FROM: U.S. DEPARTMENT OF DEFENSE
Carter Urges Closer U.S.-India Defense Cooperation
By Karen Parrish
American Forces Press Service
NEW DELHI, July 23, 2012 - Deputy Defense Secretary Ashton B. Carter today offered what he called "practical steps" to improve U.S-India defense cooperation.
During remarks at an event hosted here by the Confederation of Indian Industry, Carter noted President Barack Obama has called the two nations' relationship "one of the defining partnerships of the 21st century," adding that defense cooperation is central to that tie.
India, along with Brazil, Russia and China, is one of the "Big Four," or BRIC, nations that economists have identified as being at a similar level of recently advanced economic development. Carter said partnership with India is a key part of the U.S. strategic emphasis on the Asia-Pacific region and its focus on broader security and prosperity.
"You are an economic power with an increasing military capability," the deputy secretary said. "Your leadership in civil discourse and democracy is critical to the political stability of South Asia, and a beacon to the world."
The United States and India have built their military-to-military engagement steadily through dialogues, exercises, defense trade and research cooperation, Carter noted. He added that U.S. defense leaders want to expand that linkage even further.
"We want to develop a joint vision for U.S.-India defense cooperation," he said. "That's why I'm here, at the request of Secretary of Defense [Leon E.] Panetta."
U.S. defense leaders' goal is to strengthen the relationship, Carter said, "to get to a place where we discover new opportunities continuously, making new and innovative investments that benefit both countries for generations to come."
"We want to knock down any remaining bureaucratic barriers in our defense relationship, and strip away the impediments," he added. "And we want to set big goals to achieve."
The deputy secretary noted the United States has begun to prune back bureaucratic restrictions hindering defense trade and joint development between the two countries. The United States' export control system is designed to prevent high-end technology from getting to states that shouldn't have it, Carter noted.
"But our system can be confusing, rigid, and controls too many items for the wrong reasons," he added. "We know we need to improve it," and the president's 2010 Export Control Reform initiative is guiding those improvements, he said.
The Defense Department's internal procedures also can erect barriers, the deputy secretary acknowledged. He added that he and Panetta are committed to reforming those processes. For example, he said, the United States has moved India's Defense Research and Development Organization and the Indian Space Research Organization off the Commerce Department's entity list. The list sets restrictions on foreign end-user nations involved in proliferation activities.
"We trust India and know that India is not a re-exporter or exploiter of our technologies," Carter said.
U.S. leaders consider India a top priority in the nation's export considerations, and want the United States to be India's "highest-quality and most trusted long-term supplier of technology – not a simple seller of goods -- in such fields as maritime domain awareness, counterterrorism, and many others," the deputy secretary said. In addition, he said, the United States is committed to India's military modernization.
Even as they work to increase bureaucratic speed, Carter said, U.S. defense leaders also are taking a more strategic approach to export decisions.
"We're making decisions more anticipatory, looking at what partners are likely to want in the future, and beginning our thinking and processes earlier," he said. "In a terrific new initiative, we're building exportability into our systems from the start, so it doesn't consume time and money to do it later."
U.S. leaders also are fast-tracking priority sales, Carter said.
"All these steps will be felt here in New Delhi. ... These and other efforts will help us respond more rapidly to India's requests for U.S. equipment and systems – particularly for more advanced technologies," the deputy secretary told Indian defense industry representatives.
Defense Department leaders also are working to improve the Foreign Military Sales program, or FMS, he said.
"India was our second-largest FMS customer in 2011, with 4 and a half billion [dollars] in total FMS transactions," he noted. "And we delivered six C-130J's on time." The C-130J, produced by Lockheed Martin, is the "Super Hercules" four-engine military transport aircraft.
"We think our defense technology is the best quality on the market. ... Buying American, whether through direct commercial sales or Foreign Military Sales, will get India exceptionally high-quality technology, a high degree of transparency, and no corruption," Carter said.
Defense leaders also are working to make their acquisition process clearer and more export-friendly, he added.
"I used to be undersecretary of defense for acquisition, technology and logistics," he said. "There was a chart on my wall, outlining the 250 ... steps it takes to move a program from development to delivery. It read like hieroglyphics."
The department is working to make that system more export-friendly, and also has a new fund that allows the Pentagon to procure long-lead, high-demand items in anticipation of partner nations' requests, he said. Officials also have developed a cadre of acquisition experts to help other countries define their requests and to streamline DOD's response, he noted.
"That should help India significantly," Carter added.
The deputy secretary said most importantly, DOD leaders want to move beyond defense trade, toward cooperative research, development and co-production with India.
"I'm a scientist," said Carter, who holds a doctorate in theoretical physics from Oxford University, where he was a Rhodes Scholar. "I know this is the critical part."
Carter noted he will travel south tomorrow from New Delhi to Hyderabad, India's technology corridor. There, he said, he will visit the facilities where India's Tata Advanced Systems Limited and Lockheed soon will begin producing parts for the C-130J.
"From now on, every [C-130J] around the world will contain parts made in Hyderabad," he added. "That's an example of the kind of co-production that is the future. It highlights what can be achieved when we unleash the potential of our private industries. It shows what's possible when there's a common strategic view, when the bureaucratic barriers are down, and importantly, when our strategic interests and genuine economic and business interests are aligned."
Carter said such joint efforts can and should expand further. "The only question for us is: Where does India want to expand and grow?" he added.
India also is adapting its bureaucratic processes for the global marketplace, the deputy secretary said.
"We want to cooperate with you on high-value technologies," Carter said. "To get where we both want to be, India can make some changes too, to increase U.S. investment."
If India raises its foreign direct investment ceiling to international standards, he said, commercial incentives to invest would be greater. India currently limits foreign investment in its defense sector to 25 percent. A Washington-based nonprofit research group, the Center for Strategic and International Studies, recommended in a report last week that India increase its defense FDI cap to above 50 percent.
"An arrangement where U.S. companies invest in [the] Indian defense industry could provide a win-win for both the United States and India by improving India's defense industry while providing U.S. companies a potential source of lower-cost manufacturing for defense products," the report's authors wrote.
Carter said the Indian government also could adjust offset agreements to increase U.S investment opportunities. Offset agreements typically involve a foreign supplier agreeing to buy products from a government acting as buyer, to offset the buyer's investment.
"Offsets can be tremendously helpful to growing industry capabilities – if you have the right companies, and the right absorptive capacity," Carter said. "If offsets are calibrated correctly, they work. But if offset requirements are too onerous or too narrow, they deter a company's interest, and you lose that alignment of economic interest and strategic intent. For companies to participate, our arrangements must make good economic sense as well as good strategic sense."
Third, he said, projects integrating technology development, production and acquisition require administrative structures that can accomplish that integration, he said.
Foreign direct investment limits, offset agreement restrictions and integrative administration structures are "just three points where change could be a real help in Indian-American cooperation," the deputy secretary said.
"The point is that on both sides we need to change, reform, and push ourselves to get to a place where U.S.-India defense relations are only limited by our thinking, not by our capacity to cooperate," Carter said.
Cooperation is the norm in technology and industry, he said.
"The leaders of industry globally, such as those in this room, know that," the deputy secretary added. "Sometimes, we in the security community lag behind them in our ability to cooperate and advance technology."
Carter's visit to India is part of a 10-day Asia-Pacific tour that has included stops in Hawaii, Guam, Japan and Thailand. The deputy secretary will conclude the tour with a trip to South Korea later this week.
INDIA
PROFILEG
eography
Area: 3.29 million sq. km. (1.27 million sq. mi.); about one-third the size of the U.S.
Cities:
Capital--New Delhi (pop. 12.8 million, 2001 census).
Other major cities--Mumbai, formerly Bombay (16.4 million); Kolkata, formerly Calcutta (13.2 million); Chennai, formerly Madras (6.4 million); Bangalore (5.7 million); Hyderabad (5.5 million); Ahmedabad (5 million); Pune (4 million).
Terrain: Varies from Himalayas to flat river valleys and deserts in the west.
Climate: Alpine to temperate to subtropical monsoon.
People
Nationality:
Noun and adjective--Indian(s).
Population (2012 est.): 1.21 billion; urban 29%.
Annual population growth rate (2012 est.): 1.312%.
Density: 324/sq. km.
Ethnic groups: Indo-Aryan 72%, Dravidian 25%, others 3%. While the national census does not recognize racial or ethnic groups, it is estimated that there are more than 2,000 ethnic groups in India.
Religions (2001 census): Hindu 80.5%; Muslim 13.4%; Christian 2.3%; Sikh 1.9%; other groups including Buddhist, Jain, Parsi within 1.8%; unspecified 0.1%.
Languages: Hindi, English, and 16 other official languages.
Education:
Years compulsory--K-10.
Literacy--61%.
Health:
Infant mortality rate--46.07/1,000.
Life expectancy--67.14 years (2012 est.).
Work force (est.): 467 million.
Agriculture--52%;
industry and commerce--14%;
services and government--34%.
Government
Type: Federal republic.
Independence: August 15, 1947.
Constitution: January 26, 1950.
Branches:
Executive--president (chief of state), prime minister (head of government), Council of Ministers (cabinet).
Legislative--bicameral parliament (Rajya Sabha or Council of States, and Lok Sabha or House of the People).
Judicial--Supreme Court.
Political parties: Indian National Congress (INC), Bharatiya Janata Party (BJP), Communist Party of India-Marxist, and numerous regional and small national parties.
Political subdivisions: 28 states,* 7 union territories (including National Capital Territory of Delhi).
Suffrage: Universal over 18.
Economy
GDP (FY 2011 est.): $1.843 trillion.
Real growth rate (2011 est.): 7.8%.
Per capita GDP (PPP, FY 2011 est.): $3,700.
Natural resources: Coal, iron ore, manganese, mica, bauxite, chromite, thorium, limestone, barite, titanium ore, diamonds, crude oil.
Agriculture: 18.1% of GDP.
Products--wheat, rice, coarse grains, oilseeds, sugar, cotton, jute, tea.
Industry: 26.3% of GDP.
Products--textiles, jute, processed food, steel, machinery, transport equipment, cement, aluminum, fertilizers, mining, petroleum, chemicals, and computer software.
Services and transportation: 55.6% of GDP.
Trade:
Exports (FY 2011 est.)--$298.2 billion; engineering goods, petroleum products, precious stones, cotton apparel and fabrics, gems and jewelry, handicrafts, tea. Services exports ($101.2 billion in 2008-2009) represent more than one-third of India's total exports.
Software exports (FY 2009)--$35.76 billion.
Imports (FY 2011 est.)--$451 billion; petroleum, machinery and transport equipment, electronic goods, edible oils, fertilizers, chemicals, gold, textiles, iron and steel.
Major trade partners--U.S., China, U.A.E., EU, Russia, Japan.
PEOPLE
Although India occupies only 2.4% of the world's land area, it supports over 15% of the world's population. Only China has a larger population. India's median age is 25, one of the youngest among large economies. About 70% live in more than 550,000 villages, and the remainder in more than 200 towns and cities. Over the thousands of years of its history, India has been invaded from the Iranian plateau, Central Asia, Arabia, Afghanistan, and the West; Indian people and culture have absorbed and modified these influences to produce a remarkable racial and cultural synthesis.
Religion, caste, and language are major determinants of social and political organization in India today. However, with more job opportunities in the private sector and better chances of upward social mobility, India has begun a quiet social transformation in this area. The government has recognized 18 official languages; Hindi, the national language, is the most widely spoken, although English is a national lingua franca. Although about 80% of its people are Hindu, India also is the home of more than 138 million Muslims--one of the world's largest Muslim populations. The population also includes Christians, Sikhs, Jains, Buddhists, and Parsis.
The Hindu caste system reflects Indian occupational and socially defined hierarchies. Ancient Sanskrit sources divide society into four major categories, priests (Brahmin), warriors (Kshatriya), traders/artisans (
Vaishya) and farmers/laborers (
Shudra). Although these categories are understood throughout India, they describe reality only in the most general terms. They omit, for example, the tribal people and those outside the caste system formerly known as "untouchables", or
dalits. In reality, Indian society is divided into thousands of
jatis--local, endogamous groups based on occupation--and organized hierarchically according to complex ideas of purity and pollution. Discrimination based on caste is officially illegal, but remains prevalent, especially in rural areas. Nevertheless, the government has made strong efforts to minimize the importance of caste through active affirmative action and social policies. Moreover, caste is often diluted if not subsumed in the economically prosperous and heterogeneous cities, where an increasing percentage of India's population lives. In the countryside, expanding education, land reform and economic opportunity through access to information, communication, transport, and credit are helping to lessen the harshest elements of the caste system.
HISTORY
The people of India have had a continuous civilization since 2500 B.C.E., when the inhabitants of the Indus River valley developed an urban culture based on commerce and sustained by agricultural trade. The Harappan Civilization, as it came to be known, declined around 1500 B.C.E., most likely due to ecological changes.
During the second millennium B.C.E., pastoral, Aryan-speaking tribes migrated from the northwest into the subcontinent, settled in the middle Ganges River valley, and adapted to antecedent cultures. Alexander the Great expanded across Central Asia during the 4th century B.C.E., exposing India to Grecian influences. The Maurya Empire came to dominate the Indian subcontinent during the 3rd century B.C.E., reaching its greatest height under Emperor Ashoka.
The political map of ancient and medieval India was made up of myriad kingdoms with fluctuating boundaries. At the height of the Roman Empire under Emperor Hadrian during the 2nd century C.E., the Kushan Empire, originating in ancient Bactria, conquered north India and the trans-Indus region ushering in a period of trade and prosperity. In the 4th and 5th centuries C.E., northern India was unified under the Gupta Dynasty. During this period, known as India's Golden Age, Hindu culture and political administration reached new heights.
Islam spread across the subcontinent over a period of 700 years. In the 10th and 11th centuries, Turks and Afghans invaded India and established the Delhi Sultanate. In the early 16th century, Babur, a Turkish-Mongol adventurer and distant relative of Timurlane and Genghis Khan, established the Mughal Dynasty, which lasted for 200 years. South India followed an independent path, but by the 17th century large areas of South India came under the direct rule or influence of the expanding Mughal Empire. While most of Indian society in its thousands of villages remained untouched by the political struggles going on around them, Indian courtly culture evolved into a unique blend of Hindu and Muslim traditions.
The first British outpost in South Asia was established by the English East India Company in 1619 at Surat on the northwestern coast. Later in the century, the Company opened permanent trading stations at Madras (now Chennai), Bombay (now Mumbai), and Calcutta (now Kolkata), each under the protection of native rulers.
The British expanded their influence from these footholds until, by the 1850s, they controlled most of present-day India, Pakistan, Sri Lanka, and Bangladesh. In 1857, an unsuccessful rebellion in north India led by Indian soldiers seeking the restoration of the Mughal Emperor led the British Parliament to transfer political power from the East India Company to the Crown. Great Britain began administering most of India directly and maintained both political and economic control, while controlling the rest through treaties with local rulers. Imperial India became the "crown jewel" of the rapidly expanding British Empire.
In the late 1800s, the first steps were taken toward self-government in British India with the appointment of Indian councilors to advise the British Viceroy and the establishment of Provincial Councils with Indian members; the British subsequently widened participation in Legislative Councils. Beginning in 1920, Indian leader Mohandas K. Gandhi transformed the Indian National Congress political party into a mass movement to campaign against British colonial rule. The party used both parliamentary and nonviolent resistance and non-cooperation to agitate for independence. During this period, however, millions of Indians served with honor and distinction in the British Indian Army, including service in both World Wars and countless other overseas actions in service of the Empire.
With Indians increasingly united in their quest for independence, a war-weary Britain led by Labor Prime Minister Clement Attlee began in earnest to plan for the end of its suzerainty in India. On August 15, 1947, India became a dominion within the Commonwealth, with Jawaharlal Nehru as Prime Minister. Strategic colonial considerations, as well as political tensions between Hindus and Muslims, led the British to partition British India into two separate states: India, with a Hindu majority; and Pakistan, which consisted of two "wings," East and West Pakistan--now Bangladesh and Pakistan--with Muslim majorities. India became a republic, but chose to continue as a member of the British Commonwealth, after promulgating its constitution on January 26, 1950.
After independence, the Indian National Congress, the party of Gandhi and Nehru, ruled India under the leadership first of Nehru and then his daughter (Indira Gandhi) and grandson (Rajiv Gandhi), with the exception of brief periods in the 1970s and 1980s and during a short period in 1996. From 1998-2004, a coalition led by the Bharatiya Janata Party governed.
Prime Minister Nehru governed the nation until his death in May 1964. Nehru was succeeded by Lal Bahadur Shastri, who also died in office in January 1966. In 1 month, power passed to Nehru's daughter, Indira Gandhi, Prime Minister from 1966 to 1977. In June 1975, beset with deepening political and economic problems, Mrs. Gandhi declared a state of emergency and suspended many civil liberties. Seeking a mandate at the polls for her policies, she called for elections in March 1977, only to be defeated by Morarji Desai, who headed the Janata Party, an amalgam of five opposition parties.
In 1979, Desai's government crumbled. Charan Singh formed an interim government, which was followed by Mrs. Gandhi's return to power in January 1980. On October 31, 1984, Mrs. Gandhi was assassinated by her Sikh bodyguards, which led to the killings of thousands of Sikhs in New Delhi. Her son, Rajiv, was chosen by the Congress (I)--for "Indira"--Party to take her place. His Congress government was plagued with allegations of corruption resulting in an early call for national elections in November 1989.
Although Rajiv Gandhi's Congress Party won more seats than any other single party in the 1989 elections, he was unable to form a government with a clear majority. The Janata Dal, a union of opposition parties, then joined with the Hindu-nationalist Bharatiya Janata Party (BJP) on the right and the Communists on the left to form the government. This loose coalition collapsed in November 1990, and the Janata Dal, supported by the Congress (I), came to power for a short period, with Chandra Shekhar as Prime Minister. That alliance also collapsed, resulting in national elections in June 1991.
While campaigning in Tamil Nadu on behalf of his Congress (I) party, Rajiv Gandhi was assassinated on May 21, 1991 by Tamil extremists from Sri Lanka unhappy with India's military intervention in that country’s civil war. In the elections, Congress (I) won 213 parliamentary seats and returned to power at the head of a coalition, under the leadership of P.V. Narasimha Rao. This Congress-led government, which served a full 5-year term, initiated a gradual process of economic liberalization under then-Finance Minister Manmohan Singh. These reforms opened the Indian economy to global trade and investment. India's domestic politics also took new shape, as the nationalist appeal of the Congress Party gave way to traditional caste, creed, regional, and ethnic alignments, leading to the founding of a plethora of small, regionally based political parties.
The final months of the Rao-led government in the spring of 1996 were marred by several major corruption scandals, which contributed to the worst electoral performance by the Congress Party in its history. The Hindu-nationalist BJP emerged from the May 1996 national elections as the single-largest party in the Lok Sabha but without a parliamentary majority. Under Prime Minister Atal Bihari Vajpayee, the subsequent BJP coalition lasted only 13 days. With all political parties wishing to avoid another round of elections, a 14-party coalition led by the Janata Dal formed a government known as the United Front, under the former Chief Minister of Karnataka, H.D. Deve Gowda. His government collapsed after less than a year, when the Congress Party withdrew its support in March 1997. Inder Kumar Gujral replaced Deve Gowda as the consensus choice for Prime Minister at the head of a 16-party United Front coalition.
In November 1997, the Congress Party again withdrew support from the United Front. In new elections in February 1998, the BJP won the largest number of seats in parliament--182--but fell far short of a majority. On March 20, 1998, the President approved a BJP-led coalition government with Vajpayee again serving as Prime Minister. On May 11 and 13, 1998, this government conducted a series of underground nuclear tests, spurring U.S. President Bill Clinton to impose economic sanctions on India pursuant to the 1994 Nuclear Proliferation Prevention Act.
In April 1999, the BJP-led coalition government fell apart, leading to fresh elections in September-October. The National Democratic Alliance--a new coalition led by the BJP--won a majority to form the government with Vajpayee as Prime Minister in October 1999. The NDA government was the first coalition in many years to serve a full 5-year term, providing much-needed political stability.
The Kargil conflict in May-July 1999 and an attack by terrorists on the Indian parliament in December 2001 led to increased tensions with Pakistan.
Hindu nationalists supportive of the BJP agitated to build a temple on a disputed site in Ayodhya, destroying a 17th-century mosque there in December 1992, and sparking widespread religious riots in which thousands, mostly Muslims, were killed. In February 2002, 57 Hindu volunteers returning from Ayodhya were burnt alive when their train caught fire. Alleging that the fire was caused by Muslim attackers, anti-Muslim rioters throughout the state of Gujarat killed over 2,000 people and left 100,000 homeless. The Gujarat state government and the police were criticized for failing to stop the violence and in some cases for participating in or encouraging it.
The ruling BJP-led coalition was defeated in a five-stage election held in April and May of 2004. The Congress Party, under the leadership Sonia Gandhi, the widow of Rajiv Gandhi, formed a coalition government, known as the United Progressive Alliance (UPA). It took power on May 22 with Manmohan Singh as Prime Minister. The UPA's victory was attributed to dissatisfaction among poorer rural voters that the prosperity of the cities had not filtered down to them, and rejection of the BJP's Hindu nationalist agenda.
The Congress-led UPA government continued many of the BJP's foreign policies, particularly improving relations with the U.S. Prime Minister Singh and President George W. Bush concluded a landmark U.S.-India strategic partnership framework agreement on July 18, 2005. In March 2006, President Bush visited India to further the many initiatives underlying the agreement. The strategic partnership is anchored by a historic civil nuclear cooperation initiative and includes cooperation in the fields of space, high-technology commerce, health issues, democracy promotion, agriculture, and trade and investment.
In July 2008, the UPA won a confidence motion with 275 votes in its favor and 256 against. In late November 2008, terrorists killed at least 164 people in a series of coordinated attacks around Mumbai. Prime Minister Singh promised a thorough investigation and Home Minister Chidambaram pledged significant reforms to improve India’s counterterrorism agencies.
The Congress-led UPA coalition gained a more stable majority following May 2009 elections, riding mainly on the support of rural voters. Singh became the first prime minister since Nehru to return to power after completing a full 5-year term.
GOVERNMENT
According to its constitution, India is a "sovereign, socialist, secular, democratic republic." Like the United States, India has a federal form of government. However, the central government in India has greater power in relation to its states, and has adopted a British-style parliamentary system.
The government exercises its broad administrative powers in the name of the president, whose duties are largely ceremonial. A special electoral college elects the president and vice president indirectly for 5-year terms. Their terms are staggered, and the vice president does not automatically become president following the death or removal from office of the president.
Real national executive power is centered in the cabinet (senior members of the Council of Ministers), led by the prime minister. The president appoints the prime minister, who is designated by legislators of the political party or coalition commanding a parliamentary majority in the Lok Sabha (lower house). The president then appoints subordinate ministers on the advice of the prime minister.
India's bicameral parliament consists of the Rajya Sabha (Council of States) and the Lok Sabha (House of the People). The Council of Ministers is responsible to the Lok Sabha.
The legislatures of the states and union territories elect 233 members to the Rajya Sabha, and the president appoints another 12. The members of the Rajya Sabha serve 6-year terms, with one-third up for election every 2 years. The Lok Sabha consists of 545 members, who serve 5-year terms; 543 are directly elected, and two are appointed.
India's independent judicial system began under the British, and its concepts and procedures resemble those of Anglo-Saxon countries. The Supreme Court consists of a chief justice and 25 other justices, all appointed by the president on the advice of the prime minister.
India has 28 states* and 7 union territories. At the state level, some legislatures are bicameral, patterned after the two houses of the national parliament. The states' chief ministers are responsible to the legislatures in the same way the prime minister is responsible to parliament.
Each state also has a presidentially appointed governor, who may assume certain broad powers when directed by the central government. The central government exerts greater control over the union territories than over the states, although some territories have gained more power to administer their own affairs. Local governments in India have less autonomy than their counterparts in the United States. Some states are trying to revitalize the traditional village councils, or panchayats, to promote popular democratic participation at the village level, where much of the population still lives. Over half a million panchayats exist throughout India.
Principal Government Officials
President--Pratibha D. Patil
Vice President--Mohammed Hamid Ansari
Prime Minister--Manmohan Singh
Minister for Home Affairs--P. Chidambaram
Minister of External Affairs--S.M. Krishna
Ambassador to the U.S.--Nirupama Rao
Ambassador to the UN--Hardeep Singh Puri
POLITICAL CONDITIONS
Having emerged as the nation's single-largest party in the May 2009 Lok Sabha election, Congress leads a coalition UPA government under Prime Minister Singh. Party President Sonia Gandhi was re-elected by the Party National Executive in May 2005. Also a member of parliament, she heads the Congress Lok Sabha delegation. Congress positions itself as being a secular, left of center party, with a long history of political dominance. Although its performance in national elections had steadily declined during the previous 12 years, its surprise victory in 2004 was a result of recruiting strong allies into the UPA, the anti-incumbency factor among voters, and its courtship of India's many poor, rural, and Muslim voters. Congress's political fortunes suffered badly in the 1990s, as many traditional supporters were lost to emerging regional and caste-based parties, such as the Bahujan Samaj Party and the Samajwadi Party, but rebounded following its May 2004 ascension to power. In November 2005, the Congress regained the Chief Ministership of Jammu and Kashmir state, under a power-sharing agreement.
The Bharatiya Janata Party (BJP), led by Shri Nitinn Gadkari, took the second-largest number of seats in the Lok Sabha in 2009. Sushma Swaraj is leader of the opposition. The Hindu-nationalist BJP draws its political strength mainly from the "Hindi Belt" in the northern and western regions of India. Former Foreign Minister Jaswant Singh was expelled from the party in August 2009 after authoring a book which portrayed the founder of Pakistan, Muhammad Ali-Jinnah, in a positive light, although he was allowed to rejoin in June 2010.
Popularly viewed as the party of the northern upper caste and trading communities, the BJP made strong inroads into lower castes in past national and state assembly elections. The party must balance the competing interests of Hindu nationalists, (who advocate construction of a temple on a disputed site in Ayodhya, and other primarily religious issues including the propagation of anti-conversion laws and violence against religious minorities), and center-right modernizers who see the BJP as a party of economic and political reform.
Four Communist and Marxist parties are united in a bloc called the "Left Front," which had 59 parliamentary seats following the 2009 elections. The Left Front provided external support to the UPA government until the July 2008 confidence vote. It advocates a secular and Communist ideology and opposes many aspects of economic liberalization and globalization, resulting in dissonance with Prime Minister Singh's liberal economic approach. The Maoist-inspired Naxalite insurgency continues to be a major internal security threat, affecting large parts of eastern India. With the Communists in retreat in West Bengal, the Trinamool Congress Party was expected to perform well in the 2011 state elections.
ECONOMY
For 2011, India's estimated GDP was $1.843 trillion with 7.8% growth. Services, industry, and agriculture account for 56%, 26%, and 18% of GDP, respectively. India's population is estimated at 1.2 billion and is growing at 1.3% a year. The country is capitalizing on its large numbers of well-educated people skilled in the English language to become a major exporter of software services and software workers, but more than half of the population depends on agriculture for its livelihood. 700 million Indians live on $2 per day or less, but there is a large and growing middle class of more than 50 million Indians with disposable income ranging from 200,000 to 1,000,000 rupees per year ($4,166-$20,833). Estimates are that the middle class will grow tenfold by 2025.
India continues to move forward, albeit haltingly, with market-oriented economic reforms that began in 1991. Reforms include increasingly liberal foreign investment and exchange regimes, industrial decontrol, reductions in tariffs and other trade barriers, opening and modernization of the financial sector, significant adjustments in government monetary and fiscal policies, and more safeguards for intellectual property rights.
The economy has posted an average growth rate of more than 7% in the decade since 1997, reducing poverty by about 10 percentage points. India achieved 9.6% GDP growth in 2006, 9.0% in 2007, and 6.6% in 2008, significantly expanding manufactures through late 2008. The country weathered the 2008-2009 global financial crisis well. Estimated GDP growth was 6.5% for 2009. Foreign portfolio and direct investment inflows have risen significantly in recent years. They contributed to the $283.5 billion in foreign exchange reserves by December 2009. Government receipts from the 34-day 3G spectrum auction in 2010 were $14.6 billion.
Economic growth is constrained by inadequate infrastructure, a cumbersome bureaucracy, corruption, labor market rigidities, regulatory and foreign investment controls, the "reservation" of key products for small-scale industries, and high fiscal deficits. The outlook for further trade liberalization is mixed, and a key World Trade Organization (WTO) Doha Ministerial in July 2008 was unsuccessful due to differences between the U.S. and India (as well as China) over market access. India eliminated quotas on 1,420 consumer imports in 2002 and incrementally lowered non-agricultural customs duties in later budgets. However, the tax structure is complex, with compounding effects of various taxes.
U.S.-India bilateral merchandise trade in 2008 topped nearly $50 billion. Principal U.S. exports are diagnostic or lab reagents, aircraft and parts, advanced machinery, cotton, fertilizers, ferrous waste/scrap metal, and computer hardware. Major U.S. imports from India include textiles and ready-made garments, Internet-enabled services, agricultural and related products, gems and jewelry, leather products, and chemicals.
The rapidly growing software sector is boosting service exports and modernizing India's economy. Software exports surpassed $35 billion in FY 2009, while business process outsourcing (BPO) revenues hit $14.8 billion in 2009. Personal computer penetration is 14 per 1,000 persons. The number of cell phone users was expected to rise to nearly 300 million by 2010.
The United States is India's largest investment partner, with a 13% share. India's total inflow of U.S. direct investment was estimated at more than $16 billion through 2008. Proposals for direct foreign investment are considered by the Foreign Investment Promotion Board and generally receive government approval. Automatic approvals are available for investments involving up to 100% foreign equity, depending on the kind of industry. Foreign investment is particularly sought after in power generation, telecommunications, ports, roads, petroleum exploration/processing, and mining.
India's external debt was nearly $230 billion by the end of 2008, up from $126 billion in 2005-2006. Foreign assistance was approximately $3 billion in 2006-2007, with the United States providing about $126 million in development assistance. The World Bank planned to double aid to India to almost $3 billion a year, focusing on infrastructure, education, health, and rural livelihoods.
DEFENSEThe supreme command of the Indian armed forces is vested in the president of India. Policies concerning India's defense, and the armed forces as a whole, are formulated and confirmed by the cabinet.
The Indian Army numbers over 1.4 million strong and fields 34 divisions. Its primary task is to safeguard the territorial integrity of the country against external threats. The Army has been heavily committed in the recent past to counterterrorism operations in Jammu and Kashmir, as well as the in the Northeast. Its modernization program focuses on obtaining equipment to be used in combating terror. The Army often provides aid to civil authorities and assists the government in organizing relief operations.
The Indian Navy is by far the most capable navy in the region. The Navy's primary missions are the defense of India and of India's vital sea lines of communication. India relies on the sea for 90% of its oil and natural gas and over 90% of its foreign trade. The Navy operates one aircraft carrier with two on order, 15 submarines, and 15 major surface combatants. It is capable of projecting power within the Indian Ocean basin and occasionally operates in the South China Sea, the Mediterranean Sea, and the Arabian Gulf. Fleet introduction of the Brahmos cruise missile, the possible lease of nuclear submarines from Russia, and the introduction of a new aircraft carrier in 2012 will add significantly to the Indian Navy's flexibility and striking power.
Although small, the Indian Coast Guard has been expanding rapidly in recent years. Indian Navy officers typically fill top Coast Guard positions to ensure coordination between the two services. India's Coast Guard is responsible for control of India's huge exclusive economic zone.
Fielding nearly 900 combat aircraft, the Indian Air Force is the world’s fourth largest. It is becoming a 21st-century force through modernization, new tactics, and the acquisition of modern aircraft, such as the SU-30MKI, a new advanced jet trainer (BAE Hawk), and the indigenously produced advanced light helicopter (Dhruv). In April 2008 six firms submitted proposals to the Indian Government to manufacture 126 multi-role combat aircraft for the Indian Air Force.
FOREIGN RELATIONS
India's size, population, and strategic location give it a prominent voice in international affairs, and its growing economic strength, military prowess, and scientific and technical capacity give it added weight. The end of the Cold War dramatically affected Indian foreign policy. India remains a leader of the developing world and the Non-Aligned Movement (NAM). India is now strengthening its political and commercial ties with the United States, Japan, the European Union, Iran, China, and the Association of Southeast Asian Nations. India is an active member of the South Asian Association for Regional Cooperation (SAARC).
Always an active member of the United Nations, India seeks a permanent seat on the UN Security Council. The country holds a non-permanent seat on the Security Council 2011-2012. India has a long tradition of participating in UN peacekeeping operations.
Bilateral and Regional Relations:
Pakistan. India and Pakistan have been locked in a tense rivalry since the partition of the subcontinent based on the "two-nations theory" upon achieving independence from Great Britain in 1947. The principal source of contention has been Kashmir, whose Hindu Maharaja at that time chose to join India, although a majority of his subjects were Muslim. India maintains that his decision and subsequent elections in Kashmir have made it an integral part of India. This dispute triggered wars between the two countries in 1947 and 1965 and provoked the Kargil conflict in 1999.
Pakistan and India fought a war in December 1971 following a political crisis in what was then East Pakistan and the flight of millions of Bengali refugees to India. The brief conflict left the situation largely unchanged in the west, where the two armies reached an impasse, but a decisive Indian victory in the east resulted in the creation of Bangladesh.
Since the 1971 war, Pakistan and India have made slow progress toward normalization of relations. In July 1972, Indian Prime Minister Indira Gandhi and Pakistani President Zulfikar Ali Bhutto met in the Indian hill station of Simla. They signed an agreement by which India would return all personnel and captured territory in the west and the two countries would "settle their differences by peaceful means through bilateral negotiations." Diplomatic and trade relations were re-established in 1976.
The 1979 Soviet invasion of Afghanistan caused new strains between India and Pakistan. Pakistan supported the Afghan resistance, while India implicitly supported the Soviet occupation. In the following 8 years, India voiced increasing concern over Pakistani arms purchases, U.S. military aid to Pakistan, and Pakistan's nuclear weapons program. In an effort to curtail tensions, the two countries formed a joint commission. In December 1988, Prime Ministers Rajiv Gandhi and Benazir Bhutto concluded a pact not to attack each other's nuclear facilities and initiated agreements on cultural exchanges and civil aviation.
In 1997, high-level Indo-Pakistani talks resumed after a 3-year pause. The Prime Ministers of India and Pakistan met twice, and the foreign secretaries conducted three rounds of talks. In June 1997 at Lahore, the foreign secretaries identified eight "outstanding issues" around which continuing talks would be focused. The dispute over the status of Jammu and Kashmir, an issue since partition, remains the major stumbling block in their dialogue. India maintains that the entire former princely state is an integral part of the Indian union, while Pakistan insists upon the implementation of UN resolutions calling for self-determination for the people of the state.
In September 1997, the talks broke down over the structure of how to deal with the issues of Kashmir and peace and security. Pakistan advocated that separate working groups treat each issue. India responded that the two issues be taken up along with six others on a simultaneous basis. In May 1998 India, and then Pakistan, conducted nuclear tests. Attempts to restart dialogue between the two nations were given a major boost by the February 1999 meeting of both Prime Ministers in Lahore and their signing of three agreements. These efforts were stalled by the intrusion of Pakistani-backed forces into Indian-held territory near Kargil in May 1999 (that nearly turned into full scale war), and by the military coup in Pakistan that overturned the Nawaz Sharif government in October the same year. In July 2001, Prime Minister Vajpayee and General Pervez Musharraf, leader of Pakistan after the coup, met in Agra, but talks ended after 2 days without result.
After the terrorist attack on the Indian parliament in December 2001, India-Pakistan relations cooled further as India accused Pakistan of involvement. Tensions increased, fueled by killings in Jammu and Kashmir, peaking in a troop buildup by both sides in early 2002.
Prime Minister Vajpayee's April 18, 2003 speech in Srinagar (Kashmir) revived bilateral efforts to normalize relations. In November 2003, Prime Minister Vajpayee and President Musharraf agreed to a ceasefire, which still holds, along the Line-of-Control in Jammu and Kashmir. After a series of confidence building measures, Prime Minister Vajpayee and President Musharraf met on the sidelines of the January 2004 SAARC summit in Islamabad and agreed to commence a Composite Dialogue addressing outstanding issues between India and Pakistan, including Kashmir.
In February 2004, India and Pakistan agreed to restart the "2+6" Composite Dialogue formula, providing for talks on Peace and Security and Jammu and Kashmir, followed by technical and Secretary-level discussions on six other bilateral disputes: Siachen Glacier, Wuller Barrage/Tulbul Navigation Project, Sir Creek estuary, Terrorism and Drug Trafficking, Economic and Commercial cooperation, and the Promotion of Friendly Exchanges in various fields. The restart of the Composite Dialogue process was especially significant given the almost 6 years that had transpired since the two sides agreed to this formula in 1997-1998. The UPA government continued the Composite Dialogue with Pakistan. Following the October 2005 earthquake in Kashmir, the two governments coordinated relief efforts and opened access points along the Line-of-Control to allow relief supplies to flow from India to Pakistan and to allow Kashmiris from both sides to visit one another.
The Foreign Secretary talks resumed in November 2006, after a 3-month delay following July 11, 2006 terrorist bombings in Mumbai. The meeting generated modest progress, with the two sides agreeing to establish a joint mechanism on counterterrorism. Since 2006, India and Pakistan have continued to take part in the Composite Dialogue process in an effort to maintain the peace process and strengthen bilateral relations. Following Pakistani elections in February 2008 the Indian Minister of External Affairs and the Indian Foreign Secretary met with their new counterparts to advance the Composite Dialogue talks, reaffirming a commitment to maintain the ceasefire along the Line-of-Control as well as increasing people-to-people connections through improving cross-border bus services. The July 2008 bombing of the Indian Embassy in Kabul and the Mumbai terrorist attacks in November 2008 increased tensions between India and Pakistan. Although Prime Minister Singh and Pakistan Prime Minister Yousuf Gilani agreed to resume talks following the 2010 SAARC summit, India continued to insist that Pakistan must do its part to dismantle terror networks operating from its territory and prosecute those who had a hand in planning the Mumbai attacks.
SAARC. Certain aspects of India's relations within the subcontinent are conducted through the South Asian Association for Regional Cooperation (SAARC). Its members are Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka, with the People's Republic of China, Iran, Japan, European Union, Republic of Korea, and the U.S. as observers. Established in 1985, SAARC encourages cooperation in agriculture, rural development, science and technology, culture, health, population control, narcotics, and terrorism.
SAARC has intentionally stressed these "core issues" and avoided those which could prove divisive, although political dialogue is often conducted on the margins of SAARC meetings. In 1993, India and its SAARC partners signed an agreement gradually to lower tariffs within the region. Forward movement in SAARC had slowed because of tension between India and Pakistan, and the SAARC summit scheduled for 1999 was not held until January 2002. In addition, to boost the process of normalizing India's relationship with Pakistan, the January 2004 SAARC summit in Islamabad produced an agreement to establish a South Asia Free Trade Area (SAFTA). All the member governments have ratified SAFTA, which was slated to come into force on January 1, 2006, with a series of graduated tariff cuts through 2015. As of December 2006, however, the FTA partners were still negotiating sensitive product lists, rules of origin, and technical assistance. India hosted the 2007 SAARC summit, which called for greater regional cooperation on trade, environmental, social, and counterterrorism issues. At the 2008 SAARC summit in Sri Lanka, the SAFTA member countries signed a protocol for Afghanistan’s accession and several countries (Including India, Pakistan, and Sri Lanka) agreed to drop some items from their sensitive product lists.
China. Despite suspicions remaining from a 1962 border conflict between India and China and continuing territorial/boundary disputes, Sino-Indian relations have improved gradually since 1988. Both countries have sought to reduce tensions along the frontier, expand trade and cultural ties, and normalize relations. Their bilateral trade reached $24 billion in 2006. China is India's second-largest trading partner behind the U.S.
A series of high-level visits between the two nations has improved relations. In December 1996, Chinese President Jiang Zemin visited India on a tour of South Asia. While in New Delhi, he and the Indian Prime Minister signed a series of confidence-building measures along the disputed border, including troop reductions and weapons limitations.
Chinese Premier Wen Jiabao invited Prime Minister Vajpayee to visit China in June 2003. They recognized the common goals of both countries and made the commitment to build a "long-term constructive and cooperative partnership" to peacefully promote their mutual political and economic goals without encroaching upon their good relations with other countries. In Beijing, Prime Minister Vajpayee proposed the designation of special representatives to discuss the border dispute at the political level, a process that is still under way.
In November 2006, President Hu Jintao made an official state visit to India, further cementing Sino-Indian relations. India and China are building on growing economic ties to improve other aspects of their relationship such as counterterrorism, energy, and trade. In another symbol of improved ties, the two countries opened the Nathu La Pass to bilateral trade in July 2006 for the first time in 40 years. Although it was the first direct land trade route in years, trade was expected to be local and small since the pass is open only 4 months a year.
Prime Minister Singh and Chinese President Hu met in January 2008 in Beijing in an effort to reinforce their confidence to further develop ties, vowing to promote their relations to a higher level. The meetings cemented a shared vision for the 21st century, with agreement to raise the annual volume of bilateral trade to $60 billion by 2010. Despite flare-ups over border issues, China-India relations remain stable at the strategic level. In 2010 there were a large number of high-level visits from Indian Government officials, including National Security Advisor Shivshankar Menon, External Affairs Minister S.M. Krishna, and President Pratibha Patil.
Former Soviet Union. The collapse of the Soviet Union in 1991 and the emergence of the Commonwealth of Independent States (CIS) had major repercussions for Indian foreign policy. India's substantial trade with the region plummeted after the Soviet collapse and has yet to recover. Longstanding military supply relationships were similarly disrupted due to questions over financing. Russia nonetheless remains India's largest supplier of military systems and spare parts.
Russia and India have not renewed the 1971 Indo-Soviet Peace and Friendship Treaty and follow what both describe as a more pragmatic, less ideological relationship. The visit of Russian President Boris Yeltsin to India in January 1993 helped cement this new relationship. The pace of high-level visits has since increased, as has discussion of major defense purchases. UPA leader Sonia Gandhi and Prime Minister Singh visited Russia in July 2005. President Vladimir Putin traveled to India in January 2007 to attend an Indo-Russia summit and was the guest of honor at India's Republic Day celebrations. President Dmitriy Medvedev visited India in December 2008 and signed a civil nuclear agreement.
U.S.-INDIA RELATIONS
Recognizing India as a key to strategic U.S. interests, the United States has sought to strengthen its relationship with India. The two countries are the world's largest democracies, both committed to political freedom protected by representative government. India is also moving gradually toward greater economic freedom. The U.S. and India have a common interest in the free flow of commerce and resources, including through the vital sea lanes of the Indian Ocean. They also share an interest in fighting terrorism and in creating a strategically stable Asia.
There were some differences, however, including over India's nuclear weapons programs and the pace of India's economic reforms. In the past, these concerns may have dominated U.S. thinking about India, but today the U.S. views India as a growing world power with which it shares common strategic interests. A strong partnership between the two countries will continue to address differences and shape a dynamic and collaborative future.
In late September 2001, President Bush lifted sanctions imposed under the terms of the 1994 Nuclear Proliferation Prevention Act following India's nuclear tests in May 1998. The nonproliferation dialogue initiated after the 1998 nuclear tests has bridged many of the gaps in understanding between the countries. In a meeting between President Bush and Prime Minister Vajpayee in November 2001, the two leaders expressed a strong interest in transforming the U.S.-India bilateral relationship. High-level meetings and concrete cooperation between the two countries increased during 2002 and 2003. In January 2004, the U.S. and India launched the Next Steps in Strategic Partnership (NSSP), which was both a milestone in the transformation of the bilateral relationship and a blueprint for its further progress.
In July 2005, President Bush hosted Prime Minister Singh in Washington, DC. The two leaders announced the successful completion of the NSSP, as well as other agreements to further enhance cooperation in the areas of civil nuclear, civil space, and high-technology commerce. Other initiatives announced at this meeting included: a U.S.-India economic dialogue, the fight against HIV/AIDS, disaster relief, technology cooperation, a democracy initiative, an agriculture knowledge initiative, a trade policy forum, an energy dialogue, and a CEO forum. President Bush made a reciprocal visit to India in March 2006, during which the progress of these initiatives was reviewed, and new initiatives were launched.
In December 2006, Congress passed the historic Henry J. Hyde United States-India Peaceful Atomic Cooperation Act, allowing direct civilian nuclear commerce with India for the first time in 30 years. U.S. policy had opposed nuclear cooperation with India because the country had developed nuclear weapons in contravention of international conventions and never signed the Nuclear Non-Proliferation Treaty. The legislation cleared the way for India to buy U.S. nuclear reactors and fuel for civilian use.
In July 2007, the United States and India reached a historic milestone in their strategic partnership by completing negotiations on the bilateral agreement for peaceful nuclear cooperation, also known as the "123 agreement." This agreement, signed by Secretary of State Condoleezza Rice and External Affairs Minister Pranab Mukherjee on October 10, 2008, governs civil nuclear trade between the two countries and opens the door for American and Indian firms to participate in each other's civil nuclear energy sector.
In July 2009, Secretary of State Hillary Clinton traveled to India to launch the "Strategic Dialogue," which called for collaboration in a number of areas, including energy, climate change, trade, education, and counterterrorism. Prime Minister Singh visited Washington, DC in November 2009 for the first state visit of the Barack Obama administration. The inaugural session of the U.S.-India Strategic Dialogue was held in June 2010 in Washington, DC. The event was successful and showed progress in the U.S. India relationship. President Obama visited India in November 2010.
In July 2011, Secretary Clinton led a U.S. delegation to India for the second round of the U.S.-India Strategic Dialogue, which took place in New Delhi on July 19, 2011, followed by a visit to Chennai.
Principal U.S. Embassy Officials
Ambassador--Nancy J. Powell (arrival April 2012)
Deputy Chief of Mission--Donald Lu
Counselor for Management--Michael C. Mullins
Counselor for Commercial Affairs--Judy Reinke
Counselor for Political Affairs--Herro K. Mustafa
Counselor for Agricultural Affairs--Allan P. Mustard
USAID Country Director--William Hammink (Acting)
