U.S., India Have Yet to 'Unleash' Partnership's Potential

U.S., India Have Yet to 'Unleash' Partnership's Potential

U.S. Secretary of Defense Leon Panetta, right, shakes hands with U.S. Ambassador to India Nancy Powell upon his arrival in New Delhi, India.

U.S. and Indian officials are all smiles and platitudes ahead of strategic talks this week in Washington, but building the closer relationship the Obama administration hoped for has been more difficult than expected. Some experts wonder behind the scenes whether it is already too late to maximize the mutual benefits of cooperation.

Ahead of a third-annual strategic conference with a jammed agenda, slated for Wednesday in Washington, senior officials are focusing on "an incredible array of activity" and a "certain momentum" between Washington and New Delhi.

Nancy Powell, U.S. ambassador to India, touts the level of annual trade in merchandise and services between the two economic giants. Bilateral merchandise trade is up by nearly $52 billion in 1990, according to government data. And overall trade between the two allies could top $100 billion for the time in 2012, Powell says.

When senior U.S. private-sector executives visit her New Delhi office, they often tell her about new opportunities in India their firms are examining.

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For instance, there is "lots of debate" among U.S. corporate chieftains about new opportunities in the Indian insurance and pension markets, Powell says.

"People are making profits," says Nirupama Rao, New Delhi's ambassador to Washington.

Rao is quick to note it is a two-way relationship, noting Friday during a forum in Washington that $26 billion flowed from India into the American economy over the last several years.

Yet, behind the kind words and rosy talk, there are signs of a friendship that never quite took off as each side hoped just three years ago.

In May, U.S. Secretary of State Hillary Clinton said during a visit to India that "there is much more potential to unleash," before adding the two nations "should be working toward having one of the world's largest trading relationships."

The relationship has not blossomed enough to allow for a full unleashing of the fury of U.S.-Indian economic teamwork, experts say.

"The world's oldest and largest democracies were to become major trading partners, with India opening its markets to U.S. investors," Rich Verma and Michael Werz of the Center for American Progress write in a new report. "Three years later some critics contend neither President Obama nor Prime Minister Singh have much to show for all their good intentions."

On the U.S. side, gripes include unmet promises that New Delhi would make changes to its economy that would make it easier for American firms to do business there. U.S. companies were supposed to help India with a range of civilian nuclear programs, but they remain locked out; Boeing and Lockheed Martin hoped to sell F-18 or F-16 fighter jets to Washington's new best friend, but lost a competition to a French firm that underbid both U.S. weapon makers.

Among Indians' complaints with the U.S. are a clunky regime of controls over what firms can export to certain countries, and work visa restrictions that prevent Indian citizens from taking and keeping high-quality jobs in the United States.

One need only glance at the latest data that paints a portrait of the U.S.-Indian trade and economic relationship to see there are reasons to wonder whether the two economic powers will grow any closer than they are today.

"Even as the volume of U.S.-India trade continues to grow," says Karl Inderfurth, a former top U.S. diplomat, "the share of Indian trade that involves the United States is dropping.

"India holds great promise as a potential economic partner for the United States," says Inderfurth. "However, this potential is far from realized. Despite being on track to become the world's third-largest economy, India is only our 13th-largest trade partner."

One move the two nations could make this week is to sign--or enter into final negotiations about--something known as a "bilateral investment treaty," which Washington uses to fan the flames of economic work with other nations, says Inderfurth.