asia, periodic naval exercises including US–India–Japan trilateral, and a larger quadrilateral naval exercise involving the US, India, Japan and Australia have bolstered India’s security ties with other Asian powers (Shukla 2014). While the US and India have been cautious not to project such military exercises as a containment strategy aimed at Beijing, the two countries have sought to forge a working military relationship between Asian powers that could constitute a credible strategic hedge against an aggressive China.

Yet, US policy towards China has often elicited concerns among India’s policymakers. When former Secretary of State Hillary Clinton articulated that the US’s relationship with China ‘will be the most important bilateral relationship in the world in this century’ (Clinton 2007), it raised concerns in New Delhi, leading to apprehensions that a US–China ‘G2’ power structure could seriously undermine India’s position in the region.

A glimpse of that global diarchy was visible when both the US and China reached a historic climate change agreement on the sidelines of the APEC Summit in November 2014. On November 12, the US and China released a joint statement on climate change at the APEC Summit revealing for the first time both countries’ post-2020 emissions targets (Fransen et al. 2014). While the world’s two largest economies have agreed on a common goal, the pact has increased pressure on India to comply on reducing emissions and conforming to stricter pollution controls. This assumes significance as, after China and the US, India is the third top polluting country. The back channel bonhomie between the US and China on this issue has meant that India could find herself isolated at the global forum, especially in the context of the 2015 United Nations Climate Change Conference in Paris. In effect, the US–China deal has cornered India among other nations to present their post-2020 targets in the Paris conference.

The divergence between Indian and US interests also manifests in New Delhi’s engagement with China under various multilateral groupings. India’s economic rise and its new found place in the emerging world order has meant that it has been an active participant in various economic groupings, notably the BRICS.¹ This has raised hackles among American officials, who view such mechanisms as ‘anti-U.S.’ Recent moves by the BRICS to set up a new development bank to fund infrastructure development in Asia, a historic challenge to the Western-dominated international system, shows the five emerging economies are taking their partnership seriously (BRICS 2014). The accomplishment appears that much more significant when viewed against the backdrop of the US’s continued failure to endorse IMF reforms or to give significantly more voice to such countries as India and China in the governance structures of international financial institutions (The Economist 2014).

The Key Role of Japan in India’s Relations with the US

Despite frictions between India and the US, there is immense potential for a fruitful relationship that can give shape to a new Asian power balance and create a healthy environment for economic growth and prosperity in the region. And one country that is at the heart of India’s East Asia strategy straddling both economic and security cooperation is Japan.

New Delhi and Tokyo’s growing strategic partnership is two-pronged: strengthening economic and defence engagement; and forging a multilateral hedge against China’s growing influence in Asia. In pursuing both elements of the bi-lateral strategy, India and Japan could benefit from active US engagement, both explicit and behind-the-scenes. According to former Deputy Secretary of State Strobe Talbot, ‘In the U.S., there was a lot of admiration and optimism about Prime Minister Modi’s decision to go to Japan and to develop what was already a good relationship with Prime Minister Abe’ (Sinha 2014).

The existing ties between India and Japan are underpinned by commercial bonds. Japan has been the largest source of foreign investment in India’s infrastructure sector with over US$35 billion worth of Japanese Overseas Development Assistance (ODA) flowing into India since 2003–2004 (Sharma 2013). Trade ties between India and Japan, though meagre when compared to China or the US, totalled US$18.61 billion in 2012–2013 and the two sides have set a target of US$25 billion by 2014 (Sahoo and Bhunia 2014). Prime Minister Modi’s successful visit to Japan yielded significant Japanese commitment to shore up India’s infrastructure and technology transfers in defence. India is keen on purchasing defence equipment from Japan. During Prime Minister Modi’s recent visit to Tokyo, the two countries agreed to accelerate discussions on modalities for sale of Japan’s US-2 amphibious aircraft to India for surveillance purposes in the Indian Ocean (The Indian Express 2014b). If the deal goes through, it will mark the first time Japan has exported defence goods and technology since World War II.

The US could play a critical role in forging greater ties between the two Asian powers. Although the Indo-Japanese relationship has built on economic cooperation and shares growing strategic convergence, the issue of civil nuclear cooperation still remains an area of unrealised potential. Japan’s opposition to a nuclear deal with non-NPT signatories has often conflicted with India’s aspirations to be a nuclear state. During negotiations on the historic Indo-US civilian nuclear energy cooperation deal, Japan expressed serious reservations regarding India’s de facto accommodation in the global nuclear club. It was only under pressure from the US that Tokyo eventually relented and supported the deal in 2008.

For Washington, civil nuclear cooperation between India and Japan is key to consummate the Indo-US nuclear deal. Both Toshiba and Mitsubishi have majority stakes in General Electric and Westinghouse, two of America’s largest nuclear technology firms (Joshi 2014). A civilian nuclear agreement between India and Japan, therefore, will pave the way for American suppliers to operationalise the Indo-US nuclear deal. India also needs Japan’s support for membership in the Nuclear Suppliers Group (NSG), a key multilateral group that shapes international policy on nuclear issues. Japan, however, has expressed reservations about Indian membership, citing New Delhi’s lack of commitment to nuclear disarmament, especially the Comprehensive Test Ban Treaty (CTBT) and the Fissile Material Cut-off Treaty (FMCT). But, recent progress in negotiations on a civil nuclear deal and Japan’s decision to remove six of India’s space and defence-related entities from Japan’s Foreign End User List (The Economic Times 2014b) marks a significant step forward.

As the principal security guarantor of Japan, Washington is well-placed to use its leverage to nudge Tokyo to move towards a favourable nuclear cooperation framework with India. Such a deal will not only catapult the Indo-Japan relationship to the next strategic level, but also pave the way for greater security and defence cooperation involving high technology transfers. It is in this context that a strong Indo-US bilateral partnership is key to India’s own foreign policy ambitions in East Asia and Japan in particular.

Can the US Fuel India’s Economic Engine?

In his August 15 Independence Day address, Prime Minister Modi gave an emphatic pro-growth speech exhorting business to ‘Come, make in India’ and give a fillip to India’s staid manufacturing sector which contributes only about 15 per cent of its GDP, less than half that of China (The Indian Express 2014c). Underlying Modi’s strategy is to make India the next export manufacturing power like the East Asian tiger economies. An expansive reforms agenda that puts India on a 7–8 per cent growth trajectory for the next decade will make India a powerful economic ‘balancer’ to China. More importantly, if India grows more sustainably and innovatively during the period, it will present a democratic model of strong growth that is different from the Chinese model. For countries in Southeast Asia, such as Cambodia, Myanmar and Thailand, which have wavered between democracy and more authoritarian tendencies, a stable, democratic and economically vibrant India could act as a serious ideological—and strategic—counterweight to China’s authoritarian capitalism.

Growing the Indian economy is at the top of the Modi government’s agenda and shapes both his domestic and international trade and foreign policy. The East Asian growth model focused on manufacturing lies at the core of the prime minister’s economic strategy. At a time when labour costs in China and other East Asian countries are rapidly increasing, India is well positioned to leverage its youth bulge to become the next manufacturing powerhouse. This strategy, however, requires significant capital and technological inputs. This is where a new thrust in trade and investment between India and the US could enhance the bilateral relationship that has already shown a steady growth on strategic and defence issues.

US trade with India encompasses a broad range of sectors which include aircraft, electrical machinery, pharmaceuticals, automobiles, railway equipment and steel. Services trade is also significant. During President Obama’s 2010 visit to India, he committed to ramp up innovative high technology trade by reforming US export controls to treat India as a partner country (The White House 2010). In January 2011, the US removed the Indian Space Research Organization (ISRO) and the Defence Research and Development Organization (DRDO) from the US Commerce Department’s Entity List, which will facilitate dynamic cooperation on cutting-edge high-technology sectors (Rajghatta 2011).

As the Modi government seeks to implement an expansive agenda to build India’s infrastructure through the ‘100 Smart Cities’ and the ‘Digital India’ programmes, they present an opportunity for US companies to provide both capital and technology to build railroads, power plants and fibre optic cables to put India on a higher growth trajectory. According to a McKinsey report, India’s Urban Awakening, in 2030, India will have 68 different cities housing a population of over a million each (Sankhe et al. 2010). A rapid trend towards urbanisation means India will have to construct as much as 900 million square metres of commercial and residential space each year, pave 2.5 billion square metres of roads, and tunnel 4,600 miles of subways and metros.

Such a scale of infrastructure expansion will require heavy infusion of foreign capital. With the size and depth of the US financial markets, American investors and financial institutions could play a significant role in quenching India’s thirst for cheap capital. After meeting Modi during his recent trip to the US, Laurence Filk, CEO of the world’s largest asset manager Blackrock, which manages US$4 trillion of assets worldwide, committed to hosting a global investors meet in India in 2015 (The Economic Times 2014c). Blackrock is only one example of potential US investors, especially in costly infrastructure efforts. Others would be the capital rich pension funds and large private equity funds based in the US. The US–India Business Council (USIBC) declared during Modi’s US visit that it had identified upwards of US$41 billion for investment by its members in India within the next 3 years (The Times of India 2014c). Given Modi’s emphasis on making India a manufacturing hub and ramping up the country’s physical infrastructure, the development could give rise to new transformative projects by the private sector realising India’s quest for manufacturing excellence.

But the road towards deeper investment ties between India and the US is filled with challenges. The proposed Bilateral Investment Treaty (BIT) between the two countries remains stalled. India and the US began BIT negotiations in August 2009. Reducing restrictions on foreign investment and ensuring adequate investor protection, such as through access to binding and neutral investor–state arbitration were key issues discussed during talks between the two countries. However, India placed negotiations on hold in January 2013 pending a review of its model BIT after the US too placed a hold on talks while it conducted a similar review of its own model BIT. While President Obama and the then Indian Prime Minister Manmohan Singh had reaffirmed their commitment to concluding a high-standard BIT, there was little progress on the issue during Prime Minister Modi’s visit to the US.

One of the principal roadblocks that has prevented any significant movement forward on the BIT has been India’s uncertain tax regime and lack of investor protection rights. The controversial retroactive tax law enacted by India in 2012 dealt a significant blow to investor confidence in India. Reforming India’s tax law, therefore, will be a key first step towards attracting US businesses and investors to power India’s manufacturing and infrastructure boom.

As India sets it eyes on becoming the next manufacturing powerhouse of Asia, integrating with the world economy will become even more critical. India’s relative disconnect form the global economy is evident in its low share in global trade which was only 2.07 per cent in 2013, less than a fifth of that of China (World Trade Organization 2014). However, the real question is not whether India must integrate more with the world economy, but how it can do this in a fast-changing global trading environment. After the global financial crisis of 2008–2009, Washington has led talks for a de facto expanded Trans Pacific Partnership (TPP), which includes the ASEAN ‘tigers’ (Singapore, Malaysia, even Vietnam); the NAFTA nations (US, Canada and Mexico); Latin American countries (Chile and Peru); Oceania (Australia and New Zealand); and East Asia (Japan, South Korea) minus China. The TPP has attracted interest elsewhere in Asia, with China showing interest in eventual TPP membership.

One would imagine that India’s participation in the TPP could energise New Delhi’s trade with the developed world. However, the inclusion of non-trade related issues, such as labour, environmental laws, and intellectual property rights seeks to create high barriers to entry, especially for a developing economy like India. While both India and the US adhere to the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), in recent times, their views have differed on the approach to IPR protection. In 2014, India remained on the Priority Watch List of the ‘Special 301’ annual report by the Office of the US Trade Representative (USTR) for inadequate protection and enforcement (USTR 2014a). The divergence between the two countries has specially been observed in the pharmaceutical sector, where India has denied or revoked patents for foreign drug companies because they did not meet its patentability standards. Under India’s Patent Law, pharmaceuticals and certain other technologies must meet India’s requirement of ‘enhanced efficiency’ to be patentable. From India’s perspective, the ‘enhanced efficiency’ requirement protects against companies making minor modifications of their patented products to extend the life of their patents, a practice known as ‘evergreening’.

Negotiating India’s entry into a high-standard agreement, such as the TPP, therefore, will not only be challenging, it will require significant costly concessions by New Delhi and some of these concessions pose important political challenges. The TPP will establish advanced-country rules in intellectual property, generic pharmaceuticals, local content requirements and liberalisation of services, which will not necessarily serve Indian interests. It is in this context that the US could play a more accommodative role in supporting India’s bid for TPP membership, but with reduced concessions. The November 2014 US–India Agreement on the WTO Trade Facilitation is a good example of how diplomacy between the two partners can achieve an important breakthrough in international trade. The US unilateral statement that the ‘peace clause’ on agricultural subsidies will last until a permanent solution is found not only assuaged New Delhi’s concerns, but also led to a binding framework whereby India’s food subsidies regime would not be challenged under the WTO dispute resolution mechanism until a permanent settlement was achieved (USTR 2014b).

For Washington, TPP is not only a way to widen access to attractive markets but also a hedging device to ensure a US presence in the region amidst China’s rise. India’s participation in the TPP could serve that objective, but it would require Washington to play a leadership role in accommodating Indian trade interests while simultaneously using the TPP instrument to push India to execute its own structural reforms at a steady pace.

Subcontinental Stability: A Prerequisite to Extend Influence beyond the Straits of Malacca

India’s quest for playing a larger role in the Asia Pacific is dependent on its ability to establish its regional hegemony in practice which would entail normalising relations with Pakistan and playing a critical role towards stability in Afghanistan. Settling the subcontinental fronts with Pakistan and Afghanistan would allow India to shift important resources to other regional fronts with China and beyond South Asia. The US drawdown of troops from Afghanistan and possible instability thereafter poses a direct threat to Indian security interests and inherently shackles New Delhi’s ability to strengthen its ‘Indo-Pacific’ outlook beyond the subcontinent.

In this context, India’s strategic interests will be served by coordinating with the US on security and development in Pakistan and Afghanistan. On the other hand, the United States remains one of the three states—along with China and Saudi Arabia—that have influence on Pakistan. Until recently, India has been simply too weak, and too mired in regional and internal conflicts that have prevented its geopolitical heft to spread across Asia. This is where the US, by aligning its security objectives with New Delhi, can help India rid of traditional security constraints that have hobbled her military and diplomatic resources for decades. Such a move would not only enhance Indian influence within the subcontinent, but also allow New Delhi to play a more assertive geopolitical role in East and Southeast Asia.

But, Indian and American interests remain divergent on many key issues related to security in the so-called Af–Pak region. While there has been significant convergence between the two on the Afghan-led reconciliation strategy, India still remains sceptical of rehabilitating Afghan Taliban leaders, who are likely to be unfavourably predisposed towards India. In February 2011, when US Secretary of State Hillary Clinton signalled a significant shift in US policy towards the Taliban, softening earlier US position on key issues like renunciation of violence, alliance with Al-Qaeda and abidance by the Afghan Constitution, which she termed as ‘necessary outcomes’ rather than preconditions for talks, it caused much discomfort within the Indian establishment.

India’s concerns regarding the western marches of South Asia mainly stem from a security standpoint, foremost among them being the terror threats emanating from the extremely volatile Af–Pak border regions and spilling over to India. The return of the Taliban or civil war like conditions of the early 1990s is clearly not in India’s interest. India’s foremost priority is to prevent such a scenario by working towards a long-term international commitment in Afghanistan and strengthening the hands of the Afghan government, insuring against a Taliban takeover of the country.

The drawdown of the International Security Assistance Force (ISAF) and the subsequent US exit from the region, however, has narrowed the window of opportunity for India to safeguard its security interests in Afghanistan. This has led to increased and accelerated efforts by India to forge new strategic ties with the Afghan government and strengthen its position in order to influence peace negotiations between the Afghan government and the Taliban.

With US troops withdrawing by 2014, India’s biggest concern is that not only would it find its influence eroded, but that the Pakistani military might play a major role in negotiating a settlement between the international community, the Afghan government and the Taliban. This would seriously undermine Indian reconstruction efforts holding India back from providing future human and economic assistance in the region. From an Afghan perspective, this is likely to be a negative development as it would lose a key ally in its rebuilding efforts, jeopardising long-term stability of the country.

On the Pakistan side of the Af–Pak issue, the Modi government’s ties to the Sharif regime have deteriorated since the Pakistani prime minister’s visit to Modi’s swearing-in on 26 May 2014. Foreign Secretary talks were cancelled in August 2014 when the Pakistani Ambassador to Delhi met Kashmiri separatists (BBC 2014). Shootings along the Line of Control in Kashmir have continued and have only intensified over the past few months. The relations had deteriorated to the point that the powerful Indian Home Minister, Rajnath Singh, publically criticised Pakistan for its harbouring anti-Indian terrorists (Kashyap 2014). This anomaly in the relations between the two countries is likely to persist unless Pakistan takes some concrete steps against groups that are committed to violence in India, such as the Lashkar-e-Taiba (LeT) and that may well require greater diplomatic pressure on Pakistan by the US. Unlike the past, India is too powerful to find its international role undermined significantly by tensions with Pakistan, but such tensions now do get in the way of building up the economy and playing an effective role in regional and Asian affairs. Under the worst scenario, such tensions could slide into war between two nuclear powers. More likely, continued terrorism directed from Pakistan would make investors nervous. In this context, loosening the nexus of government, the army and radicals in Pakistan presents a major challenge for India’s security establishment.

Another country that features prominently in New Delhi’s security matrix, is Iran. In October 2014, the Indian government, led by the prime minister, cleared a proposal to support the Iranian Chabahar port project on the shores of the Arabian Sea (The Economic Times 2014d). Reinforcing its commitment to the Chabahar project, India announced a strategic investment plan of US$85 million to convert berths in the port into a container and multi-purpose cargo terminal. For India, this project holds significant strategic value as New Delhi seeks an alternative route to Afghanistan and Central Asia that circumvents Pakistan. India has remained a long-trusted partner for Iran in the region, and is also the second-largest buyer of Iranian oil. But, Tehran’s hostile relations with the West and especially the US, has often created complications in the India–Iran bilateral relationship. Relations between the two countries soured when India voted against the Iranian nuclear programme, under US pressure, at a resolution passed at the International Atomic Energy Agency in 2009.

A détente between Iran and the West, led by the US, could go a long way in strengthening the security architecture in West Asia. India and Iran share a great deal of convergence on security issues in the region. In Afghanistan, both India and Iran supported the Tajik-led Northern Alliance historically and both countries suffered tremendously from the emergence of the Pakistan-backed Taliban gaining power in Afghanistan. Preventing the return of the Sunni-radical Taliban, therefore, is not only a common security priority for both India and Iran, but also aligns with the security objectives of the US post its withdrawal from Afghanistan. In this context, Washington’s push for meaningful dialogue with Tehran presents an opportunity for India to emerge as a key partner in the region, trusted by both sides. Moreover, American engagement with Tehran will ease pressure on New Delhi which has often found itself eschewing its traditional ties with Tehran for an enhanced relationship with the US.

Similarly, India has been increasingly uncomfortable with the US position on Bangladesh. The US has displayed a more favourable stance towards the BNP–Jamaat combine, who have demonstrated a radicalised streak to their politics. India views the rise of the Jamaat as inimical to its security interests as the politics of the BNP and Jamaat have become more radicalised in recent years. It is no secret that influences of both Pakistan-based Lashkar-e-Taiba (LeT) and al-Qaida are visible in events that unfolded in Bangladesh in 2013. Some sections in the American establishment believe that the BNP–Jamaat combine is more open to the ideology of free markets and being in power would moderate their radical Islamist policies that they have espoused whilst in opposition.

India’s wariness of the Jamaat stems from New Delhi’s bitter experience during the earlier BNP–Jamaat’s rule in Bangladesh from 2001–2006. The Jamaat occupied ministries crucial to furthering their radical agenda which saw the flowering of Jama’atul Mujahideen Bangladesh (JMB) and other terror groups like the Harkat-ul-Jihad al-Islami (HuJI) opposed to India. Recent terror activities in West Bengal, where it was revealed that a Bangladeshi terror group had planned to bomb cities and mount an assassination attempt on Bangladeshi prime minister Sheikh Hasina (The Telegraph 2014), demonstrates the continuing threats to regional security and against India’s key allies in the region.

It is in this context that both New Delhi and Washington must coordinate their efforts to achieve a common security objective for South and West Asia. A stable subcontinent which allows India to maintain its dominant regional position will enhance the former’s ability to expand its economic and strategic interactions with countries beyond the Straits of Malacca and complement the US’s ‘pivot’ to Asia.

Conclusion—The Hedging Strategy

Both India and the US are engaged in a hedging system that involves primarily Japan and China. An assertive China has drawn India, the US and Japan closer strategically without an overt security alignment. The point of a hedging strategy is to keep all players in the system. It is aimed at making China more cautious about taking any steps that would draw India closer strategically to Japan and the US. While it is in Indian interests to keep the US involved in Asia, it is also in the interest of Japan and the US to build a strong India, militarily and economically. An economically vibrant, and militarily strong India would play a more effective balancing role in Asia.

At a time when China is facing numerous challenges in East and South China Sea over the Senkaku Island with Japan, and in South China Sea with the Philippines and Vietnam, it must also contend with growing US presence in Asia through Washington’s renewed trade and security outreach. For New Delhi, entering into an overt security arrangement with Japan or the US would endanger the core Indian strategy of maintaining maximum freedom of manoeuvre in its foreign policy.

Yet, India’s quest for playing a larger role in the Asia Pacific will depend greatly on its ability to establish regional dominance and deepening relations with its immediate neighbours in the subcontinent. Normalisation of relations with Pakistan and stability in Afghanistan post-2014 remain key challenges for New Delhi. In this context, closer security ties with the US, which enjoys significant leverage over Pakistan, could help India address its traditional security concerns to its west. Success of such a strategy would greatly depend on US commitment to a stable South Asia and Washington’s own ability to neutralise the presence of radical terrorist outfits in the region. India, therefore, is in a delicate balancing situation regarding the US; on the one hand, it seeks US assistance in strengthening its security architecture in the subcontinent and on the other hand, retain, if not widen, its freedom of diplomatic manoeuvre vis-à-vis China, and countries in Southeast and East Asia.

In the first six months in office, Prime Minister Modi has demonstrated remarkable diplomatic acumen, and has not shied away from taking bold decisions. Modi’s activist foreign policy approach towards charting a new vision to reclaim India’s lost strategic clout has added new vigour to India’s foreign-policy establishment. Even as Modi looks to make India a more competitive, economically vibrant, and secure country, the government’s foreign policy success and India’s global stature will depend on strong domestic foundations. US and Japanese participation in India’s technological, investment and infrastructure upgrade, therefore, bears major significance and aligns with Modi’s ambition to make India a manufacturing powerhouse. The revived US pivot to Asia not only creates new opportunities for India to enhance its bilateral ties with Washington but also expands New Delhi’s strategic landscape beyond its immediate neighbourhood, especially Asia to its east. Enhanced engagements with Asia promises economic prosperity as well as an opportunity to be a part of a multilateral hedging system that strengthens India’s bilateral position vis-à-vis China and its South Asian neighbours. The US, for its part, must keep in mind that India will eschew any direct defence alignment with it for the foreseeable future.

Footnotes

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