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Asia-pacific

Why is Obama wooing the Indian juggernaut?

Text by Apoorva PRASAD

Latest update : 2010-11-06

On Saturday, US President Barack Obama kicked off a three-day visit to India, the longest trip of his presidency to any one country. Why is the Asian giant so important to the American superpower?

US President Barack Obama landed in India’s financial capital Mumbai on Saturday for a three-day trip to the Asian economic powerhouse – the longest trip of his presidency to any one country.

In the wake of disappointing midterm elections results, which some have attributed to the dismal state of the US economy, Obama’s Indian trip is heavily focused on lifting the US economy through trade with Asia. But in a region bordered by Pakistan and Afghanistan and loomed over by China, India - a vibrant largely English-speaking democracy with a free press - has more than just business prospects to offer the US.

The US already has a big Indian-American community - there are over 2.5 million Americans of Indian origin, one of the fastest growing and richest groups in the USA, according to USINPAC (US-India Political Action Committee). As a case in point, two of the largest companies in the US – Citigroup and PepsiCo – are headed-up by Indian-Americans. And last week, Nikki Haley joined the ranks of important Indian-American politicians when she became governor-elect of South Carolina.

But up until recently, Indian and American ties were viewed through the prism of America's traditional alliance with India's estranged sibling, Pakistan. That is increasingly changing, as India's growing economic and military importance has now changed how the US administration views the country.

Critical economic power

In a New York Times op-ed published on Nov 7th, Obama described Indian economic power as critical to the US. “In fact, every $1 billion we export supports more than 5,000 jobs at home,” he wrote, before landing in Mumbai where he met the India-US Business Council, a top tier business advocacy organisation.

India’s phenomenal GDP growth after liberalisation in the 1990s, now at approximately 8 percent per year, is currently the second fastest in the G20 group of nations.

“India can be a big market for US goods”, concurs an Indian analyst at a leading London-based consultancy firm, when contacted by FRANCE 24. “India is the second largest consumer market in the world now… and unlike China, India's growth is driven by internal consumption,” he said.

That’s not the least of India’s advantage over China, its big business rival in the region. Like the US, the Indian economy runs on standard capitalist principles, unlike China’s often opaque, party-driven approach to growth. “India's financial markets are more transparent than China's,” said the analyst. “[So] people think in the long term India will be a safer bet to invest in”.

Defence deals and military sales

Defence and military equipment are among the many business deals that the US is eyeing in India, which has become the world’s largest arms importer (according to SIPRI, a Swedish research group). “In terms of long-term market potential, India is tough to match”, Saurabh Joshi, editor of defence and security site StratPost, told FRANCE 24.

The list of various deals for military aircraft, artillery guns and other equipment currently being negotiated (between the US and India) is a long one, Joshi adds. “Ten [Boeing] C-17 aircraft. Four more P-8I aircraft. Possibly six more C-130 J aircraft. The F/A-18 Super Hornet and the F-16 are being offered to India in the MMRCA [jet fighters] tender, which is far from complete,” he says.

Deals expected to be completed in the coming days total at least eight billion dollars. Adding to that the so-far undecided contracts for fighter jets, that figure could well go up to at least 20 billion dollars - and counting.

And then there’s the possible nuclear technology trade. In 2008 then-President Bush signed an Indo-US nuclear trade bill, a landmark deal that accepted India’s de facto place in the list of nuclear nations and opened its markets to investment and trade in nuclear technology and power production.

“[There is] talk of sums starting from 150-200 billion,” between the US and India in this arena Joshi says. Though he cautions, there are many “outstanding issues for nuclear trade” to be sorted out, and the market in India for nuclear energy may not be as big as touted by the industry.

Stability in South Asia - Terrorism, Afpak and China

While in Mumbai, the President is staying at the Taj Hotel – the very same hotel that was targeted by Pakistan-based terrorists in the 2008 Mumbai attacks. That is no coincidence, as Obama himself stated, it is a message.

“US interests will be served by stabilising Afghanistan and Pakistan. So will India’s,” says Saurabh Joshi, editor of defence and security site StratPost.

But US interests in India lie beyond cooperating on terrorism. India is rapidly ramping up its defence capability to match China’s military modernisation drive – and the US is happy to help, seeing India as a regional counterweight to China, a non-democratic and increasingly belligerent power.

Strategically, the US “is a formal guarantor of Japanese, South Korean, Taiwanese and Australian security”, says Joshi – most being countries with which China is currently in conflict over maritime economic rights and territorial claims. “There are too many games in town, for the US Navy to be able to maintain a presence everywhere”.

“A formidable Indian naval ability would complement the thrust of [the US] security agenda,” he added.
 

Date created : 2010-11-06

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