US Launches Charm Offensive Against Wary India

By Lara Jakes 1 August 2014

NEW DELHI — Given a rare opportunity to lunch with US Secretary of State John Kerry, Gaurav Dalmia was less interested Thursday in discussing the planned topics at hand, including climate change or even the trade dispute between India and the US. Instead, the Indian businessman was focused on Kerry himself—and whether he would be able to smooth over brittle relations between Washington and New Delhi for the sake of economic growth.

“So there’s a perception in India that Mr. Kerry is not very pro-India. I want to see what the reality is,” said Dalmia, who runs a New Delhi commodities firm. He was among about 50 Indian politicians, scholars and businessmen who attended a private midday meeting with Kerry and Commerce Secretary Penny Pritzker as they pitched a fresh start in a strained partnership with India’s government.

Their mission will be neither easy nor immediate. Despite both nations’ stated desire to move forward where their interests intersect—including on foreign investment, defense partnerships and developing science and technology—the US and India are still stalemated on a number of areas. The two countries have squared off over a major trade deal, regulation of chemical emissions into the environment, the limited number of US visas that are given to visiting Indians, and American surveillance of the ruling Indian political party.

New Delhi is still nursing a grudge over the arrest last December of India’s deputy consul general in New York who was deported after she was indicted on charges of visa fraud and under-paying her maid. And the Obama administration has been seeking since May to build trust with the US and newly elected India Prime Minister Narendra Modi, who was denied an American visa in 2005 after being accused of complicity in religious riots that killed more than 1,000 Muslims three years earlier in the country’s western Gujarat state where he was serving as the top elected official.

Modi will visit Washington in September, and this week’s two-punch charm offensive by Kerry and Pritzker sought to soften any tensions between the US and India before his trip. Kerry will meet privately with Modi on Friday. Defense Secretary Chuck Hagel is planning to visit India next week.

“The moment has never been more ripe to deliver on the incredible possibilities of the relationship between our two nations,” Kerry told a news conference Thursday with India Foreign Minister Sushma Swaraj. He said both nations now have a good idea of where to begin repairing the partnership, adding: “We all acknowledge that there have been ups and downs in the relationship for some period of years.”

Swaraj described “the latent potential” in US-India diplomacy and noted a new foundation between the two nations “to treat issues where we diverge as an opportunity for further conversation and dialogue.”

Foreign investment is a key area where India and the US can find common ground for mutual benefit.

Each country has exponentially increased its investments in the other over the last decade. In 2012, the year for which the latest data is available, the US invested about US$28 billion in businesses based in India. At the same time, India invested $9 billion in US firms—up from $300 million annually in 2000.

As Kerry landed in New Delhi on Wednesday night, Inc. announced it will invest $2 billion to expand its India division, upping the ante for local competitor Flipkart that a day earlier said it had raised $1 billion to fund its own growth. In a statement, Amazon founder and CEO Jeff Bezos touted India’s economic potential as a prime reason for the boost, saying, “We’ve never seen anything like it.”

India is Asia’s third-largest economy and boasts the second most-populated city—New Delhi—in the world.

Still, the nation of 1.2 billion people is struggling to grow while battling a rising cost of living. Hundreds of millions of people live without electricity, Kerry said, and hunger and poverty is widespread throughout the country. India gives broad government food subsidies to its farmers and poor consumers—a benefit that has allegedly undercut fair-market agriculture prices and is at the heart of a World Trade Organization dispute that has irked the US.

The US visit this week was seen mostly as a symbolic trip and was not expected to accomplish many concrete goals. But frank discussions among diplomats at least aired years of grievances and pledges for a new path forward.

“This is an effort by both sides to patch up and bring a new life to strained relations,” said Lalit Mansingh, former Indian ambassador to the United States.