US and India Appear Ready to Try to Hash Out Differences

Differences that the United States and India have been grappling with for years are expected to dominate talks between President Barack Obama and Prime Minister Narendra Modi when they meet in New Delhi next week.

Climate Change

India is the world’s third-largest emitter of greenhouse gases, behind China and the United States. But Indian officials have consistently prioritized economic growth and the eradication of poverty over reducing carbon emissions.
Prakash Javadekar, India’s environment minister, has indicated that the burden of addressing climate change should rest squarely on developed, industrialized nations. The power minister, Piyush Goyal, has aggressively pursued coal mining as a way to provide power to nearly 300 million Indians who have no access to electricity. The country, which has the fifth-largest coal reserves in the world, plans to double its coal production by 2019.

Obama has made an agreement on climate change a policy priority for his second term. And Javadekar said during a meeting on climate change last year in Lima, Peru, that the Indian government would submit a proposal by June that would show how it plans to lower the rate at which India produces pollution.

Modi has promised to build an array of solar power stations, and projects have already begun, taking advantage of India’s favorable weather conditions, with more than 300 sunny days a year. The United States has developed technology on solar panels, and a State Department official expressed interest in coming to an agreement on solar power projects.

Nuclear Energy

The United States and India have long been engaged in a complicated dance over nuclear energy. In 2008, the US Senate gave final approval to a deal allowing sales to India of nuclear power equipment and fuel for civilian energy production. But US companies have not been able to benefit from the deal, partly because of India’s nuclear liability law, passed in 2010, which places a financial burden on contractors in the event of an accident.

US critics of the deal said it was too permissive and could allow India to continue to stockpile nuclear weapons while failing to ratify the nonproliferation treaty.

Modi has expressed interest in resolving the disputes that stalled the civilian energy deal with the United States. India’s vast energy needs are hardly being met by nuclear energy – it has 20 reactors, just nine of which are operating at capacity. India aims to drastically increase its nuclear energy capacity, and it has been pursuing agreements with other partners, including Japan and Australia.

Military Hardware Sales

India, the world’s largest arms importer, is interested in developing a domestic supply chain. But it is saddled with inefficient public companies that are unable to meet the country’s demands for weapons. To build its own capacity, India will need the help of foreign companies. Most of its imports come from Russia.

In the five years ended in 2013, Russia supplied three quarters of India’s arms imports, and the United States only 7 percent, according to the Stockholm International Peace Resource Center. Russian sales, however, are trending down, and Indian officials have complained about costly and malfunctioning equipment.

A hindrance to large-scale US investment in Indian defense manufacturing is the fact that, unlike China, the United States cannot direct private companies to invest. Modi would have to make India a more attractive investment opportunity for US firms.

India’s aging fleet of naval equipment has proved dangerous: A 16-year-old Russian submarine exploded off the coast of Mumbai in 2013, killing 18 crew members. The next year, the Indian naval chief resigned after a series of accidents involving Indian warships. Corruption scandals involving foreign acquisitions of equipment have contributed to a decline in imports, and India is scrambling to build a private indigenous industry.

Manufacturing and Investment

Modi entered his meeting with US business leaders in September on a wave of optimism created by his commanding electoral victory in May on a development agenda.

He has put in place some domestic policies that favor foreign businesses, although widespread economic overhauls have yet to materialize. Last fall, he announced his “Make in India” campaign, which is intended to attract global businesses to India.

And he introduced labor overhauls to bolster manufacturing and create jobs. After Modi took office, he eased environmental regulations, an attempt to bypass part of India’s serpentine bureaucracy. But caps on foreign investment and forbidding tax laws still hinder growth, and they are politically difficult to change in India.

Some US observers responded with cautious hope that India could become an attractive investment opportunity. And during a visit to India last year, Secretary of State John Kerry expressed interest in private investment in high-end manufacturing, infrastructure, health care and information technology.

In Kerry’s visit to India earlier this month, he attended a summit meeting in Gujarat, where Modi was the chief minister, and pronounced a desire to set “tangible” gains ahead of Obama’s visit.