• [WEBCAST] Raoul Pal & Neil Howe: A Sobering U.S. Economic Reality Check

    Prepare your portfolio for “big picture” paradigm shifts with Real Vision co-founder Raoul Pal and Demography analyst Neil Howe. Watch the replay from this webcast.

While the nation continues to mourn the horrific tragedy in Orlando, it's important at the same time to reflect on the critical, even emotional visit by Indian Prime Minister Modi to Washington, DC last week. It was an important visit, on many levels - commercial as well as strategic.

  • Business groups like the U.S. Chamber of Commerce, in advance of the visit, laid out the business challenges and "hopes unfulfilled" with the Modi government. Despite a promising beginning to the Modi tenure as PM two years ago, with frequent statements by the Prime Minister about India being "open for business," long-standing impediments remain. In a letter to the president and Congressional leaders, these business groups stated, "Thus far, the new Indian government has produced troubling policies of its own," with "backsliding" in key areas.
  • Nevertheless, in the euphoria of the visit, substantive business announcements were made: Toshiba's Westinghouse unit has preliminarily secured a contract, to be finalized next year, to produce six nuclear power reactors in India, the first such "win" by a U.S. subsidiary since the breakthrough U.S.-India civil nuclear agreement nearly eight years ago; and to highlight their joint commitment to clean energy, the two leaders advanced a solar initiative that can marshal financing to help India "Green its Grid."

But one area not covered in the business coalition letter was military cooperation. And here, the "Modi Moment" has yet to produce a hoped-for strategic advance. U.S.-India defense cooperation (or lack of it) has been symbolized by the oft-stymied "Logistics Supply Agreement (LSA)." This potential deal was pushed strongly by U.S. Defense Secretary Ash Carter during his visit to India in April. The U.S. has been pressing India for over 10 years to consummate an LSA, and Carter and his Indian counterpart announced in April an "agreement in principle to conclude (the agreement) in the coming months." However, the deal remained unfulfilled prior to the prime minister's visit; and it was not inked during the Modi-Obama summit.

  • To be clear, an LSA even when concluded, would not be a major breakthrough in U.S.-India strategic relations. It is not a "basing agreement," for example; it would just give the U.S. Navy and other branches of our military occasional access to Indian basing support – refueling, spare parts, etc.
  • But even this minor deal has raised political objections in India; those blocking the arrangement cite India's tradition of "non-alignment" and a contemporary worry about being drawn into U.S. strategic quarrels with China.

The LSA (and some other minor but stymied defense deals on mapping and communication) are a metaphor for the complicated and evolving US-India geo-political relationship. In one of the few areas of U.S. foreign policy consistency that spans three administrations (Clinton, Bush43 and Obama), the White House has tried to draw the two countries closer together in a strategic relationship between the world's two largest democracies.

  • But, as reflected in the LSA stand-off, it has always posed problems in New Delhi. (I was reminded of this complication 10 years ago by an Indian Air Force Vice Chief of Staff when I was pushing the sale of U.S. combat aircraft; he curtly opined then that the "U.S. is not a reliable supplier!") 

Henry Kissinger summarized the big picture well. In talking about Bush43's efforts to effect U.S.-India "strategic coordination," Kissinger cautioned that "India's tradition of nonalignment (stands) in the way of a global arrangement."

So, while Modi's visit held hope for advances in key business areas, the business community was right in telling the president and Congress, "Hope is not a method." It still isn’t; much more needs to be done to open Indian markets, despite the welcomed breakthroughs last week in clean energy -- nuclear power in particular.

  • That same advice holds for security cooperation. For sure, India has eagerly accepted the transfer of U.S. technology, is enthused about co-development, participates more frequently with the U.S. in training exercises; and if an LSA is finally inked in the coming weeks -- and it is expected to be --  it will be yet another step in a slowly evolving strategic relationship. But despite the advances in our bilateral military ties since the late 90’s, New Delhi will continue to say, "No thanks" to a genuine strategic realignment with Washington.