US President Barack Obama on Friday extended a formal invitation to Prime Minister Narendra Modi for a visit to the US and expressed keenness to work closely with him to make the bilateral relations a “defining partnership” in the 21st century. Prime Minister Narendra Modi has accepted the formal invitation from President Obama and is likely to visit US in September this year. The US President sent a letter of invitation with US Deputy Secretary of State William Burns, who is visiting India. The US could be anticipating billions of dollars in new deals as India lifts its foreign direct investment cap on the defence sector to 49 per cent, which it announced in the annual budget for 2014-15.

Though not unlikely, the road towards a closer alliance with India – economic or strategic – might call for a lot of effort on America’s part to patch an edgy past with new Prime Minister Narendra Modi, who in 2005 was denied diplomatic visa to enter US on account of the Obama administration’s allegation of Modi’s role in the 2002 communal riots in Gujarat. Nine years on and the tables have turned completely with Modi being elected as Prime Minster of the world’s largest democracy with a resounding mandate. The business mood in India is buoyant as the markets and the country’s currency march towards near stability.

The first budget by Modi government opened up many key sectors – railways, insurance, not to mention defence – for foreign investment with resilient growth ambition of 5.4–5.9 per cent for 2014-15 and further taking it to 7-8 per cent in 2015-16. The US sees India – predicted to emerge as the world’s third-largest economy by 2050 – at the nib of a significant transformation under the growth-focused Modi government and it wants a share, not just of economics, but also strategic advantages of using a strong India to counter the Chinese growth or in American terms creating a better Asian ‘balance’.

Modi in his statement has said that he looks forward to result-oriented visit to US.

The state of Indo-US relations

India and USA share a symbiotic relationship. Keeping a good relationship is in the interest of both these countries. USA has high stakes in India, especially strategic stakes. But over the years the relationship between the two democracies has suffered rupture. It was evident from the manner in which the Devyani Khobragade issue was handled. A minor issue, which could have been solved easily, was made to escalate because no effort was taken from both the sides to resolve the matter quickly. In fact, Devyani Khobragade issue was the proverbial last straw on the camel’s back. Differences were brewing up between the two countries in the wake up various serious differences, mainly relating to business.

Historically, India and USA were not allies. India being the pioneer of NAM maintained safe distance from the two cold war super powers. Gradually, India grew closer to USSR, thus annoying USA. After the dissolution of the USSR, India tried to establish relationship with the USA on the grounds of shared culture. Before we could reach at any significant stage in our relation, the Pokharan Nuclear test in 1998 damaged the fledgling relationship. The USA imposed various trade sanctions on India. Despite the sanctions, India economy continued to develop. The Indian economic growth prompted US administration to renew relations with India; as a result, USA president Bill Clinton visited India in March 2000. The relation between the countries improved the most during the Bush era when the two countries signed the Civil Nuclear deal. The relationship kept improving with the new Obama administration. Obama visited India in 2010 and had said in an overblown rhetoric that the relationship with India will be a defining one for 21st century.

The downhill

The relationship has gone downhill since then as both India and USA has serious differences. The major economic differences include the issues of Compulsory licensing, Protection of drugs and pharmaceuticals, nuclear Liability Law. The countries are involved in various trade disputes. India is facing 14 trade disputes with US in WTO. India is not happy with the USA on the Immigration Bill, pending in US congress. If the bill is passed, it will have serious impact on our IT sector. Similarly, USA has problem with our Tax laws. America expects more transparency in our tax laws.

Over the last two years, we have seen USA losing interest in India. USA expected India to be the new economic power but the economic crisis slowed down the economy of India from 9 per cent to 5 per cent. USA also expected US to start playing a more assertive role in Global politics but India continued to handle its foreign policy cautiously, refraining from taking any sides. India and USA have serious disagreements regarding US policy on Pakistan, Ukraine , Sri Lanka and Iran. On the business front, American rating agencies have downgraded India as a place for business and investment. India has major interest in USA in terms of trade, Investment, technology, Security and Global position for India. We should realize that US leaving Afghanistan is going to hurt our interest in the volatile region. US also needs India to maintain a power balance in the Asia-pacific region.

Modi’s visit to USA is going to be very crucial for the relationship between the two countries. Modi with his growth centric economic policies, is expected to perform well at the economic front. If Modi and his party do deliver, the impact will be felt not just in India but across the global economy. The effect will be comparable to what happened after 2001, when China grew more rapidly than anyone expected- and that in turn will notably impact US growth.

The need of the hour

The need of the hour is to repair the rupture in the dialogue process. The differences on specific issues will continue, what we need to do, to establish a sound relationship between the two countries, is emphasizing on the commonality of the two countries. We need to build up on the Democratic and other shared value. We need to get back to our basic common interest, which are strategic.

The Modi government needs to take the initiative to improve the relationship to make for the lost time, when the relationship was stagnant. Prospects of improvement of the ties are good if both the parties move fast towards eliminating the long standing differences, more so for India before Obama government itself turns into a lame duck government.