[Senate Hearing 113-463]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 113-463
 

          INDISPENSABLE PARTNERS--REENERGIZING U.S.-INDIA TIES

=======================================================================

                                HEARING

                               BEFORE THE

                   SUBCOMMITTEE ON NEAR EASTERN AND
                    SOUTH AND CENTRAL ASIAN AFFAIRS

                                 OF THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              JULY 16, 2014

                               __________

       Printed for the use of the Committee on Foreign Relations
      Available via the World Wide Web: http://www.gpo.gov/fdsys/

                               ----------

                         U.S. GOVERNMENT PRINTING OFFICE

91-143 PDF                       WASHINGTON : 2014
-----------------------------------------------------------------------
  For sale by the Superintendent of Documents, U.S. Government Printing
  Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800;
         DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC,
                          Washington, DC 20402-0001


                COMMITTEE ON FOREIGN RELATIONS

             ROBERT MENENDEZ, New Jersey, Chairman
BARBARA BOXER, California            BOB CORKER, Tennessee
BENJAMIN L. CARDIN, Maryland         JAMES E. RISCH, Idaho
JEANNE SHAHEEN, New Hampshire        MARCO RUBIO, Florida
CHRISTOPHER A. COONS, Delaware       RON JOHNSON, Wisconsin
RICHARD J. DURBIN, Illinois          JEFF FLAKE, Arizona
TOM UDALL, New Mexico                JOHN McCAIN, Arizona
CHRISTOPHER MURPHY, Connecticut      JOHN BARRASSO, Wyoming
TIM KAINE, Virginia                  RAND PAUL, Kentucky
EDWARD J. MARKEY, Massachusetts
               Daniel E. O'Brien, Staff Director
        Lester E. Munson III, Republican Staff Director

                         ------------

                SUBCOMMITTEE ON NEAR EASTERN AND
                SOUTH AND CENTRAL ASIAN AFFAIRS

                 TIM KAINE, Virginia, Chairman

BARBARA BOXER, California            JAMES E. RISCH, Idaho
BENJAMIN L. CARDIN, Maryland         MARCO RUBIO, Florida
CHRISTOPHER A. COONS, Delaware       RON JOHNSON, Wisconsin
RICHARD J. DURBIN, Illinois          JOHN McCAIN, Arizona

                              (ii)


                            C O N T E N T S

                              ----------
                                                                   Page

Biswal, Hon. Nisha D., Assistant Secretary for South and Central
  Asian Affairs, U.S. Department of State, Washington, DC........     5
    Prepared statement...........................................     6
    Response to question submitted for the record by Senator
      Robert Menendez............................................    57
    Response to question submitted for the record by Senator
      Marco Rubio................................................    58
Curtis, Lisa, senior research fellow, the Heritage Foundation,
  Washington, DC.................................................    39
    Prepared statement...........................................    41
Kaine, Hon. Tim, U.S. Senator from Virginia, opening statement...     1
Rossow, Richard M., Wadhwani Chair in U.S.-India Policy Studies,
  Center for Strategic and International Studies, Washington, DC.    28
    Prepared statement...........................................    30
Risch, Hon. James, U.S. Senator from Idaho, opening statement....     3
Searight, Amy, Ph.D., Deputy Assistant Secretary of Defense for
  South and Southeast Asia, U.S. Department of Defense,
  Washington, DC.................................................    11
    Prepared statement...........................................    12
Singh, Vikram J., vice president, National Security and
  International Policy, Center for American Progress, Washington,
  DC.............................................................    32
    Prepared statement...........................................    34
Wisner, Hon. Frank G., Foreign Affairs advisor, Squire Patton
  Boggs, Washington, DC..........................................    23
    Prepared statement...........................................    26

                                 (iii)



 
                       INDISPENSABLE PARTNERS--
                      REENERGIZING U.S.-INDIA TIES

                              ----------


                        WEDNESDAY, JULY 16, 2014

                           U.S. Senate,
           Subcommittee on Near Eastern and
                    South and Central Asia Affairs,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 3:03 p.m., in
room SD-419, Dirksen Senate Office Building, Hon. Tim Kaine
(chairman of the subcommittee) presiding.
    Present: Senators Kaine, Risch, and McCain.

             OPENING STATEMENT OF HON. TIM KAINE,
                   U.S. SENATOR FROM VIRGINIA

    Senator Kaine. If I could get everyone's attention, this
meeting of the Senate Foreign Relations Committee Subcommittee
on Near East, South, and Central Asian Affairs will come to
order. This is a very great set of panels on a very important
topic. Senator Risch is on his way. He should be here in just a
couple of minutes, and we expect other colleagues may join us
during the hearing. But I want to welcome all to this hearing
today.
    The title of the hearing is ``Indispensable Partners--
Reenergizing U.S.-India Ties.'' I generally am not a fan of the
word ``indispensable.'' There is a great quote attributed to De
Gaulle: ``The graveyards are filled with indispensable men.''
No matter how much we think things are indispensable or people
are indispensable, the answer is we are usually wrong. But in
this case we advisedly chose to use that word because we do
think the partnership between the United States and India meets
the high standard of what ``indispensable'' means.
    This is an important and propitious time with a new
Government in India and a forthcoming visit of the Indian Prime
Minister, Prime Minister Modi, here to the United States in the
fall. So we are very, very glad to have two good panels with
witnesses both from the United States Government and longtime
United States-India experts who are here to illuminate us about
opportunities and challenges and the path forward.
    I had the wonderful fortune of serving as Governor of
Virginia and working very closely with both the Virginia
Indian-American community, but also with significant trade
opportunities with Indian businesses. One of the first business
deals I did as Governor--I will always remember this--in a part
of the State that had been hit very, very hard by NAFTA, that
had lost a lot of jobs after the NAFTA Treaty was signed,
Danville, VA, on the North Carolina border, an economic
development deal was done in a closed manufacturing plant,
where Indian venture capitalists purchased an English plastic
polymer company, decided that they needed to have a U.S.
manufacturing facility, purchased the closed plant in Danville
and hired a Spaniard to be the plant operator.
    When I went to the plant opening in Danville, VA, and I saw
not only a United States and Virginia flag, but an Indian flag,
a United Kingdom flag, and a Spanish flag, I knew something
about the importance of this partnership. And it has worked out
very, very well.
    But we are here at an important time. The United States-
India relationship has grown tremendously in the 6 years since
the signing of the landmark United States-India civil nuclear
deal. Some examples of activity in the last 6 years: The United
States and India participate in more than three dozen dialogues
covering a wide array of cooperative activities: clean energy,
peacekeeping, counterterrorism, health.
    Bilateral trade in goods and services between our nations
has reached nearly $100 billion. In 2013 India was the single
largest country market for the Export-Import Bank, with
authorizations of $2.1 billion. The Partnership to Advance
Clean Energy has mobilized $2 billion in public and private
resources for clean energy projects in India. Our defense
trade, which has kind of been a recent arrival on the scene in
terms of cooperation, has taken off and been very successful,
nearly $10 billion, with billions more in the pipeline.
    Over 100,000 Indian students are currently studying in U.S.
universities. According to the latest Pew Global Attitude
Survey, released just this week, over 55 percent of Indians
hold a very positive view of the United States.
    When asked what country would most likely be India's
leading ally, the United States came in at numer one.
    It is not just about polls and it is not just about trade.
It is also about common democratic values. Maybe that is the
primary thing, the world's oldest democracy and the world's
largest democracy, and the people-to-people ties and the
business linkages we have are very important.
    The 3-million-strong Indian Americans who contribute across
this country to the professions and to the entrepreneurship and
the civic life and academia and every other walk of life serve
as and important bridge between our two countries. Global
connections is a key to economic success today and a person is
a global connection if that person has ties, as so many of our
Indian-American citizens do.
    I was reminded of this last week at a dinner I attended
hosted by the Indian Ambassador to the United States. CEO's of
major American companies, Pepsi and MasterCard, were in
attendance. Both hale from the Indian-American community. Just
in Virginia, more than 100,000 Indian-Americans call Virginia
home, and we have some spectacular, successful businesses.
    One example in Virginia I am proud of, Husk Power. It is an
innovative company. It was founded by graduates of the
University of Virginia. I know that Nisha Biswal will approve
of that as a Cavalier herself. The innovative company provides
electricity to over 200,000 rural Indian households using
biomass. So Indian American professionals from an American
university, UVA, doing a wonderful project that is providing
significant benefit in India.
    Now, any relationship between partners is bound to have
some friction, and there has been friction in the last 6 years.
That is necessary. You do not ever test a friendship until you
have disagreements, and so disagreements occur and the test of
the friendship is whether we can work through them.
    But the strategic rationale behind the partnership is only
growing more important every day. There is increasing
instability around the globe in Syria and Iraq, Russia and
Ukraine, China in the South China Sea. Both India and the
United States notice that, care about it, want to be productive
in helping solve it. So cultivating this partnership in 2014
with the new government in India is critically important.
    The relationship is important today and it will grow.
    India is bound to become the world's most populous nation
and the third-leading economy by 2030. It is a democracy where
the median age is 25. Fifty years from now the relationship
will directly affect the strategic and economic interests of
the entire United States and impact ordinary Americans, as it
does today.
    So we need the United States and India to be joint
stakeholders, to uphold global norms and rules of the road.
    India will need our partnership as it shoulders global
responsibilities and expands its economy to meet its own
developmental goals. So that is why we need to get the
relationship right and that is why the committee is holding the
hearing today. The engagement has to be driven by a sense of
realism and realistic assumptions and shared interests. It has
to avoid just being transactional and keep in mind both long-
term strategic goals, but also a sense of the shared values
that animate both nations.
    So I look forward to hearing today how the United States
intends to capitalize on the new phase in the United States-
India relationship, particularly in the areas of strategic and
regional cooperation, defense ties, and our business and
economic engagement.
    I would like to now ask my ranking member on the
subcommittee, Senator Risch, for opening comments. Following
that I will introduce panel one and we will get right to the
testimony and questions.

           OPENING STATEMENT OF HON. JAMES E. RISCH,
                    U.S. SENATOR FROM IDAHO

    Senator Risch. Well, thank you very much, Chairman Kaine.
    It has been a while since this committee has taken the time
to evaluate the United States-India relationship and it is
appropriate that we do so at this time, particularly in light
of the changes that we see going forward. Fortunately, changes
in India present new opportunities to move our bilateral
relationship forward.
    Specifically, I am encouraged by Prime Minister Modi's
victory and I know there is a lot of hope that Modi wants to
revive India's economic growth, rein in corruption, encourage
the private sector, and create jobs. This will require tough
decisions to be made, but the election provides him with a
mandate to make them.
    Economic reforms will be incredibly important to create a
fair and equal playing field to lure more foreign investment.
This is why I hope we can conclude a bilateral investment
treaty quickly, increase United States direct investment in
India, and, very importantly, improve intellectual property
protections. Those type of protections are absolutely necessary
for any economy hoping to move forward.
    One area of particular interest to me is civilian nuclear
cooperation. Much of the technical cooperation between the
United States and India on nuclear power is led by the great
people at the Idaho National Laboratory located in eastern
Idaho. Just last week, the laboratory hosted the latest meeting
of the U.S.-India Civil Nuclear Energy Working Group. This is a
great partnership.
    However, we need to move beyond the technical cooperation
and research. It has been 6 years since the United States-India
nuclear deal was completed and we have yet to see United States
nuclear companies have the ability to participate in India. I
hope we can see improvement on the liability issues and I urge
the parties to move quickly to resolve those issues. This will
result in the relationship deepening and it will be a great
benefit to both parties.
    Defense cooperation and security are also important arenas
where we can and should increase our collaboration. India is a
pivotal country and can be a crucial partner to maintaining
stability in the Indo-Pacific region. The United States can
help India modernize its military, especially in light of other
powers that are advancing in the region.
    There is already good cooperation through the U.S.-India
Defense, Trade, and Technology Initiative, but there is room
for deeper engagement. India's willingness to adhere to and
increase United States technology protection agreements will be
critical to moving the United States-India defense partnership
forward.
    Again, Mr. Chairman, I think it is very appropriate to hold
this hearing at this time. Thank you for doing so.
    Senator Kaine. Thank you, Senator Risch.
    Now on to the witnesses. We are glad to be joined by
Senator McCain, who recently returned from a trip to India, and
glad that he is with us as well. Our first panel has two
witnesses. Nisha Biswal was sworn in as the Assistant Secretary
of State for South and Central Asian Affairs in October 2013.
She has been before the Foreign Relations Committee a number of
times recently. Previously she served as the Assistant
Administrator for Asia at USAID. She holds a bachelor's degree
from the University of Virginia.
    Dr. Amy Searight is Deputy Assistant Secretary of Defense
for South and Southeast Asia. She is a principal adviser to
senior leadership within the DOD for all policy matters that
pertain to the development and implementation of joint defense
strategies within this region. Dr. Searight, it is great to
have you as well.
    I would like to begin with Secretary Biswal, if you would
give your opening testimony, followed by Dr. Searight, and then
we will move to questions.

  STATEMENT OF HON. NISHA D. BISWAL, ASSISTANT SECRETARY FOR
  SOUTH AND CENTRAL ASIAN AFFAIRS, U.S. DEPARTMENT OF STATE,
                         WASHINGTON, DC

    Ms. Biswal. Chairman Kaine, Ranking Member Risch, thank you
very much for inviting me to testify today and for holding this
very timely hearing. I am pleased to be here with Dr. Searight,
a close friend and colleague. In the interest of time, I will
summarize my statement and ask that the full testimony be
submitted for the record.
    Senator, this is indeed an important time to reexamine the
United States-India relationship. The historic elections this
spring conferred an unprecedented mandate on Prime Minister
Modi to create a historic opportunity as well in reenergizing
our relationship with India. I was in New Delhi last week with
Deputy Secretary Bill Burns to meet with Prime Minister Modi
and key members of his Cabinet. Our trip was on the heels of
the visit by Senator McCain, who was there previously, the
previous week, and again demonstrated that as far as the United
States-India relationship is concerned that this is deeply a
bipartisan supported relationship in the United States.
    In fact, we noted during our meetings that successive
administrations, Democratic and Republican, have made the
strategic bet that a rising India is fundamentally in the
United States interest. Asian economies will play a greater
role in shaping the global economic landscape in the years to
come and will also be of greater consequence on ensuring
regional security. A strong and prosperous India, with its
democratic values, as you noted, Mr. Chairman, and its
entrepreneurial spirit, will play a critical role in shaping
that landscape and will be an increasingly important partner
for the United States in the Asia-Pacific region.
    But if India is to achieve its economic and strategic
potential, it will need to address the myriad economic and
governance challenges that it faces. Much of the excitement
that has been generated by the new Modi government in India and
around the world, and most notably in the business community,
has been around this idea of accountable and effective
government that can unleash India's economic potential.
    As we are invested in the strategic importance of a rising
India, we are also economically invested in India's growth. We
think our economies, our businesses, our universities, and our
peoples can partner and collaborate in helping India realize
its vision and its potential. Our two countries are already
more heavily invested in each other's prosperity than ever
before. Our trade has grown fivefold since 2000, to almost $100
billion annually, and we are focused on growing that fivefold
again to half a trillion, as Vice President Biden has
challenged us.
    American companies recognize the tremendous potential of
India's economy and are eager to make long-term investments in
India. As trade has grown, inevitably we have also had some
areas of disagreement and some areas of friction, as you noted.
We are committed to addressing those areas of friction through
dialogue and engagement, and we are optimistic that this new
government will take the necessary steps to promote long-term
growth.
    Areas of cooperation include energy as one of the brightest
areas, where India is meeting--we are helping India meet its
growing energy needs, as well as creating opportunities for our
own businesses, through contracts on the export of American
liquefied natural gas, identifying unconventional energy
resources, clean energy resources, and fulfilling the promise
of delivering cutting edge United States nuclear energy
technologies, as Senator Risch mentioned, collaborating on
other areas of energy security.
    While my colleague Dr. Searight will discuss in more detail
the defense partnership, I simply want to underscore the
centrality of our security engagement with India to the United
States-India partnership. We are committed to a strong and
capable India that will advance stability and security across
the Indo-Pacific.
    The locus of our convergent strategic interests is in Asia
and, as Prime Minister Modi demonstrated with his invitation to
regional leaders at his inauguration, India has set out that it
will be a more consequential and influential relationship in
the region. We welcome that initiative because strong Indian
leadership is very much in our interest, whether in supporting
a successful security and political transition in Afghanistan,
bolstering trade and economic connectivity between South and
Southeast Asia, improving relations between India and Pakistan,
combating the threats of terrorism and violent extremism.
    Our bilateral engagements over the course of the next
several months will reinforce our strategic, security,
economic, and people-to-people ties. As Secretary Kerry is
planning to travel to New Delhi later this month to cochair the
next round of the U.S.-India Strategic Dialogue, we see new
possibilities for advancing that partnership. The strategic
dialogue will kick off a series of high-level engagements
throughout the late summer and into the fall, culminating in
the visit of Prime Minister Modi to Washington at the
invitation of President Obama.
    But, Mr. Chairman, the true potential of this relationship
was probably best captured by Prime Minister Modi when he said
to us last week that this is a relationship not just about the
benefits it brings to the Indian people or the American people,
but that its true value is that when the world's largest
democracy and the world's oldest democracy come together the
world stands to benefit.
    We deeply appreciate that framing and we deeply appreciate
the engagement and support that this relationship enjoys across
the United States. The U.S. Congress and this body has played
an important role in continuing to advance the partnership and
we look forward to working with you as we move forward in the
months ahead.
    With that, Mr. Chairman, I look forward to answering any
questions that you may have.
    [The prepared statement of Ms. Biswal follows:]

                 Prepared Statement of Nisha D. Biswal

    Chairman Kaine, Ranking Member Risch, thank you for inviting me to
testify before you today. It is an honor to appear before this
committee, and I'm pleased to speak alongside my colleague, Deputy
Assistant Secretary of Defense for South and Southeast Asia, Amy
Searight.
    This is indeed an important time to reexamine U.S.-India relations.
The historic elections this spring, which brought a record 530 million
voters to the polls and conferred an unprecedented mandate on Prime
Minister Narendra Modi and
the Bharatiya Janata Party, also created a historic opportunity to
reenergize our relationship.
    Mr. Chairman, successive administrations have made the strategic
bet that a rising India is in the U.S. interest. Our rebalance to the
Asia-Pacific is premised on the consequential role the region's 4.3
billion people will play in global politics, security, and economics in
the 21st century. The continent's success will depend on choices Asian
nations and their partners make. A strong India will play a critical
role in the coming decades in shaping this Asian landscape, and our
partnership with India will play an increasingly important role in that
context.
    But if India is to achieve its economic and strategic potential, it
must grapple with the myriad economic and governance challenges it is
facing, including slow growth, energy shortages, and flagging foreign
investment.
    I had the opportunity to accompany Deputy Secretary Bill Burns to
India last week to meet with Prime Minister Modi and key members of his
cabinet to discuss their economic and security agenda, as well as the
U.S.-India relationship. The Modi government has identified
infrastructure, manufacturing, modernizing the military, energy
security, attracting greater foreign investment, and expanding access
to skills training and education as its key priorities. The Prime
Minister, in inviting regional leaders to his inauguration, also
signaled that India will play a greater strategic role in its immediate
neighborhood and across the Indo-Pacific region. For India to achieve
its potential, Prime Minister Modi has said that one of his top
priorities will be efficient, effective, and accountable governance.
    In all the areas that the Modi government has identified as
priorities, we think the United States, including our businesses and
universities, can play an important role in helping address the
challenges India faces and creating opportunities that benefit both
countries. But the true potential of the relationship is best captured
in what Prime Minister Modi said to Deputy Secretary Burns last week.
He noted that he does not see our relations in terms of the benefits it
brings to the Indian people or the American people--that goes without
saying. The true power and potential of this relationship, he said, is
that when the world's oldest democracy and the world's largest
democracy come together, the world will benefit.
    Mr. Chairman, we are confident we can work in a strong and
collaborative partnership with the Modi government to grow our economic
and strategic relations with India in a way that benefits both
countries and both economies. But we also believe the true measure of
this partnership, which President Obama said will be one of the
defining partnerships of the 21st century, is its potential to address
global challenges and, as the Prime Minister noted, to benefit the
world.
                     economic and trade partnership
    Our two countries have never been more invested in each other's
economic future. India's goal of building a strong and integrated
economy that is led by private-sector growth and boasts a global reach,
will offer sustainable, long-term market opportunities for U.S. firms.
    With annual two-way trade in goods and services of almost $100
billion in 2013--up 61 percent from 2009 and over 400 percent since
2000--we already enjoy an important commercial relationship with India.
We're focused on growing that fivefold again, a goal Vice President
Biden set last year on his visit to India. To achieve that ambitious
figure, American companies need to believe that the benefits of trade
with India outweigh the costs and the challenges--and that India
remains committed to growth over the long term.
    One way to strengthen two-way investment and ensure increased
opportunities for U.S. businesses in India is through a Bilateral
Investment Treaty (BIT). A BIT with India would help support key
economic objectives for both countries, from protection of investment
interests overseas to the promotion of market-oriented policies and
exports.
    A BIT would also greatly improve two-way investment flows. That's
good for the U.S. economy. Increasing Indian foreign direct investment
in the United States would expand U.S. jobs in a variety of
professional, scientific, and technical sectors that have traditionally
attracted Indian investment. Trade expansion also benefits families and
businesses by supporting productive, high-paying jobs in exports and
increasing the variety of products available for purchase.
    American companies recognize the tremendous potential of India's
economy and are eager to make long-term investments in India. U.S.
companies--boasting the highest standards and highest quality products
and services--can play an invaluable role in transforming the Indian
economy through partnerships for joint innovation and development.
Cross-pollination of U.S. and Indian businesses is a win-win for our
economies and will create thousands of jobs in both our countries.
    Higher education is a vital part of our economic agenda. Indian
students comprise the second-largest group of foreign students in the
United States, with 100,000 students studying in the United States in
2012-13. Not only do they contribute
over $3 billion to the U.S. economy every year, they also advance
innovation and research in our universities.
    Our education partnership is not focused only on universities. Mr.
Chairman, in your home State of Virginia and throughout the United
States, community colleges are working with Indian counterparts to
strengthen the connection between industry and education. Working with
the Indian Government, we are keen to help India adapt our community-
college model to meet its skills needs and goal of building 10,000
community colleges by 2030, so that India's future workforce can
benefit from one of our Nation's greatest exports, knowledge, and skill
development.
    As trade has grown by a factor of five in 15 years, inevitably we
have also had some disagreements over trade. We're committed to
addressing trade frictions through dialogue and engagement. We
appreciate the huge strides India has made over the past two decades,
benefiting from trade liberalization and reappraising decades-old
orthodoxies. While India is still ranked 134 out of 189 countries in
the World Bank's Ease of Doing Business ranking, the new government is
already taking decisive steps to make India more open to the foreign
businesses and investment that can help stimulate greater growth.
    On July 10, the Indian Government unveiled its Union Budget for
consideration by Parliament. There is much for us to take note of,
including efforts by the government to stimulate growth; curb
borrowing; and reduce barriers to investment in defense, insurance, e-
commerce, transportation infrastructure, and real estate. We are
studying the budget proposal closely, and we will continue to follow
the parliamentary debates as the budget bill moves forward. In fact, a
senior delegation led by Assistant Secretary of Commerce Arun Kumar,
along with officials from USTR and the State Department, is in India
right now, engaging with the new government on a broad range of
economic issues.
    To fully realize its economic potential, India also needs to foster
inclusive and sustainable growth. While women continue to rise to the
highest positions in civil society, business, and government, in many
ways the potential of women and girls in India remains untapped and
underutilized as a force for growth and development. Fundamental issues
of women's security and opportunity need to be addressed, so that
Indian women can achieve their full potential and make their
contribution to India's growth story. As President Obama has said,
``When women succeed, nations are more safe, more secure, and more
prosperous.'' We know that securing equal rights and opportunity for
women and girls is not only the right thing to do, but the smart thing
to do.
    Climate change is another issue that all emerging economies,
including India, are grappling with. For growth to be enduring, it must
be environmentally sustainable. We enjoy a broad range of bilateral
cooperation with India on clean energy and climate issues, including
Secretary Kerry's Climate Change Working Group. Our cooperation on
mitigating the causes and effects of climate change, including
investment and development of clean and renewable energy sources, is
increasingly a whole-of-government effort. It is our hope this
bilateral cooperation can lead to greater collaboration in multilateral
fora.
                         energy and innovation
    We have seen tremendous progress in our energy cooperation since
the launch of the U.S.-India Energy Dialogue in 2005. This forum has
brought our governments and private sectors together to expand
cooperation on nuclear energy, electrical grid and power generation,
energy efficiency, and oil and gas exploration. It has also expanded
markets for renewable energy technologies and lowered barriers to clean
energy deployment. The Energy Dialogue--along with the Energy Security
Roundtable--has leveraged each country's strengths in research, opened
opportunities for American businesses and technologies, and
strengthened India's energy security and economic growth.
    Under the Partnership to Advance Clean Energy, we have mobilized
over $2 billion of public and private investment in solar, biofuels,
building efficiency, and other areas. Our energy relationship is also
expanding through contracts for the export of American liquefied
natural gas, by together identifying unconventional energy resources,
and by fulfilling the promise of delivering cutting-edge U.S. nuclear
energy technology to meet Indian energy needs. These are top priorities
for the United States and India.
    One fast-growing area of partnership is our robust science and
technology cooperation. Our collaboration sustains economic growth and
job creation, while helping our citizens to live longer, healthier
lives. We will showcase this partnership later this year in New Delhi
at the U.S.-India Technology Summit, which will enable new partnerships
in innovation and technology development, stemming from breakthroughs
our scientists and engineers have already achieved together.
    The intersection of innovation and health will provide the next
frontier of partnership for the United States and India, with global
implications. Already, our two countries are deploying a rotavirus
vaccine, ROTAVAC, the product of a public-private partnership that has
the potential to save hundreds of thousands of young lives in India as
well as around the world.
    We are also expanding our efforts in space exploration and science.
NASA has collaborated with the Indian Space Research Organization to
share navigation expertise for India's Mars Orbiter Mission, and we are
exploring even more opportunities for collaboration through our Civil
Space Joint Working Group.
                                security
    While my colleague will discuss the future of defense trade and
cooperation, I would like to underline the centrality of our security
engagement to the U.S.-India partnership. We are committed to a strong
and influential India in the security realm.
    Take, for instance, the impressive growth in our counterterrorism
(CT) and security cooperation over the last several years. This
includes the December 2013 conference in New Delhi on mega-city
policing, which focused on domestic terrorism, emergency disaster
response, corruption, and other challenges faced by major cities in
both countries.
    India remains an active and strong CT partner of the United States.
Our cooperation has already brought to justice several Mumbai
terrorists, including David Headley and Ajmal Kasab. Five years after
the terrorist assault on Mumbai, the United States stands with the
people of India in mourning the loss of innocent lives, including six
Americans, and seeking justice. As President Obama has stated, the
Mumbai perpetrators, financers, and sponsors must be held accountable
for their crimes, and we have called on all governments to do just
that. We will also continue to work together to track and disrupt
terrorism, including those responsible for the Indian consulate attack
in Herat.
                          regional cooperation
    As I noted at the outset, the locus of our convergent strategic
interests is in Asia. We are confident that a strong U.S.-India
partnership will help us address shared challenges and seize shared
opportunities.
    When Prime Minister Modi invited the Prime Minister of Pakistan,
Nawaz Sharif, and the leaders of South Asia Association for Regional
Cooperation (SAARC) countries to his inauguration ceremony, he
demonstrated his firm commitment to strengthening India's ties with its
immediate region. That's good news for India and the region, and
greatly beneficial to global stability.
    In South Asia, where intraregional commerce comprises only 5
percent of total trade, and intraregional investment a paltry 1 percent
of investment flows, India has a chance to bring its entire
neighborhood along with it, enhancing prosperity and peace by boosting
trade and building connectivity throughout South Asia and the Bay of
Bengal region. That India trades much more with Europe, the United
States, and the Middle East than with its immediate South Asian
neighbors is a global economic anomaly, one that India can help address
by shaping a connectivity network between India, South Asia, and the
rest of the continent. The United States welcomes the new government's
efforts to strengthen SAARC, and we were pleased to see Indian Minister
of External Affairs Sushma Swaraj make her first official visit abroad
to Bangladesh in late June.
    We are also confident that the United States can play a helpful
role in facilitating trade and connectivity in South Asia, through our
New Silk Road and Indo-Pacific Economic Corridor strategies. American
firms have voiced strong support for our leadership in the region,
noting that U.S. technology should be instrumental in developing cross-
border ties in the region.
    Where do our comparative advantages lie? The United States has a
tremendous opportunity to encourage physical connectivity by expanding
port and ``last mile'' connectivity across the Bay of Bengal region,
and linking key Indian, Bangladeshi, and Burmese transit hubs; to help
shape regional regulatory architecture through regional trade and
transit agreements, improving the investment climate for greater
foreign direct investment, and reducing nontariff trade barriers
throughout South Asia; and to foster human connectivity by linking
government officials, business leaders, think tanks, and civil society.
    We support increasing trade and investment between India and
Pakistan, and reducing trade barriers. Increased economic cooperation
will improve the long-term prosperity of both nations and the entire
region. Trade between India and Pakistan in 2013 was a relatively
meager $2.5 billion. There's no reason that figure can't quadruple to
$10 billion, with steps to ease trade barriers and open up new market
and investment opportunities.
    Further west, India shares our goal of a successful transformation
in Afghanistan. We both want to ensure the peace and stability of a
democratic Afghanistan, and help it economically integrate further into
the South and Central Asia region. Our bilateral and trilateral
discussions on Afghanistan help advance our economic, political, and
security objectives.
    Both our nations watch developments in the Middle East with a close
eye. We share concerns about the situation in Iraq. India has been
supportive of the P5+1 process and a partner in our efforts to limit
Iranian oil exports as we seek a negotiated solution to the Iranian
nuclear issue. And our efforts to address trafficking in persons and
labor concerns in the gulf benefit millions of expatriate Indian
workers there.
    We have expanded our regional consultations with India to include
South, Central, West, and East Asia. We will hold new rounds of several
of these dialogues in the months to come, and are exploring how to
elevate these discussions further. These consultations are not just a
talk shop: The U.S.-India-Japan trilateral dialogue has deepened our
partnership on our Indo-Pacific Economic Corridor agenda, maritime
security, humanitarian assistance and disaster planning, as well as
coordination in multilateral fora. Last year, with the support of
India, we participated in the Indian Ocean Regional Association as a
dialogue partner for the first time.
    While some believe our renewed strategic commitment to India comes
at the expense of other regional powers, we see it differently. We
welcome the rise of any power in Asia that upholds global norms and
contributes to the stability and prosperity of the continent. We also
welcome, with India, the opportunity to showcase the commonalities that
bind the largest democracies in the Indo-Pacific region, including
India, Indonesia, Australia, Japan, and the United States.
                             looking ahead
    With a solid foundation to work from, our bilateral engagements
over the course of the next several months will reinforce our
strategic, economic, and people-to-people ties. Already, India's newly
appointed Minister for Health and Family Welfare, Dr. Harsh Vardhan,
visited Washington and several other cities in the United States to
explore how to enhance our U.S.-India Health Initiative, and make more
progress together in improving child health in India. I was
particularly pleased that earlier this month Senator McCain led a
congressional delegation to New Delhi, where he met with Prime Minister
Modi.
    Let me briefly touch on our U.S.-India Strategic Dialogue.
Secretary Kerry is planning to travel to New Delhi later this month to
cochair the U.S.-India Strategic Dialogue with his new counterpart,
Minister of External Affairs Sushma Swaraj. This year, the Strategic
Dialogue will highlight how U.S.-India ties promote shared prosperity
in both countries.
    We expect that the Strategic Dialogue will kick off a series of
cabinet- and sub-cabinet-level visits throughout the late summer and
fall, culminating in the visit of Prime Minister Modi to Washington at
the invitation of the President.
    Looking further out, we're particularly excited about the private
sector-led U.S.-India Technology Summit, scheduled for November 2014 in
the New Delhi area. The Tech summit--as we have dubbed it--will spur
the formation of new partnerships between our countries in science-,
technology-, and innovation-related sectors. We expect that our most
successful American firms will participate, and we're confident large-
scale events like this will help create jobs and build new partnerships
in both countries.
    Today, we see the U.S.-India relationship on increasingly sure
footing. But with countries as large as ours and with democratic
systems that foster debate and dissent, we're likely to have some
disagreements. It is only natural. However, I can assure you that our
systems are mature enough to address impediments with honesty and
sincerity, and ensure that no one, isolated incident can jeopardize
what we have built over three successive presidencies and between our
1.6 billion citizens.
    For India and the Indo-Pacific region to live up to their
potential, they must create societies that encourage strong and
inclusive economic growth; one where the private sector and not
government leads economic development. They must quell terrorism and
counter violent extremism while at the same time advancing human
dignity and protecting religious freedom. They must address barriers
preventing women and minority groups from full political, economic, and
social participation.
    Mr. Chairman, simply put, the Obama administration firmly believes
that if the United States and India can continue to grow our trade and
investment relationship and further enhance our already strong
strategic partnership, we and the world will be better off. By
reenergizing the U.S.-India relationship now, we are making future
generations of Americans and Indians safer and more prosperous, and we
are helping strengthen stability in Asia and around the world.
    Finally, I would be remiss not to acknowledge the strong support of
the U.S. Congress and this committee in particular for the U.S.-India
partnership. Many of the greatest accomplishments over the last decade
were made possible by the advocacy and support of members of both
Houses, and from both parties. I look forward to working closely with
you as we embark on a new chapter of U.S.-India relations in the months
and years to come.
    Thank you, Mr. Chairman. I look forward to answering any questions
that you and others from the committee may have.

    Senator Kaine. Thank you, Secretary Biswal.
    Dr. Searight.

STATEMENT OF AMY SEARIGHT, PH.D., DEPUTY ASSISTANT SECRETARY OF
   DEFENSE FOR SOUTH AND SOUTHEAST ASIA, U.S. DEPARTMENT OF
                    DEFENSE, WASHINGTON, DC

    Dr. Searight. Thank you for inviting me to be here today to
participate in this timely hearing on a very important
relationship. As you all know, the U.S. Government and the
Department of Defense are committed to a long-term strategic
partnership with India. We view India as a regional and
emerging global power, as well as a provider of security and a
strategic partner with shared interests, from the Indian Ocean
to Afghanistan and beyond.
    Defense relations continue to play a significant role in
advancing the strategic partnership and we continue to make
progress toward advancing United States-India defense
cooperation to the point where it is both expected and routine
across our multifaceted relationship. The bottom line is that
we want India to have all of the capabilities it needs to meet
its security demands and we want to be a strong partner in that
effort.
    Our policy in this area has not changed and remains part of
our broader rebalance to the region. We continue to maintain
strong military-to-military ties and are building a growing
record on defense trade. This partnership requires effort and
persistence on both sides, and as we look ahead we see that
there are even more areas where the two of us can cooperate.
    One of the pillars of our effort to build a strategic
partnership with India on defense is to U.S.-India Defense,
Trade, and Technology Initiative, or DTTI. Secretary Hagel when
he was recently in Singapore for the Shangri-La Dialogue
designated the Under Secretary of Defense for Acquisition,
Technology, and Logistics, Mr. Frank Kendall, to be his lead
for DTTI. Even as Under Secretary Kendall assumes this role,
the Secretary himself will continue to play a very strong
personal role in making sure of the success of this initiative.
    Only 2 months into Prime Minister Modi's tenure, it already
looks like we will have a very busy year. Under the auspices
of DTTI, we are ready to move forward on a number of efforts,
from coproduction and codevelopment proposals to procurement
and sales. On the coproduction and codevelopment side, we have
continued to identify forward-leaning proposals from United
States industry for cooperative projects with India. Once the
new government shows interest in proposals already offered, we
will follow up.
    We also remain supportive of finding ways to include
industry leaders in existing official dialogues and will
continue to look for opportunities to foster close ties between
the United States and Indian defense sectors. We hope to see
more joint partnerships take root, like we have seen between
Lockheed Martin and Tata building C-130 components in
Hyderabad.
    We will also continue to advocate on behalf of U.S.
industry for needed changes in the Indian system, such as
continued reforms to their offset system, and we will continue
to emphasize that we offer a transparent export system in
foreign military sales. On foreign direct investment, we are
very encouraged by the Modi government's proposal in the budget
introduced last week to raise FDI caps in the defense sector to
49 percent.
    DTTI alone does not fully capture the scope of our
engagement with the Indian Government. There are a wealth of
opportunities for engagement already scheduled for this year
and more are expected. We are now at the point where we can
look toward the horizon and decide where we want to take the
relationship further. We will continue to hold close
consultations with India on Afghanistan and regional security
and will look for opportunities to work together as our
presence in Afghanistan draws down post-2014.
    India is currently participating right now in the Rim of
the Pacific, or RIMPAC, 2014 exercise in Hawaii, where for the
first time an Indian frigate has joined this large multilateral
activity. And Japan will participate in Malabar this year,
which is our largest bilateral naval exercise with India and is
schedule to take place at the end of this month.
    Secretary Hagel will be traveling to India in early August
to discuss bilateral defense ties with Indian officials. Under
Secretary Kendall is expected to travel with him, as will I.
This trip will follow the State Department's strategic dialogue
which, as Secretary Biswal mentioned, will be in New Delhi on
July 31, but this trip will be our first opportunity to engage
in a direct and meaningful way with India's new leadership on
defense and security issues that matter to us both.
    In addition, the 2005 New Framework for the U.S.-India
Defense Relationship will be up for renewal in June 2015 and we
are looking for opportunities to reinforce and potentially
expand efforts under its guidelines. The framework was a
breakthrough document and laid out the bilateral defense
cooperation structure that we follow today. This year we have
an opportunity to review our progress and set goals for the
coming decade on where we want to take the relationship next.
    Thank you very much again for this opportunity and I look
forward to your questions.
    [The prepared statement of Dr. Searight follows:]

                 Prepared Statement of Dr. Amy Searight

    Thank you for inviting to me to be here today to participate in
this very timely hearing.
                                overview
    As you all know, the U.S. Government, and the Department of Defense
are committed to a long-term strategic partnership with India. We view
India as a regional and emerging global power, as well as a provider of
security and a strategic partner with shared interests from the Indian
Ocean to Afghanistan and beyond.
    Defense relations continue to play a significant role in advancing
the strategic partnership, and we continue to make progress toward
advancing U.S.-India defense cooperation to the point where it is both
expected and routine across our multifaceted relationship. Bottom line:
we want India to have all of the capabilities it needs to meet its
security demands, and we want to be a strong partner in that effort.
    Our policy in this area has not changed, and remains part of our
broader rebalance to the region. We continue to maintain strong
military-to-military ties and are building a growing record on defense
trade. This partnership requires effort and persistence on both sides,
and as we look ahead, we see that there are even more areas where the
two of us can cooperate.
    update on the u.s.-india defense trade and technology initiative
    One of the pillars of our effort to build a strategic partnership
with India on defense issues is the U.S.-India Defense Trade and
Technology Initiative (DTTI). Secretary Hagel designated the Under
Secretary of Defense for Acquisition, Technology, and Logistics, Frank
Kendall, as his lead for the DTTI at the Shangri-La Dialogue in June.
Even as Under Secretary Kendall assumes this role, the Secretary will
continue to take a personal interest in the success of this initiative.
    Only 2 months into Prime Minister Modi's tenure, already it looks
like we will have a very busy year. Under the auspices of DTTI, we are
ready to move forward on a number of efforts, from coproduction/
codevelopment proposals to procurement and sales.
    As you recall, DTTI was formulated in recognition that we needed to
find a better way for our two systems to work together and to ensure
that in cases where we wanted to collaborate, bureaucratic hurdles
could be surmounted. It has paved the way for increased private sector
ties, science and technology cooperation, defense trade, and potential
for coproduction/codevelopment.
    Regarding export controls, we continue to review each dual-use and
munitions export application on a case-by-case basis. DOD provides its
recommended dual-use positions to the Department of Commerce and
munitions positions to the Department of State. Over the past year and
a half, India has succeeded in acquiring the vast majority of what it
sought to obtain from U.S. industry, with DOD recommending approval of
just over 90 percent of dual-use requests and about 95 percent of
munitions requests.
    On the coproduction/codevelopment side, we have continued to
identify forward-leaning proposals from U.S. industry for cooperative
projects with India. Once the new government shows interest in the
proposals already offered, we will follow up. Positive indications from
the Indian side on these proposals would go a long way in helping us
maintain the Initiative's momentum, but we realize that the new
government--not even 2 months old--may take some time in responding.
    We remain supportive of finding ways to include industry leaders in
existing official dialogues, and will continue to look for
opportunities to foster closer ties between the U.S. and Indian defense
sectors. We hope to see more joint partnerships take root, like we have
seen between Lockheed Martin and Tata building C-130 components in
Hyderabad.
    We will also continue to advocate on behalf of U.S. industry for
needed changes in the Indian system--such as continued reforms to their
offset system--and continue to emphasize that we offer a transparent
export system in foreign military sales. On foreign direct investment,
we are very encouraged by the Modi government's proposal in the budget
introduced last week to raise FDI caps in the defense sector to 49
percent.
                              way forward
    DTTI alone does not fully capture the scope of our engagement with
the Indian Government. There are a wealth of opportunities for
engagement already scheduled for this year, and more are expected. We
are now at a point where we can look toward the horizon and decide
where we can take the relationship further.
    We will continue to hold close consultations with India on
Afghanistan and regional security, and will look for opportunities to
work together as our presence in Afghanistan draws down post-2014.
    India is currently participating in the Rim-of-the-Pacific (RIMPAC)
2014 exercise in Hawaii, where for the first time an Indian frigate has
joined this large multilateral activity. Japan will participate in
MALABAR this year, our largest bilateral naval exercise with India,
scheduled for the end of this month.
    Secretary Hagel will be traveling to India in early August to
discuss bilateral defense ties with Indian officials. Under Secretary
Kendall is expected to travel with him, as will I. This trip will
follow the State Department's Strategic Dialogue, scheduled for July 31
in New Delhi, and will be our first opportunity to engage in a direct
and meaningful way with India's new leadership on defense and security
issues that matter to us both.
    We also look forward to convening the Defense Policy Group (DPG)
this year, now that Under Secretary of Defense for Policy, Christine
Wormuth, has been confirmed. As the premier defense dialogue between
our two countries, it is extremely important for this group and its
subgroups to be reenergized as we look toward a very busy year.
    The 2005 New Framework for the U.S.-India Defense Relationship will
be up for renewal in June 2015, and we are looking for opportunities to
reinforce and potentially expand efforts under its guidelines. The
Framework was a breakthrough document and laid out the bilateral
defense cooperation structure we follow today. This year, we have an
opportunity to review our progress and set goals for the coming decade
on where we want to take the relationship next.
    As we enter this window of opportunity on both sides, we need to
ensure our bureaucracies do not prevent progress and further
development of a vital strategic partnership. We will continue to urge
both sides to keep moving forward, deepen our candor in discussions,
and find new areas to collaborate in the coming years.
    Thank you again for this opportunity, and I look forward to your
questions.

    Senator Kaine. Great. Thank you.
    We will do questions in 6-minute rounds and I will begin.
Secretary Biswal, dig in a little bit more to your recent visit
with Deputy Secretary Burns. You talked about direct dialogue
with Prime Minister Modi and his clarity about the priorities
that he views as his most pressing priorities. If you could
talk a little bit about that discussion and the kinds of
priorities where he wants to focus his initial energies, that
would be helpful.
    Ms. Biswal. Certainly. Thank you, Mr. Chairman. We did have
a very good meeting with the Prime Minister, as well as with
the Finance Minister, with the External Affairs Minister, and
various other members of the Cabinet. Clearly the economic
growth agenda is going to be one of the key agendas, and within
that they have identified a desire for increased United States-
India cooperation in infrastructure, in manufacturing, in the
energy sector, and certainly looking at the whole issue of
skills and how we can improve access to education and skills in
terms of the Indian population.
    Those are all areas where we think that American
educational institutions and American businesses, American
technology, bring very significant added value, and we are
looking to see how we can address some of those areas in more
specificity as we look forward to the strategic dialogue and to
the Prime Minister's visit here this fall.
    Senator Kaine. One of the initial signs that I thought was
very positive was in Prime Minister Modi's inauguration, his
decision to invite Pakistani Prime Minister Sharif, and not
only to have him attend, as other heads of state did, but the
opportunity that they took to then find time to speak together
at some length. How do you see Indo-Pakistani ties today and
how are they progressing? Can greater trade contribute to
closer relationships and rapprochement in the region?
    Ms. Biswal. You know, Mr. Chairman, both Prime Minister
Sharif and Prime Minister Modi have come into office with a
very strong agenda and a very strong mandate for economic
opportunity for their populations. We see an improvement and an
opening in the economic relationship between India and Pakistan
as one win-win opportunity that both leaders could and should
pursue. We have seen some statements to that effect that make
us think that such an easing of trade relations, improving of
trade relations, is something that both are considering. So we
would hope and we would encourage that this would be an
important way to invest both countries in each other's
economies and in each other's opportunities.
    Senator Kaine. Thank you.
    Dr. Searight, I was surprised as I was preparing for this
hearing with staff to read--and just tell me if this is right--
that the United States and India from a defense standpoint have
as many joint exercises together as the United States has with
any other nation in the world. The notion of this kind of joint
activity is pretty significant.
    I wanted to ask in particular about cooperation on
counterterrorism strategies. The United States is dealing with
it and India has dealt with it as well. Talk to me a little bit
about the level of cooperation between us on counterterrorism
activities?
    Dr. Searight. Mr. Chairman, you are correct that we do a
broad range of military-to-military activities, including a
number of exercises. In terms of specific counterterrorism
exercises, I will have to get back to you with the specifics on
that.
    Senator Kaine. How about, separate from exercises, just the
state of the relationship on counterterrorism planning? Talk to
me about that a little bit if you can, or Secretary Biswal,
either way?
    Ms. Biswal. Sure. We have very extensive areas of
cooperation on counterterrorism. It is both a priority for the
United States and one for the Indian Government. So we have a
homeland security dialogue where we do both discussions on
intelligence cooperation with respect to counterterrorism and
on technology and training and capacity issues with respect to
counterterrorism. We expect that the strategic dialogue later
this month will have a strong component focused on
counterterrorism as well, with participation from the
Department of Homeland Security, the State Department's Bureau
of Counterterrorism, and other key players, to see how we can
expand both the institutional aspects of cooperation as well as
the operational aspects of cooperation.
    Senator Kaine. Thank you very much.
    One of the things we have been supportive of in the past
has been Indian membership in multilateral export control
regimes. There are four in particular where we have supported
India's participation in: The Nuclear Suppliers Group, Missile
Technology Control Regime, the Wassenaar Agreement, and the
Australia Group. What is the current status of India
progressing into membership in these multinational export
regimes?
    Ms. Biswal. We continue to very much strongly support
India's inclusion in those four regimes, and India has been
taking steps in terms of its own aspirations and applications
to those regimes. It is an issue where it is not solely up to
the United States and we continue to look for opportunities to
advance India's membership.
    Senator Kaine. We have a U.S.-India Higher Education
Dialogue that has a number of purposes, one of which is to try
to deal with a system that has a tremendous demand. They are
overburdened by the demand and the United States and India are
cooperating in dealing with it. What is the current status of
that U.S.-India Higher Education Dialogue?
    Ms. Biswal. This is a very important area of collaboration
between our two countries. We hope to have a higher education
dialogue later this year, both in terms of how we can expand
access to American educational institutions for Indian students
who are seeking to come to the United States and how we can
expand opportunities for American institutions to partner with
and provide opportunities in India.
    There is a very strong emphasis on access to education for
the new government as they look to increase the skills base of
their work force and I think that there is an opportunity here
as we look at things like community colleges and the systems
that have worked so well in our country, how we can partner and
collaborate to provide those kinds of educational platforms in
India as well.
    Senator Kaine. Great. Thank you.
    Senator Risch.
    Senator Risch. Well, thank you.
    Ms. Biswal, I want to go back to the matter I raised in my
opening statement regarding civil nuclear power. As I
explained, we are so proud of what we do in Idaho. We are the
flagship--we have the flagship laboratory, the lead laboratory
in America on civilian nuclear power. As a result of that, we
do have relationships with other countries and we are proud of
the relationship that we have with India, and particularly have
the working group, and even going so far as to say it has been
hosted there very recently.
    But we are disappointed that we have been 6 years now and
have not really seen the participation of the U.S. nuclear
industry, in particular the companies being able to participate
there. It of course surrounds this issue of liability. What can
you tell us about that? What work is being done? What are the
prospects? What is our prognosis for how that is going to
resolve, if it is going to resolve?
    Ms. Biswal. Senator, we share your frustration in terms of
the lack of progress over the last 6 years, while we did get
some small progress and we were able to complete a small
contract with respect to the previous government. We see some
expanded areas of opportunity with the new government. While we
have not yet had detailed discussions with the Modi government
on the way forward on civil nuclear cooperation, we believe
that there may be an opening to address nuclear liability
issues either through a legal framework or through other
frameworks that can help create more surety on what the
application of liability might be, so that it is not unlimited
liability, as the companies are rightly concerned.
    But this is going to be an area that is going to require
much greater discussion between the United States and India and
between the companies and NPCIL to see what the way forward is
going to be. I think that we have heard from Westinghouse that
they think that there is a greater scope for trying to make
progress on this and we are going to pursue that in the coming
months.
    Senator Risch. I understand it is very early on in the Modi
administration, but do you see some things there that give you
some hope that there is going to be some movement in that
regard?
    Ms. Biswal. We certainly heard statements that make us feel
like there is a desire to find a way forward. The devil is
always in the details and for that we really do need to wait
and see what the conversations disclose.
    Senator Risch. Have you got any ideas or suggestions how we
might move that forward a little by pushing a little bit on it?
    Ms. Biswal. Well, I think we need to see whether there are
options either in terms of legislative remedies or regulatory
remedies that can help create a framework for discussions to
proceed with respect to liability. Beyond liability, there are
a host of other issues that also need to be addressed, which we
have not really been able to engage in until the liability
issues are addressed.
    Senator Risch. Ms. Searight, next year the 10-year defense
framework agreement expires. Do you have confidence we are
going to be able to renegotiate that and get a new agreement to
move forward?
    Dr. Searight. Yes, that is certainly very high on our
priority list. We do see it as a real opportunity to take stock
of what we have accomplished under the framework agreement and
sketch out where we would like to go. So this will be one of
the things that Secretary Hagel will discuss with his
counterparts when he visits India this August.
    Senator Risch. I assume from that statement that it is not
moving forward yet, but you expect it to move forward soon?
    Dr. Searight. Yes, we have not yet really engaged with this
new Indian Government under Prime Minister Modi on renewing the
framework agreement, but we have indicated our strong interest
in doing so.
    Senator Risch. Have they reciprocated in that regard?
    Dr. Searight. Yes, they have indicated that they are happy
to hold those discussions.
    Senator Risch. Ms. Biswal, back to you on the intellectual
property issue. Where are we headed in that direction with
India? Has the new administration given us any signals that
they understand the seriousness of this and the necessity that
there be protections for intellectual property if we are going
to do things right and move forward successfully?
    Ms. Biswal. As India seeks to develop the knowledge
economy, it is going to need to grapple with this issue of
intellectual property from the perspective even of indigenous
innovation in India. I think that too often the discussion has
been too much about what the United States thinks India ought
to do, but intellectual property protection is fundamentally in
India's own interest, and we think that Indian companies are
increasingly making that fact known to the Indian Government.
    So we think that as this government looks at its own
economic agenda that strengthening and beefing up intellectual
property protection in India is going to naturally emerge as an
area of priority. We will continue to make that case with
respect to the perspective of American companies and their
ability to do business in India and to provide modern cutting-
edge technology to India.
    Senator Risch. Referenced in your statement, kind of
buried, was the statement that too often these are centered on
what the United States thinks ought to be done. Is that a
criticism that you hear, that we get regarding this issue?
    Ms. Biswal. No. I think that we are very compelling and
forceful advocates of what we think is the right thing to do.
But often what that is interpreted as is something where the
United States thinks you ought to do this, and what is lost in
the process is that
this is actually what is necessary and right for India for its
own agenda, for its own growth. I think we need to emphasize
that these are things that India needs to do to be able to
achieve its economic ambition.
    Senator Risch. I think with all countries sometimes you do
not have the same--you know, our view of the intellectual
property protection is based on personal property rights, which
we as Americans seem sometimes to have a unique view of in the
world. One of the things that has made us great is us having
personal property rights; that we can accumulate and protect
personal property.
    Sometimes what you read, what you see from other countries,
is they do not have the same view that intellectual property is
personal property. I do not know how you bring people to the
realization that intellectual property is property that has
value just as much as currency or a bushel of wheat or anything
else that is personal property that needs protection. What are
your thoughts on that?
    Ms. Biswal. I think that that is a growing chorus that is
heard within India, within the Indian private sector. I had the
opportunity to meet with the head of NASSCOM, which represents
kind of the technology sector in India, and I think that much
of what we have articulated as being necessary for the
investment climate--the business climate--in India to be
attractive to American companies is also what the Indian
private sector has also been articulating.
    I think that when you have a government coming in with the
mandate that this government has and with an outright majority
and a very pro-business mind-set in terms of how to grow the
economy, I think that we will see hopefully that some of these
issues will have greater resonance.
    Senator Risch. Thank you very much, Mr. Chairman.
    Senator Kaine. Thank you, Senator.
    Senator McCain.
    Senator McCain. Thank you. I thank the witnesses.
    Ms. Biswal, it was my clear impression from meeting with
the Prime Minister that he wants to focus our partnership on an
ambitious strategic agenda. Would you generally agree with
that?
    Ms. Biswal. That was certainly the impression we had as
well in our conversation.
    Senator McCain. What does the administration think the
elements of that agenda might be?
    Ms. Biswal. We think that we have a very strong opportunity
in terms of the security cooperation, the defense partnership,
as Dr. Searight elaborated.
    Senator McCain. What specifically would that be?
    Ms. Biswal. The Prime Minister in his conversation with us
talked about defense manufacturing as a key area that India
would like to pursue. We think that there is scope, and
particularly, as Dr. Searight noted, the Indian budget did
increase the FDI caps to 49 percent----
    Senator McCain. I am not exactly sure that that is a
strategic agenda.
    Ms. Biswal. But I think that as we have a greater
collaboration in the defense partnership and in the security
partnership that we also are going to advance our ability to
work together around strategic objectives in the region,
whether it is in terms of India's engagement in East Asia and
working with us on issues of maritime security, whether it is
in terms of India's engagement across South and Central Asia
and the role that it plays. I think that that is one aspect of
it.
    We certainly look to increase our relationship with respect
to how we are working together to address problems in the
region and across the globe. I think that those are all areas
that we need to strengthen the collaboration between our two
countries.
    Senator McCain. Strategic agenda? What is our overall
strategy?
    Ms. Biswal. Senator, as you noted in your comments while
you were in-country, we think that as India grows, as India
prospers, and as India increases its capabilities, that India--
--
    Senator McCain. No.
    Ms. Biswal [continuing]. As a partner in the region----
    Senator McCain. Go ahead. But you still have not outlined
the strategy. Strategy as I understand it are specific measures
to ensure certain aspects of security. You have not mentioned
China. You have not mentioned Japan. You have not mentioned
that strategy and the threats that we are facing and the
challenges that we are facing.
    Ms. Biswal. We have a very strong relationship and a
trilateral partnership between the United States, India, and
Japan. We were about to hold the fifth iteration of the U.S.-
India-Japan Trilat earlier this summer. We have had to
reschedule that, but we have seen a tremendous growth in the
amount of collaboration that we are able to have, not only in
terms of sharing of intelligence and analysis, but also looking
at active areas of cooperation.
    As Amy talked about, we will be doing joint exercises with
Japan and India in the Malabar exercises later this fall. And
we see opportunities for increasing the collaboration across
Southeast Asia. We are engaging more frequently in
consultations and dialogue with the Indians on ASEAN and look
forward to increased and frequent consultations across the East
Asia sphere.
    We are also engaging in conversations with the Indians and
consultations with respect to Afghanistan. With Deputy
Secretary Burns we talked quite a bit about where things are
headed and what role India can play in terms of the current
electoral and political impasse in Afghanistan and how we can
try to work together with respect to our objectives there.
    But across the board, Senator, I think that the point that
you are making, and we fully agree with, is that we have an
opportunity here to engage more robustly with India in how the
Asian landscape unfolds, and we look forward to engaging with
this new government in that agenda.
    Senator McCain. I look forward to the articulation of a
strategy.
    Mrs. Searight--Dr. Searight, I am sorry. The Prime Minister
of India, Prime Minister Modi, and Indian leaders are deeply
concerned about President Obama's decision to fully withdraw
United States troops from Afghanistan by January 2017
regardless of the conditions on the ground. Would you agree
that that is generally the Indian position?
    Dr. Searight. Yes, Senator McCain, I am aware that they
have strong concerns. We do consult with them regularly on our
Afghanistan policy and our plans for post-2014. Afghanistan is
actually not in my purview, so for a more detailed answer I
would have to get back to you.
    Senator McCain. But they are concerned about the situation
in Afghanistan?
    Dr. Searight. Yes, they are. And we very much appreciate
their efforts to provide development assistance and training
and support to Afghanistan forces.
    Senator McCain. Ms. Biswal, has the administration had any
discussions with the government about Indian involvement in the
TPP?
    Ms. Biswal. We have not yet been talking about Indian
involvement in TPP, but we have talked to the Indians about
what they see as their role in a global trade architecture.
India itself has to make some decisions with respect to how it
wants to open up its economy and engage in trade relations
across Asia.
    Senator McCain. As you know, one of the big obstacles--
problem areas that we have had--is on the nuclear issue with
the Indians because of their legislation that basically makes
it untenable for our nuclear capabilities to be sold to India.
What do you think the answer to that problem is? They were
saying that they thought that they could have new
interpretation to government regulations rather than passing
new legislation.
    Do you think that that would be sufficient to satisfy the
concerns of our manufacturers?
    Ms. Biswal. I think it is going to be up to the individual
manufacturers to see what the level of assurance they need to
feel comfortable. I think that if there is some combination of
some regulatory along with, I think they have been talking
about, insurance pools as well, that that might prove
sufficient for some. But I think again that the companies are
going to have to engage in these discussions, these
negotiations, and see if there is a framework that will work
for them.
    Senator McCain. Are you confident that that can happen?
    Ms. Biswal. I think we have to pursue this and see where it
will go. I think that we see a willingness on the Indian side
to enter into these conversations and to address the issue of
liability, and we need to pursue that and see how far we can
get there, get with that. I do think that it is a little bit
premature right now because we have not had the detailed
conversations to delve into exactly the specifics. But I think
it is an opening that we are going to pursue and hopefully will
be one aspect of the strategic dialogue coming up.
    Senator McCain. Thank you.
    Thank you, Mr. Chairman. I thank the witnesses.
    Senator Kaine. Thank you, Senator McCain.
    I actually want to follow up. Senator McCain raised a point
about the India-China relationship. I would love to hear from
each of you about this. It is a very important one. It has a
bit of economic cooperation, but also strategic rivalry. I know
there has been some recent visits with the new Prime Minister.
Given the aggressive posture that China is showing on a number
of areas, including maritime disputes, what is the concern
level about potential tensions, either along the disputed
border or Tibet or other issues that might be flashpoints, and
what was the attitude that you found in Prime Minister Modi in
talking about those issues?
    Ms. Biswal. Clearly, there are going to be areas between
India and China of economic collaboration and there will be
areas of competition. I think that we want to see an India that
is able to thrive and rise and we want to see that all of the
economies of Asia are able to grow in a way that is sustainable
and that mitigates against the areas of conflict.
    With respect to the India-China relationship, I think you
see that there will be areas where the United States and India
will have great complementarity and collaboration and there
will be areas where the United States and China will be working
together, and there will be areas where India and China will be
working together. I think that that is the era that we are
walking into. A rising India is in some ways going to be an
ameliorating influence on China, in China's own growth and in
China's own behavior in the region.
    Senator Kaine. Dr. Searight, from the defense standpoint?
    Dr. Searight. Yes, thank you. As India looks east and we
pursue our strategic rebalance, there is a real strategic
convergence there as we both are looking to the challenges and
opportunities in East Asia today, of which a rising China is
certainly a major part. So India has integrated itself into the
ASEAN-led regional architecture, as have we. So we are
beginning to cooperate much more with India on the kind of work
that we do in ASEAN-based organizations, such as, from the
defense perspective what is important to us is the ASEAN
Defense Ministers meeting, or ADMM-Plus framework.
    The challenges that those kinds of frameworks address are
things like maritime security. There are obviously a lot of
tensions in the maritime domain in the region right now. So
those are the areas where I think there are concerns on India's
part, there are concerns on our part, there are concerns on
many of the ASEAN nations' part. Those are the discussions we
are having in those frameworks and having separately with
India.
    We have already mentioned a couple of times opportunities
for trilateral cooperation with Japan. We have mentioned
Malabar, that will be taking place off the coast of Okinawa
later this month. USS John S. McCain will be participating in
that exercise. So that is another example where there is a
growing relationship between India and Japan, there is a
growing relationship between India and ASEAN countries, Vietnam
in particular. There is a new defense relationship growing
there. We want to capitalize on that, and we do not have to be
in all of the discussions with those partners, but we want to
support that activity and participate trilaterally or
multilaterally where it is appropriate.
    Senator Kaine. One last question, Secretary Biswal, about
sort of a diplomatic matter. The friction points--the
Khobragade incident last year was a real friction point. These
kinds of things will come up, but it almost seemed like the
friction was more about the sort of communication and how it
was handled than the initial incident, which could have been
handled.
    Have we learned anything from that, both the United States
and India, in the aftermath of that? And can we put those
lessons to use to avoid this kind of friction in the future?
    Ms. Biswal. Mr. Chairman, we have certainly spent many,
many long hours discussing with our Indian colleagues ways to,
one, ensure that we have greater understandings and greater
clarity about our expectations of each other under each other's
laws and under each other's systems. I think that that has been
time well spent.
    We have also focused a great deal on ensuring that we have
more clear and transparent communication to ensure that we
anticipate problems before they happen, that we clearly
communicate those problems, and that we resolve them. So I
think that, despite the fact that we had this very
uncomfortable and unfortunate situation that we had to work
through, at the end of the day I think we have developed closer
ties and closer communications with our two systems as a
result.
    Senator Kaine. Then actually one more question. Talking
about trilateral activities between the United States and India
and Japan and then United States, India, and China within that
trilateral, the United States and India may be complementary on
some issues, China and India in some, United States-China in
some. Are there trilateral opportunities. The United States-
India-China is nearly half the world's population, half the
world's economic output. What are the trilateral opportunities,
if any, that we should be thinking about?
    Ms. Biswal. It has been an area that has been tossed around
in various fora. I think right now we do have track-two
opportunities where we have members of the think tank
community, academia, from the three countries who engage in
those conversations and I think it bears watching to see if it
might be an opportunity to develop that into a track-one
opportunity down the road.
    Senator Kaine. Well, I would like to thank the witnesses on
panel one for your testimony and again for your service. It is
good to have you before us. I know Senators Risch and McCain
join in the thanks. With that, we will move you aside for panel
two. But thanks for being up with us today.
    If I could ask the second panel to come forward. While they
are, for the audience let me just introduce our second panel
members. We have a superb lineup in panel two: Ambassador Frank
Wisner, who is currently an international affairs adviser at
the Patton Boggs firm, where he uses international experience
to help clients with strategic global advice. As all know,
Ambassador Wisner served as Ambassador to India from 1993 to
1997, also served as Ambassador to the Philippines, Egypt, and
Zambia, and as Under Secretary of Defense for Policy.
Ambassador Wisner, it is good to have you with us.
    Vikram Singh is vice president of National Security and
International Policy at American Progress. Previously he served
as Deputy Assistant Secretary of Defense for South and
Southeast Asia at the Pentagon. Singh was also Deputy Special
Representative for Afghanistan and Pakistan at the U.S.
Department of State.
    Richard ``Rick'' Rossow is the senior fellow and holds the
Wadhwani Chair in U.S.-India Policy Studies at the Center for
Strategic and International Studies. Prior to CSIS, Mr. Rossow
spent 16 years working on a variety of capacities to strengthen
the partnership between the United States and India.
    Lisa Curtis. We are glad to have Lisa with us. She analyzes
America's economic security and political relationships with
India, Pakistan, and Afghanistan and other nations in South
Asia as a senior research fellow at the Heritage Institute.
Before joining Heritage in 2006, Ms. Curtis was a member of the
professional staff of the Senate Foreign Relations Committee.
Welcome back. It is good to have you on that side of the table.
    I will start with Ambassador Wisner and then we will just
move across the table for each of your testimony, and then we
will open it up for questions. As I say, I do expect Senator
Risch will return. Ambassador Wisner, welcome.

  STATEMENT OF HON. FRANK G. WISNER, FOREIGN AFFAIRS ADVISOR,
              SQUIRE PATTON BOGGS, WASHINGTON, DC

    Ambassador Wisner. Senator, thank you very much. It is an
honor to appear before your subcommittee. I, like the others
who have gathered with me, will submit my formal testimony for
the record.
    Senator Kaine. Absolutely.
    Ambassador Wisner. Instead, what I thought I might do is
think out loud for a few minutes about the Indian-American
relationship and how we might best advance it. In this regard,
I would like to make five points.
    The first is pretty obvious and it springs from your
testimony, your statement, and that is that India is truly
important to the United States. It is important to us because
India helps assure a balance of power in Asia in a time in
which American interests in the most fundamental fashion will
be challenged as we move increasingly into a Pacific century.
    The same is true in the opposite side. We are vitally
important to India. We are India's best market for technology,
for trade, for defense cooperation. We are on the other side of
the equation of balance. A strong India is good for America, a
strong America is, in like manner, good for India.
    If you start with that point, then the next should follow.
That is you can argue the United States and India could have
done more with their relationship in recent years, but let us
also remember that we have taken gigantic steps. A real sea
change has occurred in the last 15 to 20 years in the way we
have dealt with each other.
    Having said that, I truly believe that since 2010, the high
water marked by President Obama's trip, the relationship has
been on hold. If anything, I would say it has atrophied and
requires attention.
    Which is my third point, and that is the unprecedented
victory of Prime Minister Modi, the disarray of the opposition,
the determination of Modi to shape the agenda of his country,
means that the United States is facing an uncommon partner
across the table, an uncommon opportunity, and one that is
likely to be with us for a good 10 years. We should be planning
that the partners we have in New Delhi today will be there for
a substantial period of time. It behooves us therefore to make
certain that we get the relationship right, our understandings
right, now, so that we have the enduring capacity to engage
India in the years ahead.
    My fourth point flows therefore from that, and it is: What
are the main pillars of the relationship and how do we address
those? I am going to argue that at core the relationship has
rested on two pillars since it took off in its modern phase in
the 1990s. The first is political. We have developed a new
political relationship with India in the past decade and a half
that is unlike anything that we have known before in our
history.
    But I am also going to argue that since 2010 we have begun
to lose the strategic thread in that relationship. I believe
that is the point Senator McCain was driving this afternoon.
What is the strategic view? How do we see India and therefore
how does India judge where she fits into American strategy,
especially at a time when India is trying to calibrate its
relations with China, Pakistan, Afghanistan, and the other
crises in the region. Where India fits in is going to be the
basis of how Modi and his government decide to structure their
national policies and develop a partnership with the United
States.
    Now, it is more than general generalities. It is very
specific. How does the United States intend to manage the rise
of Chinese power? What does the United States intend to do
with, and in, Afghanistan after the withdrawal of American
forces in their great majority in 2014? Under what
circumstances are we going to come to the assistance of
Afghanistan or back the existing regime? How will India be able
to relate to our objectives?
    And third, Pakistan. While India brooks no intermediation
between the United States and Pakistan, India still needs to
know how we will deal with the very difficult circumstances
Pakistan is going through and the spillover effect across
India's borders.
    I believe, Senator, that these three particular questions
and the broader strategic framework must be the top priority of
Secretary Kerry and the President when Prime Minister Modi
visits the United States in September.
    I believe it is also a challenge for this committee to
think how to articulate American strategic purposes in Asia and
toward India, as well as Japan and China. That remains a real
task in front of all of us.
    I think we saw this afternoon the need to refine our
thinking so that we can create partners in our activities
abroad.
    The second aspect of our relationship, the second pillar,
Senator Kaine, is the economic pillar. It has been a real
driver in what got us here. In the last 4 or 5 years, there has
been a loss of confidence in the American business community in
the Indian market. India has not grown rapidly. GDP rates have
been down, inflation high, and government has not been able to
take the steps which are necessary to push the relationship
forward or, indeed, resume a high rate of Indian growth.
    Reversing that tide is the top priority in the Modi
government, and it is also the top priority we have on the
business side. There are lots of issues that have to be dealt
with. Some have been mentioned this afternoon: questions of
taxes, of intellectual property rights. I believe there are
avenues forward. The nuclear question we have touched on.
Defense sales and offsets; the Indian threat, occasionally
voiced, of localization; the criminalization of commercial
disputes that has today an American CEO in prison in an eastern
Indian state, the Amway president; the long-term difficulties
of infrastructure and power generation which impede the
effectiveness of American business firms which invest or which
wish to trade from and produce in India.
    Modi, the Prime Minister, intends to address these issues.
He made that clear and his government made it clear to the
delegation that visited India in late June from the United
States-India Business Council headed by Chairman Ajay Banga.
The USIBC represents the overwhelming majority of American
companies doing business in India. The Prime Minister made it
absolutely clear that we would see first steps in a new budget.
While I conclude we have not seen a lot of hard facts in the
budget, we have seen key directions and that is very important.
    Modi made it clear he wants to produce 15 million jobs a
year and he knows, and his government knows, you cannot get
there without foreign involvement, foreign investment, foreign
technology, and without American involvement.
    Well, growth of the Indian economy is going to be good for
us. It is going to be important for India. But I am going to
take the argument one step further since you and this
subcommittee want to look ahead. Where do we want to be in the
future? Where does India want to be? How will it develop 15
million jobs?
    I argue that the only way there is a real shot at getting
to that goal is for India to open itself up and become a
competitive marketplace for trade and investment in the
international system. Yes, as Assistant Secretary Biswal said,
we would like to see the bilateral investment treaty passed.
That is an important objective. We want to see India back in
the WTO engaging in the service rounds. It is really important
to see India in APEC and looking at the Trans-Pacific
Partnership, and indeed one day, Senator, perhaps we can dream,
if we can take those initial steps, of a free trade agreement
between the United States and India.
    For India today finds itself in the awkward position of
being neither part of the Atlantic disposition nor the Pacific
one and falling in between. But for India to reach the
objective of an open and competative trade and investment
regime takes a mind-set change. Will India open up? Rather than
investment only flowing in, is India ready to join the
international trading system and establish best investment
practices.
    I believe it is important. I believe it is part, circling
back to Senator McCain, of the strategic challenge. Do we want
to leave India struggling at the door of APEC, trying to figure
out how to get in? Or do we, the United States, want to be
India's partner in trying to help her think through the steps
she will have to take?
    So political strategy and business come together again.
    For all of these things to happen, there are a number of
fora. The Secretary and the Secretary of Commerce will be in
Delhi. The President will be involved. Many other fora have
been mentioned. They need to be launched, because we have real
jobs to do.
    But I close by saying, Senator, that we really have an
extraordinary opportunity with India and a demanding time in
which to make that opportunity happen. I believe today and I
believed for some time that, despite the progress we have made
so far, the best years in our relationship are still to come.
    [The prepared statement of Ambassador Wisner follows:]

            Prepared Statement of Ambassador Frank G. Wisner

    Senator Kaine and Senator Risch, it is an honor to appear before
your subcommittee and address the important question of ``Indispensable
Partners: Reenergizing U.S.-India Ties.''
    I come to these proceedings with experience in dealing with U.S.-
India relations. I served as United States Ambassador in New Delhi from
1993-1997. I have chaired the U.S.-India Business Council and at
present I am a member of its Board of Directors and its Executive
Committee. Since leaving government service, I have participated
regularly in fora which bring together Indian and American experts in
public policy. I have also authored or participated in a variety of
study groups which address the Indian American relationship. My
professional obligations take me to India regularly and I returned from
India in late June of this year, where together with a delegation from
the U.S. India Business Council, I met members of the new government
and leaders in the Indian business community.
    In my testimony, I intend to address the state of the U.S.-India
relationship and what needs to be done to give it fresh energy and
importance to our two countries.
    Before turning to this subject, I admit to being biased. I believe
a strong U.S.-India relationship is good for the United States and the
opposite is true as well. American strength in the world and prosperity
at home are important to India, just as a secure and prosperous India
benefits the United States. I have held these opinions firmly over
nearly 20 years, despite the ups and downs in the Indian-American
relationship. My reasons are simple. India is an emerging global power.
Its weight is felt particularly in Asia where India plays a pivotal
role in maintaining the balance of power among Asia's great nations.
India is coming into its own as a major international economic player
whose trade with the United States means that India will be a valuable
market for the exports of American goods and services as well as a
source of two way investment and technology exchange for years to come.
In a word, we need close political and economic ties to India. It is a
nation with which we share common values, especially democratic ones.
We also are a home to a large, productive community of Americans of
Indian origin.
    It is on these common interests that our relationship with India
has developed over the past quarter century. The strength of our
political and economic relations with India have regrettably atrophied
over the last 4 years and need attention if we are to set a stronger
basis for our relationship and more effectively pursue our respective
national interests. At the heart of the challenge is a strategic
question. On our side we lost confidence in the last Indian
Government's ability to follow through with the undertakings we believe
it made to us and to find common ground with us on a number of
questions--trade being a notable example. The relationship took on the
tone of a transactional undertaking. On the Indian side, many argue
they do not understand American strategy in Asia, including in South
Asia. They thought they understood the Bush administration's approach
to the continent's security problems, especially our approach to China.
They assert they have found no comparable clarity in the Obama
administration's views. Indians wish to understand our strategy for a
good reason. They want to know their place in it. The definition will
permit the Indian Government to make its choices.
    Indians are especially concerned with how the United States intends
to deal with the rise of Chinese power. This Indian Government, like
its predecessor, sees China as its principal, long-term strategic and
economic competitor. India fought a war with China; it has unresolved
border issues with China; its economic relationships are filled with
points of friction. India's defense posture is heavily dictated by the
potential threat from China. And India's new ties with Japan reflect
Indian preoccupations with China. How does the U.S. intend to cope with
China's rise is the lead question on Indian minds.
    Indians also follow events in Afghanistan closely and believe that
Afghanistan's fate directly affects India's security. Indian officials
want to know how we plan to proceed after the withdrawal of American
and NATO troops; how we will be engaged in supporting the Kabul regime
and what steps we have in mind to keep the Taliban at bay. Across the
border, Indians watch with growing concern deteriorating conditions in
Pakistan and are directly threatened by the actions of the Pakistani
Government and rogue radical terrorist across India's boarders.
Pakistani origin terror and involvement in Kashmir remain major
questions for India.
    Prime Minister Modi has opened a dialogue with Pakistan's Prime
Minister. He and his colleagues do not seek American mediation nor
direct involvement. Indians believe they can find their own way forward
with Pakistan and that American involvement will complicate the ability
of the two governments to manage their differences. Instead the Indian
Government looks to us for encouragement and with respect to Pakistan,
the Indians expect us to be clear what the steps we will take to nudge
Pakistan toward a peaceful relationship with India.
    Our current strategic dialogue contains many channels for
discussing political, intelligence and security matters. Our military
exercises and defense trade strengthen our ability to deal with India's
national security establishment. But these activities need a strategic
definition and that is the task before Secretary Kerry when he visits
India this month. It is also the challenge the President will face when
he meets Prime Minister Modi in September in Washington. It is
important that we get our strategic definition right. Prime Minister
Modi's recent election is virtually unprecedented; he comes to office
with great authority; the opposition is in disarray and will be so for
sometime to come. We are wise to assume that the Prime Minister and his
party may be in office for the next 10 years. It is a good time to
define our political and security relationship.
    In defining national strategy, I believe your committee can play a
key role and take part in the strategic dialogue between our two
countries. I urge through these hearings and others like them and
through your visits to India that you do so.
    The second pillar in our relationship with India is business. Our
commercial and investment interests with India also need attention. In
the 1990s, the engagement of the American business community in India
was the driving force in the relationship. In recent years, American
business has lost confidence in the Indian market. Indian rates of
growth have slowed and the Indian Government's restrictions on foreign
ownership, its tax policies, approaches to intellectual property
rights, its insistence on localization, the criminalization of civil
disputes that has put an American CEO in jail, and failed attempts to
secure legislation which would permit American investment in the
nuclear power industry are all examples of why American companies have
backed away from the Indian market. These issues must be addressed if
there is to be renewed American investor confidence in India.
    This said, Prime Minister Modi's government has sent a strong
signal that it intends to be business friendly. In my judgment, India's
Government will address individual business problems American
enterprises face, as well as the policies which lay behind them. Unlike
its predecessor the Modi government is principally about growth. Its
first budget, announced on July 10, signals new policy directions--a
determined effort to strengthen India's weak public finances, tackle
inflation, revive the sluggish economy and build an investor friendly
environment. The budget also addresses two issues of great importance
to the United States--increased foreign ownership in the defense and in
the insurance industries.
    Prime Minister Modi seeks investment in India. He wants to create
15 million new jobs a year. The challenge is enormous and he believes
it can only be met in partnership with foreign, including American,
enterprise. He will succeed if the business policies he sponsors create
an atmosphere of predictability, consistency, and transparency.
    I believe that his ambition can best be met if he commits India to
a more robust free trade and investment regime. I also am persuaded
that our economic relationship with India needs a long-term objective
which will drive action and capture imagination. Free trade and
investment are precisely the right sort of priorities, for they bring
reciprocal benefits to India and to the United States. This said, we
have a long road to travel before we can reach a free trade
destination. First, we need to complete our Bilateral Investment
Treaty; we need India's reengagement in WTO negotiations. Further
along, India has a choice to make about APEC and the Trans-Pacific
trading regime. But we have a decision to make as well. We can let
India struggle on its own or we can turn Indian interest in Pacific
trade into a strategic feature in our relationship. Finally, and at a
future point in our history, we and India might set our sights on a
bilateral free trade agreement.
    Free Trade and investment are important objectives. India should
not let itself fall between the emerging Atlantic and Pacific trading
regimes. But a commitment to freer trade and investment implies a tough
choice for India. Is India ready to enter the world trading system
wholeheartedly or is it more concerned about attracting investment and
trade to its shores, protecting itself from international competition?
I believe the first choice is the surer way to Indian prosperity and
national economic strength.
    The United States and India have a variety of public and private
fora to discuss trade and investment issues. Several, like the Trade
Policy Forum, has lapsed and need to be reenergized. These institutions
are part of the fabric of the U.S.-India relationship. However, they
only find their logic when we and India agree on policy objectives
which benefit both nations. Neither we nor India will ever achieve all
of our objectives. Building the relationship calls for patience,
forbearance, and for give and take; it also calls for determined
action. Neither India nor the United States will accept dictation or
pressure. If we handle our relationship with respect, the rewards are
significant. India can emerge as one of this country's major strategic
and economic partners and in turn, we can help India strengthen India's
security and promote the welfare of its people. We both need that sort
of relationship in our troubling and demanding world
    I appreciate the subcommittee's attention to my arguments and I am
open for questioning.

    Senator Kaine. Thank you, Mr. Ambassador.
    Mr. Rossow.

 STATEMENT OF RICHARD M. ROSSOW, WADHWANI CHAIR IN U.S.-INDIA
POLICY STUDIES, CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES,
                         WASHINGTON, DC

    Mr. Rossow. Chairman Kaine, Ranking Member Risch, first,
let me also offer my sincere thanks for organizing this
hearing. The title and tenor differs greatly from what we saw
around Washington, DC, and the Hill just a year ago, when some
troubling economic policies in India really tended to dominate
our bilateral agenda.
    Commercial issues are real and quite serious and have been
touched on already several times. But let us first remember, as
has already been said, why partnership with India is important.
I think every time that we see a fishing boat rammed in the
South China Sea, I think every single time that an air defense
identification zone is set up without consultation, every time
that an island is created in the middle of the ocean attempting
to expand territorial claims, we understand why we need strong
regional partners. So I think the conversation here is quite
timely with the election.
    This belief drove the United States to make an initial
attempt at creating a powerful new partnership with India over
a decade ago, highlighted most poignantly by the United States-
India civilian commercial deal. However, the last Indian
Parliament gutted the commercial aspects of this deal by
passing the liability law that has been touched upon. At that
point we really had to question India's commitment to a
strategic partnership.
    At that time we kind of fell back on commercial relations
as really the driver of bilateral affairs, and when these
economic policy decisions were taken even that fell off the
rail. So that is where we started.
    There is a very different leadership team in Delhi now,
though. The BJP is not guided by India's traditional history of
nonalignment. They have only been in charge in 6 of India's
years since independence. So the past is not precedent for
them. Instead of standing on lofty principles, which may in
fact be at odds with their circumstances, the Modi government
will strike out in bold new directions which meet specific
goals.
    My good friend, Ambassador Hemant Singh, said the other day
when he came through town: India's actions will finally be
aligned with her priorities. I think that captured it most
poignantly.
    My biggest fear is the United States, both government and
industry, suffer from failed expectation syndrome right now.
Not everyone on our side of the ocean seems to understand the
sea change in Delhi and how this could serve to deepen our
partnership. We may not be prepared to make a second grand
overture, as we did in the past, or be receptive should India
signal its interest in striking out in bold new directions.
    My second fear is that we will approach the Modi government
with the same agenda that we have used in recent years. We need
to recognize the Modi government's priorities, some of which
have been discussed already today, and where these priorities
intersect with our own, and this middle ground must become our
shared agenda.
    So four areas that I would point to: First is
manufacturing, which has already been touched on. Ambassador
Wisner noted the need for 15 million jobs a year to be created.
The other aspect on manufacturing: Almost 100 million people
have moved to Indian cities in the last 10 years, and India's
trade deficit, particularly with China, of about $40 billion--
they need to come up with opportunities and means to back those
issues off and create opportunities for themselves. America can
be a crucial partner in manufacturing, supplying capital
equipment, financing, investment, and markets for the
redevelopment of the Indian manufacturing sector.
    Second is on defense. Clearly this remains the brightest
area of United States-India cooperation, but I will leave that
for Vikram as the expert here. Internal security, border
incident, or terror incident--most of us look at that in the
Modi tenure as one of the biggest threats to derailing Modi's
governance over the next 5 years--another Mumbai-style attack
and the feeling that he will have to react more forcefully than
the Manmohan Singh government did.
    Here again, the United States has a great deal to offer on
internal security, from equipment to intelligence-sharing, and
this must include a much more collaborative approach on
Afghanistan as we shape our planning for Afghanistan, not just
telling them what we are going to do, but at least bringing
them in the loop earlier in that process.
    Creating infrastructure. This is the fourth area that the
Modi government is very interested in. Actually, I think that
there is a little bit less opportunity for American involvement
in this, though. As Ambassador Wisner vividly recalls, a lot of
the early American investment after the reforms in the 1990s
were in the energy sector, power plants built across India, and
had a difficult time getting paid. So whether there is a real
opportunity for America to get back involved in infrastructure
depends on whether we can find a payment security mechanism to
make sure our companies get paid. The investment treaty could
actually go some way in making that happen. So infrastructure,
I hope that there is more to be done there.
    When it comes to economic cooperation, Washington spends a
great deal of time talking about liberalization as the thing
that will unleash the animal forces. To be sure, increasing FDI
caps will provide much-needed capital to spur additional growth
in sectors like insurance, retail trade, defense, and a range
of other industries. But even if nothing that we call reform
happens in India, the biggest reform has already happened,
which is having a business-friendly government in charge in
Delhi.
    Running a clean and fair spectrum allocation for telecom
spectrum may not qualify as a reform, but if this Modi
government is able to do it it will be an important boost of
the telecom industry and for Internet penetration. Avoiding
regulatory overreach would not qualify perhaps as
liberalization, but it can avoid the collapse of an industry,
as we saw with the life insurance industry in India in 2010,
with the regulatory change that really gutted the growth rate
of one of the fastest growing industries at the time.
    So business can operate in most environments as long as
there is stable, consistent application of the rules, and that
has not been the case in recent years. So we look at reforms,
but I think the numbers are going to show that, irrespective of
whether the FDI caps change--and I certainly hope they do--I
think business is going to be a lot more bullish, and we are
seeing the numbers tip up already.
    The last time the BJP was in power, in less than 6 years we
went from nuclear sanctions to nuclear cooperation--6 years.
When interests are aligned and leaders think big, the
relationship can progress faster than most of us believe is
possible. This Indian Government is not bound by precedents.
The reasons for partnership with India are stronger now than
they were a decade ago, and America needs to approach these
next 2 months without putting a ceiling on how big we are
thinking and without the baggage of the last 5 years.
    I thank you for your time.
    [The prepared statement of Mr. Rossow follows:]

                Prepared Statement of Richard M. Rossow

    Chairman Kaine, Ranking Member Risch, members of the committee,
first let me offer my sincere thanks for organizing this hearing. The
title and tenor differs greatly from what we saw from around
Washington, DC, and the Hill last year when a small group of companies
with serious concerns about economic policies in India dominated our
bilateral agenda.
    The issues these companies raised are real and serious. But let us
first remember why a strong India--and a deep partnership with India--
is in our national interest. A large, democratic nation with similar
values in that region will be a stabilizing force. Every time a fishing
boat is rammed in Asia, an Air Defense Identification Zone is created
over disputed territory without consultation, or an island is
constructed in the middle of the sea to expand territorial claims--we
are reminded of the need for strong regional partners.
    This belief drove the United States to make its initial attempt at
creating a powerful new partnership with India over a decade ago. This
partnership was illustrated most vividly by the U.S. India Civilian
Nuclear Agreement. However, when the last Indian Parliament gutted the
commercial meaning of the deal by approving a weak nuclear liability
law, we had to question India's commitment to a deeper partnership.
U.S.-India relations relied once more on commercial ties. Even this
aspect of the relationship became strained when the Indian Government
introduced a series of stopgap policy measures meant to shore up voter
support ahead of this year's election.
    Now there is a very different team in New Delhi. The BJP is not
guided by India's traditional policy of nonalignment. Instead of
standing on lofty principles which may, in fact, be at odds with her
circumstances, the Modi government will strike out in bold new
directions which meet specific goals.
    My biggest fear is that the United States--both government and
industry--suffer from ``failed expectation syndrome.'' Not everyone on
our side of the ocean seems to understand the sea change in Delhi, and
how this could serve to deepen our partnership. We may not be prepared
to make a second ``grand overture,'' or be receptive should India
signal its interest in bold new ideas.
    My second fear is that we will approach the Modi government with
the same agenda we used in recent years. We need to recognize the Modi
government's priorities, and where these priorities intersect with our
own. This middle ground must become our shared agenda.
    Four areas are emerging as particularly important to the Modi
government.

    1. Creating infrastructure. India is amazingly deficient in
infrastructure. Frankly speaking, the U.S. will not likely play a big
role in building out India's infrastructure unless we conclude the BIT
or find another payment security mechanism. India needs long-term
capital willing to take certain risks that are not always a good match
for American investors and developers.
    2. Manufacturing. India desperately needs to create a stronger
industrial base, to cut its trade deficit--which is far larger than
America's as measured as a percent of GDP--and to provide opportunities
for its fast-growing urban population. America can be a crucial
partner, supplying capital equipment, financing, investment, and
markets.
    3. Defense. Clearly this remains the brightest area of U.S.-India
cooperation. Next year our Defense Framework Agreement expires;
renewal--and possible expansion--should be a priority. In addition,
commercial defense relations will continue to thrive--especially if
India liberalizes its offset and foreign investment rules.
    4. Internal security. A terror or border incident involving
Pakistan ranks among the biggest threats to Modi's agenda. India is
very worried that the U.S. drawdown in Afghanistan will heighten the
chances of an incident. The U.S. has a great deal to offer on internal
security, from equipment to intelligence-sharing. This includes a more
collaborative approach to engage New Delhi as we shape our planning for
Afghanistan.

    When it comes to economic cooperation, in Washington we spend a
great deal of time talking about ``liberalization'' as the key to
increasing American trade and investment. To be sure, increased FDI
caps will provide much-needed capital to spur additional growth in
insurance, retail trade, defense, and a range of other industries.
    But even if nothing we call ``reform'' takes place, economic ties
are going to get a great deal better. The biggest ``reform'' has
already happened, through the election of a business-friendly
government.
    Running a clean and fair spectrum auction may not qualify as a
``reform,'' but it would give an important boost to the
telecommunications industry and for Internet penetration. Avoiding
regulatory overreach is not ``liberalization,'' but can avoid the
collapse of an industry as we saw with life insurance regulatory
changes in 2010. Business can operate in most environments so long as
there is stable, consistent application of the rules--which has not
been the case in recent years.
    The last time the BJP was in power, in less than 6 years we went
from nuclear sanctions to nuclear cooperation. When interests are
aligned and leaders think big, the relationship can progress faster
than most of us believe is possible.
    This Indian Government is not bound by precedence.
    The reasons for strategic partnership with India are stronger now
than they were a decade ago.
    America needs to approach these next 2 months without putting a
ceiling on how big we are thinking, and without the baggage of the last
5 years.

    Senator Kaine. Thank you very much.
    Mr. Singh.

STATEMENT OF VIKRAM J. SINGH, VICE PRESIDENT, NATIONAL SECURITY
    AND INTERNATIONAL POLICY, CENTER FOR AMERICAN PROGRESS,
                         WASHINGTON, DC

    Mr. Singh. Thank you very much, Mr. Chairman, Ranking
Member Risch. It is a real honor to be here. As the other
witnesses have done, I am submitting my testimony for the
record as well, but I will touch on a few key areas briefly
here which are going to echo a lot of what we have heard from
my esteemed colleagues.
    It really is a pleasure to be with you and this hearing
could not be better timed. We are looking toward the moment
that will set the trajectory for the next several years, with
the strategic dialogue coming up, with the high-level visits we
are going to have, and with the Prime Minister and the
President meeting. So I am very glad to have the opportunity
and to have it now. Thank you for that.
    Interestingly, we are in virtually complete alignment with
India on almost every major issue you could think about, at
least in terms of where we want to go strategically. Terrorism,
the environment, regional stability, counterproliferation. We
agree that we need to have an international order based on
rules and norms of behavior. We want secure energy flows, we
want secure commerce. We want to combat global climate change.
At home we have a lot of similar challenges. We face challenges
in terms of the growth of the middle class and good jobs and
providing good governance, protecting our citizens, securing
energy and water for the future.
    Our administrations, the current administration, the prior
United States administration, successive Indian administrations
for quite a while, have made this relationship a central
priority. And yet we have found that progress has fallen short
of expectations. Even where we have had breakthroughs--defense,
the civil nuclear deal--it is important to note that we have
given ourselves a good foundation, but we have lacked
measurable progress in terms of deals signed, projects
launched, joint activities undertaken.
    There are some reasons for this, but we cannot gloss over
them. There is a tendency in the United States-India
relationship to have a little too much happy talk and then it
is followed by excessive frustration. The bottom line is we are
doing well, we are doing well together, and we could continue
to do well together and be just fine, but we also have the
potential in the next few years, we believe, at the Center for
American Progress, we have the potential in the next few years
to really move to another level in this relationship.
    We are launching a project in the next week called India:
2020, which is going to look specifically at what can we do,
and what can we achieve in 5 years, because we think this is a
particularly good moment to look at that.
    Prime Minister Modi ran on a campaign of what he called
``Surajya,'' which means in Hindi good governance. He said: I
am going to deliver good governance, I am going to deliver it
to all classes, castes, and communities. That is the promise
that he is going to be measured by. That is the promise that we
should welcome and we should sort of measure him by ourselves.
    I know he has been a controversial figure, but I really do
think that the warmth of his reception in the United States
this fall is critical. We need to set the tone now. This is the
world's largest democracy and I think the Congress should
invite him to a joint meeting. If the logistics work out, I
think that needs to happen.
    To evaluate how things are going in the first few days of
the Modi administration, I think we should look at the budget.
The budget is a good first step, but it showed that he views
his challenges as long term and it was a set of incremental
steps. It was not a sea change. You saw some increases in
foreign direct investment. You saw some commitments to things
like smart cities and infrastructure upgrades, but these were
not met by commitments of resources. So we really are in a
period of seeing just how ambitious and how fast the Modi
government is going to move.
    On defense, there are some near-term things that can be
done to sort of show intent. There are pending sales, things
like Apaches, Chinooks, the M777 howitzer. Those could all be
done very soon. They could be done in time for Secretary
Hagel's visit in August that we just heard about from Dr.
Searight.
    But there are longer things. That defense cooperation
agreement she mentioned, the 2005 New Framework for Defense
Cooperation is the agreement that governs this relationship. It
has hit its 10-year mark. It was drafted as a 10-year
agreement. It needs to be updated in a way that takes the
vision for our security relationship to the next level. It
should be updated to incorporate agreements for better
communication and information-sharing and logistics
cooperation, so that it actually enables us to do much more.
    On economic liberalization, which was one of the areas you
asked us to touch on, Modi is focused on this because India
ranks 134th in the World Bank's ``Doing Business'' index. They
have got a long way to go. I think it is good that we see the
progress being made, but, to touch on what Ambassador Wisner
said, issues like retroactive taxation, protection of
intellectual property rights, the always emerging issues of
local content requirements that have done things like made it
very difficult for us to make progress even on renewable energy
cooperation, those things need to be clarified and really
clearly clarified. Some of these issues need to be put to bed
by the Indian government if they are going to really attract
the kind of investment it is going to take to have the kind of
growth they want to see.
    On energy and climate, we could do tremendous amounts
together. India is going to be the world's largest coal
consumer in a decade. India is already one of the largest
emitters and it suffers great threat from climate change. So we
could enhance cooperation in research and development. We could
work together to reduce hydrofluorocarbons. We could build
resilience, climate resilience. Our experience with Hurricane
Sandy is very instructive. And we could model something on what
we have done with them in terms of clean energy cooperation for
building resilience and dealing with climate change.
    But it is going to take a significant effort to get there,
and we would have to clear away some of the things that have
been real obstacles. So in the energy sector, their energy mix
has got to include natural gas, nuclear, and other things. How
far can we get if we do not resolve--or address the nuclear
liability issue? Those are difficult issues, but they have to
be grappled with. I think the new administration in India is
going to give us an opportunity to do that.
    I know everyone has talked a lot about the importance of
India in the world and the region. I just want to say very
briefly that I think it is important for us to start thinking
about India as the anchor of a strategically vital part of the
world, not as peripheral to South Asia or as peripheral to the
Asia-Pacific, but as the anchor of the region that goes from
the Middle East all the way to China, Japan, Australia, with
India sitting in the center of it.
    Modi has made very positive steps, sent positive
indications about what he is going to do. He invited all the
neighbors to his inauguration. He is going to continue to help
contribute to stability in Afghanistan. He has made indications
that he is going to take steps to improve stability with
Pakistan if he can find a good counterpart.
    We can work with them in the rest of the region--Nepal,
Bangladesh, Sri Lanka. But also, for Myanmar, where India is
working on connectivity, to new cooperation with Japan and
Australia, which are areas that Modi seems to be interested in.
He has shown that he wants to have good relations with China,
but on the campaign trail he was also willing to actually
publicly say China should not be an expansionist power, but
should be focusing on development, which indicates that he is
going to have a willingness to take on tough issues.
    I think that the United States-India relationship has grown
well, quietly, stably, in many ways. If you had said 10 or so
years ago to me that we would have $10 billion in defense
trade, I would have thought that was not even within the realm
of possibility. But we have gotten there, and we should not
rest on our laurels. I think the leadership of this committee
and the opportunity before us, with new leadership in New
Delhi, means that we are in a position to really capitalize on
an opportunity and to take the relationship to the next level.
    I look forward to the discussion. Thank you.
    [The prepared statement of Mr. Singh follows:]

                 Prepared Statement of Vikram J. Singh

    Chairman Kaine, Ranking Member Risch, members of the subcommittee,
it is an honor to be with you today to discuss ``Reenergizing U.S.-
India Ties.'' As Vice President for National Security and International
Policy at the Center for American Progress, I see the U.S.-India
relationship as one of the most critical priorities for our country.
The timing of this hearing could not be better, with a new government
in place in New Delhi, the fifth Strategic Dialogue scheduled for the
end of the month, and President Obama meeting Prime Minister Modi in
September.
    All of you on the subcommittee and many members in the India Caucus
have been vital to advancing the U.S.-India partnership. I'm pleased to
be here with my dear friend and mentor, Ambassador Frank Wisner, along
with two esteemed experts Richard Rossow and Lisa Curtis. I know you
have also just heard from two true friends of this relationship,
Assistant Secretary Biswal and Deputy Assistant Secretary Searight who
succeeded me at the Pentagon.
    Today I will touch briefly on each area you have highlighted, with
special emphasis in areas in which I have the most experience: defense,
security, and the Asia-Pacific region.
    Since the end of the cold war and the launch of economic reforms in
India in the early 1990s, the United States and India have lived with a
permanent sense of expectation. It seems that the world's oldest and
largest democracies are always on the cusp of becoming true strategic
partners. The relationship has gained strong support across party lines
in both countries. Cold-war-era gaps in trust have faded even through
periods of significant tension, and by every objective measure--
increased trade and investment, collaboration on regional and global
security, people-to-people ties--we are closer than ever. Successive
Indian and U.S. administrations have made this relationship a central
priority.
    Yet with a few notable exceptions, progress has fallen short of
expectations. Even great breakthroughs in defense ties or the civilian
nuclear deal have been accompanied by serious obstacles to real,
measurable progress in terms of deals signed, projects launched, and
joint activities undertaken. We have extremely deep and substantive
ties today and are able to consult on a multitude of issues, but most
observers of the day-to-day relationship continue to be underwhelmed.
    There is broad agreement that U.S. and Indian strategic
requirements are in almost complete alignment on major issues including
terrorism, the environment, regional stability, and
counterproliferation. We agree on the need for an international order
based on rules and norms of behavior, secure flows of energy and
commerce, and global action to combat climate change. Our goals are
most often in sync. The challenges our nations face at home are also
surprisingly similar: ensuring the growth of the middle class and good
jobs; providing good governance; dealing with violence and
discrimination based on race, religion, gender; and securing
sustainable energy and water for future generations.
    Not surprisingly, however, given our very different history and
circumstances, American and Indian approaches to problems--the ways we
choose to pursue these often similar ends--frequently differ and
sometimes clash. This will remain true under a Modi administration, and
leaders in both countries will need to confront this reality if they
want to realize the potential of this partnership.
    Both the United States and India are coming through difficult
periods. Both will do much better if they take this partnership to the
next level. The diplomatic infrastructure exists to make substantial
progress: we have a robust and broad Strategic Dialogue and a well-
established set of bilateral defense forums. We see good signs of
commitment from both sides with the early scheduling of a Strategic
Dialogue in New Delhi and with rapid steps to restart the nearly
defunct U.S.-India Trade Policy Forum. The early meeting of President
Obama and Prime Minister Modi can give these efforts the strategic
direction they require.
    At the Center for American Progress, we believe this new political
phase in India provides an opportunity to make substantial progress in
the next 5 years. Next week we are launching a project we call ``India:
2020'' to develop a vision for what our nations can realistically
achieve by the end of this decade. Real progress will require high
expectations from leaders in both nations and extreme candor about
obstacles as well as opportunities.
                  a warm welcome and high expectations
    Narendra Modi ran on a promise of delivering ``surajya'' or good
governance to Indian citizens from all classes, castes, and
communities. That is the bar against which he will be judged by the
Indian electorate, and it is a promise the United States should welcome
and help with wherever possible.
    Prime Minister Modi is sending good signals, especially to India's
famously complex bureaucracy, with rules against nepotism and steps to
improve efficiency. But his to-do list is extraordinarily long and the
release of his first budget suggests a careful, step-by-step approach,
offering glimpses of what might lie ahead without any radical changes.
    Caps on Foreign Direct Investment for the defense insurance sectors
were lifted to 49 percent. Defense spending was increased about 12
percent. A commitment to ``smart cities'' and major infrastructure was
restated, but resources were not allocated. No major changes were made
to entitlements. The FDI cap increases will be welcomed by American
business, but they are relatively minor changes that were advocated for
by members of the previous government. It will take more than this to
get India back to 8 percent growth. So while we should welcome these
steps as an opening salvo, we await what future steps Modi will take.
    Modi's commitment to good governance is the best way to engage on
the difficult and often emotional issues that come with his elevation
to power as a strong nationalist with conservative Hindu credentials.
He is not likely to let lingering resentment over the denial of his
visa in 2005 undermine U.S.-India cooperation in areas that will
advance his national priorities. However, the warmth of his welcome in
the United States this fall is important. There is no point in taking
half measures with the duly elected leader of the world's largest
democracy. Congress should invite Prime Minister Modi to address a
joint meeting, as was done by his two immediate predecessors, Prime
Minister Singh and Prime Minister Vajpayee.
    This does not mean being timid about concerns: Prime Minister
Modi's commitment to secularism, human rights, and harmony among
India's majority and minority communities will ultimately define his
legacy and India's continued success and stability. But the United
States must take a forward-looking approach. Modi has been cleared by
Indian courts of any charges in the 2002 Gujarat riots, which claimed
over 1,000 lives and elicited no apology or compensation for victims.
Now, as the duly elected leader of the country, he has promised good
governance, and that will require him to deliver justice for all Indian
communities.
    Modi has made positive steps so far in the conduct of international
affairs, starting with his invitation of all India's neighbors,
including Pakistan, to his inauguration. The United States will be able
to engage with Modi on regional issues--not just on stability in
Afghanistan and Pakistan, but also on Nepal, Bangladesh, Sri Lanka, and
the Maldives. We will be able to work with India on relations with
countries from Myanmar to Japan to Australia. Modi is likely to seek a
productive dynamic with China, but on the campaign trail he showed that
he will be willing to stand up to China by criticizing Beijing's
expansionist tendencies.
    The potential to work with Modi is very high and crosses every
important policy area. Challenges will come if he proves unable or
unwilling to make the more difficult reforms that bring India into the
global system or if he seeks to over-centralize control. India is a
decentralized system, somewhere between the United States and the
European Union in the way it functions. The states will demand a
significant degree of control over how reforms play out in their own
territories.
                   deepening the defense partnership
    A decade ago, defense sales were virtually zero. Today, sales have
topped $9 billion and defense remains a consistent bright spot in U.S.-
India relations. The 2005 New Framework for Defense Cooperation set the
stage for this robust defense trade, and U.S. systems like the P-8i to
the C130-J have delivered capabilities and reliability that India needs
without the scandals and corruption of many other Indian procurements.
The U.S. and India have also continued to deepen a very substantial
slate of defense exercises, including India's full participation for
the first time with 22 other nations in RIMPAC, the world's largest
naval exercise underway right now off Hawaii.
    The Modi government seems committed to substantial reform of the
Indian defense sector, with steps likely to include more flexible
offset policies, greater foreign investment as seen in the FDI cap
increase, and moves toward breaking up some of the state-run defense
sector. These are the kinds of reforms that will make investment in
India worthwhile for big international defense companies.
    These reforms are also necessary steps for India to be able to take
advantage of the various offers pending from the Department of Defense
through the Defense Trade and Technology Initiative, or DTTI. Launched
by former Secretary Panetta and continued by Secretary Hagel, DTTI
offers a breakthrough path to move from sales to high levels of
coproduction and codevelopment of future defense systems. The
initiative serves to identify possible joint projects of strategic
value and streamline and make the U.S. technology transfer and
licensing processes more transparent. It has not yet been fully matched
by a similar effort on the Indian side, and the U.S. should encourage
India to identify its own priorities for codevelopment and to analyze
its own bureaucratic constraints on cooperation.
    The most exciting offer from the DTTI was for codevelopment of the
next generation Javelin antitank missile, an offer the U.S. has made to
no other country. India could procure Javelin to meet near term needs
and join the U.S. in developing the next generation, which is something
the U.S. Army and the Indian Army will both need. The U.S. government
worked with industry to identify dozens of possible options for
coproduction and codevelopment in everything from helicopters to
communications equipment, and an Indian decision to move forward with
one or more of these by the time Prime Minister Modi and President
Obama meet in September would be a very strong signal that effort put
into this partnership can pay off.
    Reform of the India's Defense Public Sector will be key to making
more of these coproduction and codevelopment deals feasible. U.S.
companies will be more interested given the new 49 percent FDI cap, but
they will be seeking to make a good business case, and that will be
easier with private rather than public sector Indian partners.
    There are several short-term steps to take in order to set a
positive tone for defense. First, some long-pending sales could be
concluded. For example, Chinook and Apache helicopters, as well as M777
Howitzers could be finalized by the time Secretary Hagel visits India
later this summer. Second, India and the U.S. could increase their
mutual commitment to defense exercises. India was frustrated last year
when the U.S. canceled Red Flag air exercises due to the sequester, and
the U.S. has been frustrated by India's refusal to include multilateral
partners in some U.S.-India exercises. The previous Defense Minister
indicated an intention to reduce the overall number of exercises as
well. Both nations should commit to a robust set of exercises of
increasing complexity and to involving more multilateral partners,
including a resumption of Japanese participation in the Malabar naval
exercises.
    The defense relationship is governed by the 2005 New Framework on
Defense Cooperation, which established a strategic partnership in
defense and paved the way for remarkable progress. The New Framework
created several regular forums to meet and discuss key issues, all
reporting to the annual Defense Policy Group. The 2005 agreement was
drafted for a 10-year term, and the time is now for the U.S. and India
to take stock of that agreement and set forth a new vision to run
through 2025. This should be a rigorous reappraisal, looking at both
successes as well as where the framework came up short. It should
ideally be reviewed as part of an effort led from the White House to
rationalize the entire slate of U.S.-India cooperative forums.
   economic liberalization and ties of commerce, energy, and business
    India was unprepared when financial turmoil struck. As growth
stagnated, the previous coalition government was unable to drive
through additional liberalization and resorted to short-sighted and
damaging moves like retroactive taxation and curbs on capital outflows.
Coupled with the continued inability to address major obstacles on
trade and investment like Intellectual Property Rights, or IPR,
protection and excessive local content requirements, these steps seemed
to put economic liberalization in a deep freeze and drove away
investment.
    India ranks 139th on the World Bank's Doing Business Index, and
Modi's reforms will improve that rating if they can make India more
appealing to international business. The BJP campaigned on a commitment
to jump-start reform. The current budget is incremental with modest
improvements in FDI caps and few changes from the interim budget of the
prior government. Former Finance Minister Chidambaram went so far as to
claim credit for the BJP budget as a continuation of his policies. This
may have disappointed business, but it could give the Indian Government
much-needed time to explain to the public what specific reforms it
plans to undertake and how they will help the nation.
    Finance Minister Arun Jaitley tried to calm international business
leaders still smarting under the retroactive taxation on companies like
Vodafone, but he didn't undo the taxation, saying instead, ``The
sovereign right of the Government to undertake retrospective
legislation is unquestionable. However, this power has to be exercised
with extreme caution and judiciousness keeping in mind the impact of
each such measure on the economy and the overall investment climate.
This Government will not ordinarily bring about any change
retrospectively which creates a fresh liability.''
    Jaitley's statement provides cold comfort to multinational firms
who have been hoping for something more like what they heard in the
campaign when Modi called retroactive taxation a ``breach of trust''
that could drive away investment. The new Indian Government also looks
poised to block the World Trade Organization trade facilitation
agreement reached in Bali last December over concerns about the impact
on India's food security program. The deadline is July 31. This could
make India the cause of failure for the first significant WTO
accomplishment in years.
    The United States and India have some options on trade. The best
remains conclusion of a bilateral investment treaty, or BIT, but the
negotiations have been mired since they started 5 years ago. U.S. Trade
Representative Mike Froman has made the right gestures by planning to
restart the U.S.-India Trade Policy Forum while holding firm on IPR and
local content issues. The distance between the two sides on a BIT,
especially with regard to a dispute resolution mechanism, could remain
too great to bridge in the near term. Intensified negotiations with the
new government are the only way to proceed, perhaps with a new and
realistic target date for completion. It's also worth introducing India
to the idea of eventually joining a future Trans-Pacific Partnership,
should that process prove successful.
                           energy and climate
    India faces significant and intertwined energy security, energy
poverty, and climate challenges. It is currently on track to become the
world's largest coal importer in about a decade, and Prime Minister
Modi aims to provide basic access to power and water for every Indian
house in less than 10 years--an important and large task given that 300
million Indians currently lack electricity. India is also one of the
world's largest greenhouse gas emitters, and is highly vulnerable to
the impacts of climate change.
    With the United States simultaneously grappling with its own energy
and climate challenges, there are untapped opportunities for mutually
beneficial cooperation. Since 2010, CAP has cochaired a Track II
dialogue on climate change and clean energy with India comprised of
high-level former government officials, thought leaders, and
influential individuals from the NGO and business communities. With
annual meetings in Delhi and Washington, DC, the Track II has provided
a forum for the exchange of new and innovative ideas, as well as
produced insights that have helped to shape government policy and
define new areas for enhanced bilateral cooperation. At its most recent
meeting in February, it recommended:

    Enhancing cooperation on clean energy development: To enable the
rapid growth of renewable energy, the U.S. and India should continue
expanding their R&D collaboration, while also building capacity in
science, engineering, and other business models to spur technological
innovation and entrepreneurship in the field. It also should do so by
avoiding trade disputes in the renewable sector. Both countries have
immense opportunities for growth in renewable energy, yet we find
ourselves locked in WTO disputes with one another over local source
requirement, subsidies, and tariffs surrounding solar power. The two
sides should seek to develop a set of principles to avoid future WTO
filings. They should aim for prior consultation on national policy
requirements, identify bilateral dispute resolution methods, and
exercise restraint in filing disputes that affect renewable energy.
Resolving the current solar dispute in ways that meet the aims of both
nations will open the door to substantial cooperation on large solar
projects.
    Reducing Hydrofluorocarbons: The U.S. and India have the
opportunity to advance global action on phasing down
hydrofluorocarbons, a short-lived but highly potent greenhouse gas. The
U.S. and India can lead the pursuit of a global agreement on HFCs by
pushing for technology-agnostic global standards to curb HFCs and
ensure energy efficiency performance so that new technologies do not
increase other greenhouse gas emissions.
    Building Climate Resilience: In addition to lowering emissions, the
U.S. and India will need to ensure community resilience against climate
impacts including sea-level rise, more frequent flooding, and extreme
weather. Hurricane Sandy demonstrated how damaging intense storms can
be, even in a prepared city. We need much more research on the most
effective ways to respond to climate change. Urban and coastal
resilience are two key areas for the U.S. and India to pursue joint
research and pilot projects. The research partnership could be modeled
on the existing U.S.-India Joint Clean Energy Research and Development
Center.

    India is exploring other energy options that would reduce its coal
dependence and expand energy access, such as through increased use of
natural gas and nuclear power in its electricity mix. It is in the
United States interest to engage India on the safe and responsible
development and use of such fuels. This would include discussions about
the safe development, transmission and use of natural gas. Engagement
should also include discussion of the political and legal issues that
surround development of nuclear power generation projects in India.
They are difficult and complicated, but should be grappled with.
              india's role in the region and asia-pacific
    For the past decade, the United States has played a critical role
in welcoming India's rise as a global power. The Bush administration
drove international acceptance of India as a responsible nuclear power
outside the confines of the Non-Proliferation Treaty. It is easy to
forget how controversial and politically difficult that was. The Obama
administration welcomed India as a partner, with public calls for India
to gain a permanent seat on the U.N. Security Council. And the United
States has supported Indian membership in global nonproliferation
regimes and treats India as an adherent so long as it keeps its export
controls in conformity with the regimes. In many ways the United States
has embraced a form of Indian exceptionalism because it calculates that
India will work to advance mutual interests. That is a good bet, and
India is rising to the challenge of global and regional leadership.
    India is the anchor of the most strategically vital region on
earth, stretching from the Persian Gulf and spanning northeast to Japan
and southeast to Australia. The challenges across this region are
growing and the United States and India should look to one another for
ideas and leadership from the Middle East to Central Asia to East Asia.
India will be deeply impacted by developments in the Middle East given
its dependence on energy flows and large expatriate communities. It
will play a critical role in the long-term stability and connectivity
for Afghanistan and Central Asia. It is leading efforts to build
eastward connectivity given the new potential of a reforming Myanmar,
and it is managing, what should now be termed major power relations of
its own with Japan and China.
    The United States decision to treat India as a major power can
continue to encourage India to take a greater role. The United States
has important stake and conviction in maintaining free and safe trade
lines and waterways throughout the Pacific, and while India has
traditionally remained hesitant to active participation in maintaining
regional security, it supports unimpeded rights of passage and maritime
rights in accordance with international law. For example, India offers
naval support to the counter piracy mission in the Gulf of Aden while
refusing to join the multinational task force there.
    Seventy years ago, India's first Prime Minister Jawaharlal Nehru
stated, ``The Pacific is likely to take the place of the Atlantic in
the future as the nerve center of the world [and] though not directly a
Pacific state, India will inevitably exercise an important influence
there . . . [and] is the pivot around which these problems will have to
be considered.'' Nehru's words have proven true, and India is seeking a
greater leadership role in the rest of Asia. It is welcomed by ASEAN
nations and the United States. Total India-ASEAN trade increased by 37
percent in 2011-2012 to reach USD79.3 billion and the total U.S.-ASEAN
goods trade increased by 60 percent in the past decade, peaking at
USD206 billion in 2013. The United States and India have a shared
interest in collaborating to ensure global standards and international
norms and should look instinctively to each other to mitigate
territorial disputes and transnational threats that arise throughout
this stretch.
    India's eastern and western neighbors provide great economic
opportunity and partnership within its own region. Managing these
relationships will be a crucial challenge that will necessitate
paramount energy and diplomacy. There have been positive signs from
Pakistan and India's new governments to seize this opportunity to build
toward trade normalization and regional security, and there are high
hopes that this remains a positive upward trajectory.
    The complexities of South Asia's transnational problems, such as
refugee crises stemming from ethnic violence to climate-related
migration, defy national solutions. There is urgency for India and its
neighbors to build cooperative relationship and promote a regional
framework that incorporates the perspectives of all nations involved.
                               conclusion
    Mr. Chairman and members of the committee, let me close by saying
that the U.S.-India bilateral relationship has quietly and steadily
grown under the leadership of like-minded individuals across party
lines in both countries. There remain gaps between what our two nations
are doing and what our two nations are capable of doing. However, I do
agree with President Obama that the U.S.-India relationship will be one
of the defining partnerships of the 21st century. This partnership will
need continued engagement and nurturing and it's a commitment that
would reap mutual benefits.

    Senator Kaine. Thank you, Mr. Singh.
    Ms. Curtis.

STATEMENT OF LISA CURTIS, SENIOR RESEARCH FELLOW, THE HERITAGE
                   FOUNDATION, WASHINGTON, DC

    Ms. Curtis. Thank you, Chairman Kaine, for inviting me here
today. It is an honor.
    The BJP's victory and assumption of power provides an
opportunity to build the United States-India relationship. I
think it bodes well for the country's economic prospects as
well as its role in global affairs more generally. The previous
Manmohan Singh government had been weakened by a series of
corruption scandals. It was distracted by governance problems,
which led to the stagnation of the relationship. Of course, you
mentioned how ties were further strained by the Devyani
Khobragade episode.
    So now we have an opportunity to move beyond that phase in
the relationship and reinvigorate ties on a variety of fronts,
whether
it be defense, security, economic cooperation,
counterterrorism, or other issues of mutual concern. We have
heard a lot about how Prime Minister Modi is expected to revive
the Indian economy and encourage private sector growth. His
track record in making Gujarat one of the most investor-
friendly states gives confidence that he will implement policy
changes that will help revive the economy.
    Regarding foreign policy, the Modi-led government is
expected to pursue a more robust and assertive approach and
enhance India's influence and prestige on the global stage.
While a more assertive approach to foreign policy could pose
some challenges to the United States, I think by and large it
will open up opportunities for the United States to draw closer
to India with regard to defense and security issues.
    With regard specifically to China, the Modi government is
likely to pursue a multifaceted approach which involves both
simultaneously improving trade and investment ties while also
focusing on building up its own strategic and military
capabilities to guard against the possibility of Chinese
aggression along their disputed borders.
    The BJP election manifesto did not mention China
specifically. However, it did commit to a massive
infrastructure development program along the Line of Actual
Control, which is the disputed border between India and China
in the states of Arunachal Pradesh and Sikkim. Modi's call a
few months ago for China to abandon its expansionist attitude
shows that the Modi government is wary of Chinese territorial
ambitions, especially in light of last April's border incident
in which Chinese troops camped for 3 weeks several miles inside
Indian territory in the Ladakh region of Kashmir.
    The Modi government has been receptive to Chinese wooing
over the last 6 weeks, including an early visit by the Chinese
Foreign Minister to New Delhi just 3 weeks after Modi had
assumed office and Monday's meeting between Modi and the
Chinese President on the fringes of the BRIC summit.
    Prime Minister Modi has also demonstrated interest in
setting a positive tone in relations with Islamabad by inviting
Prime Minister Nawaz Sharif to his swearing-in ceremony, but
still a major terrorist attack inside India with links to
Pakistan could quickly reverse this positive momentum. And
having criticized Prime Minister Singh for being too soft on
Pakistan, Modi would be under pressure to react strongly in the
face of any new terrorist provocation.
    Moreover, there is growing concern about the impact on
Indo-Pakistani relations of the United States drawdown from
Afghanistan and whether this could in fact re-ignite the
Kashmir conflict.
    So what initiatives can the United States pursue with the
new Indian Government to take advantage of this opportunity to
bolster the relationship? First is in the realm of cooperation
in the Asia-Pacific. Now, Indian officials were initially
cautious in their response to the U.S. policy of rebalancing
toward the Asia-Pacific. But I think the Chinese border
provocation of April 2013 may prompt New Delhi to become more
open to this idea of a robust United States role in the region.
    You talked about trilateral cooperation. I think there is a
real opportunity to build United States-India-Japan trilateral
cooperation. Prime Minister Abe of Japan and Prime Minister
Modi have a personal relationship. Modi has visited Japan. So I
think there is a real opportunity to bolster that trilateral
dialogue.
    I would just mention that the Heritage Foundation conducted
a track two quadrilateral dialogue with an Indian think tank, a
Japanese think tank, and an Australian think tank in December.
I think it is important--even though the stage is not set for a
formal quadrilateral dialogue, I think it is useful to have
these track two dialogues so that, in the event where there
might be a need to start an official quadrilateral dialogue, we
can put that into place.
    Second is defense. As mentioned, the United States and
India need to renew the 10-year defense framework agreement and
build on the defense, trade, and technology initiative that was
launched in 2012. Regarding civil nuclear cooperation, I think
there is an opportunity to make a fresh push on changing the
liability issue. While in opposition, the BJP certainly opposed
the nuclear deal and pushed for this liability legislation that
has complicated United States companies' ability to get
involved in the civil nuclear sector in India. However, now
that the BJP is in power, I think there may be a willingness to
soften their position and build a political consensus around
resolution of this issue.
    Fourth, nonproliferation. The United States should be
pressing for India's membership in the major multilateral
nonproliferation groupings, such as the Nuclear Suppliers
Group, the Missile Technology Control Regime, and other
groupings. This is something that the United States should be
pushing for in the future. This is important to bring India
into these groupings rather than have it be outside of this
process. That is good for global stability.
    Fifth, Afghanistan and counterterrorism. We need to deepen
this dialogue and certainly Afghanistan needs to be part of the
counterterrorism dialogue and we need to increase our
consultations.
    Lastly, I just want to flag very quickly the remote
possibility that the religious freedom issue could become an
irritant in United States-India relations. I think Modi has
definitely distanced himself from communal politics during the
election campaign and he focused instead on the economy and
good governance. However, religious minorities in India remain
concerned that the BJP could pursue a communal agenda that
would be detrimental to their interests. So this is just
something that we have to keep an eye on.
    So in conclusion, the election of the BJP government is
likely to have a positive impact on the Indian economy and
reestablish confidence in India as a global power. If the
United States demonstrates its willingness to establish closer
ties with the new government, the BJP is likely to reciprocate
and we could both focus on achieving that vision of a durable
and strategic partnership.
    Thank you.
    [The prepared statement of Ms. Curtis follows:]

                   Prepared Statement of Lisa Curtis

    My name is Lisa Curtis. I am Senior Research Fellow on South Asia
in the Asian Studies Center at The Heritage Foundation. The views I
express in this testimony are my own, and should not be construed as
representing any official position of The Heritage Foundation.\1\
    The Bharatiya Janata Party's (BJP) landslide victory in India's
recent parliamentary elections bodes well for the country's future
economic prospects, as well as for its role in global affairs,
including relations with the U.S. Having won 282 parliamentary seats,
the BJP surprised even its own party members by becoming the first
Indian party in 30 years to win a majority of seats on its own. This
means that the BJP will not have to rely on coalition partners to
remain in power, being, instead, in a relatively strong position to
implement policies, including economic reforms and other measures that
could help restore investor confidence and improve India's GDP growth
rate.
    The new government led by Prime Minister Narendra Modi is expected
to pursue a more robust foreign policy than its Congress Party
predecessor, and to enhance India's influence and prestige on the
global stage. While a more assertive approach to foreign policy than
was pursued under the second Manmohan Singh government could pose some
challenges to U.S. policymakers, it also will open opportunities for
the U.S. to draw closer to India. New Delhi and Washington share
similar strategic objectives, whether they involve countering
terrorism, maintaining open and free seaways, or hedging against
China's rise.
          opportunity to reinvigorate u.s.-indian relationship
    The election of the BJP is welcome news for the beleaguered Indian
economy. Prime Minister Modi was voted into power on promises to revive
Indian economic growth, rein in corruption, and create jobs for the
rapidly growing youth population. India's GDP growth rate has recently
dipped below 5 percent, down from around 8 percent 2 years ago.
    Foreign investors have been optimistic that Modi's election would
help turn the economy around. Modi's track record of making Gujarat one
of India's most investor friendly states when he served as its chief
minister has sparked confidence that Modi will prioritize reviving the
economy and encouraging private-sector growth. Some of this optimism
was tempered following the introduction of the Indian budget last week,
however. The budget, presented to the Parliament by Finance Minister
Arun Jaitley on July 10, did not go as far in opening up the economy,
adjusting fiscal imbalances, and cutting subsidies as international
investors had expected, and markets reacted tepidly to the budget
announcement.
    One of the main reasons why the U.S.-India relationship has
foundered over the last few years, is that the previous Singh
government was unwilling to enact necessary economic reforms. The Singh
government also had been weakened by a series of corruption scandals
and was distracted from building ties with the U.S. by domestic
governance challenges during most of its second term.
    Indo-U.S. ties were further strained in December 2013 when the U.S.
arrested Indian diplomat Devyani Khobragade for underpaying her Indian
maid while serving at the Indian consulate in New York. The details of
Khobragade's arrest, particularly reports that she was handcuffed in
front of her children's school and strip-searched while in detention,
infuriated the Indian public.\2\ Washington, for its part, was taken
aback by the fierce Indian reaction, which included withdrawing
diplomatic privileges for U.S. diplomats and removing security barriers
at the U.S. Embassy in New Delhi.
    The BJP's assumption of power offers an opportunity to move beyond
the Khobragade episode and revive ties by focusing on building
cooperation on defense, security, economic and trade, counterterrorism,
and other issues of mutual concern. The previous BJP-led government
(1998-2004) was instrumental in elevating ties between Washington and
New Delhi and in laying a solid foundation for a strategic partnership.
                         robust foreign policy
    The new Modi government is expected to pursue a more robust foreign
policy than its Congress Party predecessor, and to enhance India's
influence and prestige on the global stage. The BJP election manifesto
states that the BJP ``believes a resurgent India must get its rightful
place in the comity of nations and international institutions. The
vision is to fundamentally reboot and reorient the foreign policy goals
. . . so that it leads to an economically stronger India, and its voice
is heard in the international fora.'' \3\ A greater Indian willingness
to acknowledge external threats and take initiatives to mitigate those
threats could result in increased U.S.-Indian cooperation on a variety
of defense, security, nuclear, and maritime issues.
China
    The new BJP government is likely to adopt a multifaceted policy
toward China, entailing both greater economic engagement with Beijing
and a willingness to stand up to any perceived Chinese aggression along
disputed borders. At the same time, India will focus on building up its
military and strategic capabilities in an effort to keep pace with
Chinese military modernization.
    Sino-Indian trade dipped slightly in 2013 to $66 billion (from $74
billion in 2012), but China remains India's biggest trading partner.
While the BJP is likely to pursue closer economic ties with China, in
February, Modi called on China to ``abandon its expansionist
attitude.'' A major event that will shape the new government's
policymaking toward Beijing is the April 2013 border incident in which
Chinese troops camped for 3 weeks several miles inside Indian territory
in the Ladakh region of the state of Jammu and Kashmir. The incursion--
probably the most serious by the Chinese in over two decades--has
convinced Indian strategists that it must increasingly factor the
potential threat of conflict over its disputed borders with China into
its security planning and projections.
    Signs of India's and China's deep-seated border disagreements have
been surfacing over the last several years, and it is likely that such
friction will continue, given the unsettled borders, China's interest
in consolidating its hold on Tibet, and India's expanding influence in
Asia. In recent years, China has increasingly pressured India over the
disputed borders by questioning Indian sovereignty over Arunachal
Pradesh; stepping up probing operations along different parts of the
shared frontier; and building up its military infrastructure, as well
as expanding its network of road, rail, and air links, in the border
areas. India accuses China of illegally occupying more than 14,000
square miles of its territory on its northern border in Kashmir, while
China lays claim to more than 34,000 square miles of India's
northeastern state of Arunachal Pradesh. India is a long-term host to
the Dalai Lama and about 100,000 Tibetan refugees, although the Indian
Government forbids them from participating in any political activity.
    The BJP manifesto does not mention China specifically, but it
commits to a ``special emphasis on massive infrastructure development,
especially along the Line of Actual Control [the disputed border
between India and China] in Arunachal Pradesh and Sikkim.'' \4\
Developing the areas along the disputed border allows India to
strengthen its territorial claims and defend itself against any
potential Chinese aggression.
    The Modi government has welcomed Chinese overtures, such as the
early visit by Chinese Foreign Minister Wang Yi to New Delhi just 3
weeks after Modi assumed office, and a bilateral meeting between Modi
and Chinese President Xi Jinping on Monday on the fringes of the
Brazil, Russia, India, China, and South Africa (BRICS) summit in
Brazil. It is unclear why Modi postponed a trip to Tokyo scheduled for
early July, but the optics of Modi engaging two senior Chinese leaders
before holding any meetings with Japanese officials demonstrates New
Delhi's interest in building positive momentum with Beijing.
    The BJP leadership likely wants to avoid any early controversies in
the India-China relationship like it experienced during its previous
tenure when the BJP-led government cited the ``Chinese threat'' as
justification for its nuclear tests in May 1998. One year later,
however, New Delhi was pleasantly surprised by Beijing's neutral
position on the Indo-Pakistani Kargil crisis, a position that helped
spur a thaw in Sino-Indian relations. Then-Prime Minister Atal Bihari
Vajpayee made a historic visit to Beijing in July 2003, during which
each side appointed a ``special representative'' to upgrade and
regularize their border discussions.
Japan
    In the past few years, India has focused increasingly on
buttressing security ties with Japan, South Korea, and Vietnam to meet
the challenges of a rapidly rising China. Indo-Japanese ties, in
particular, are expected to get a major boost under Modi's
administration since Modi and Japanese Prime Minister Shinzo Abe are
both increasingly concerned about China and appear prepared to take new
policy directions to deal with the challenges posed by Beijing's rapid
military and economic ascendance. They have also developed a close
personal rapport. As chief minister, Modi traveled to Japan in 2007,
marking the first time an Indian chief minister had traveled to the
country. Modi was one of the first foreign dignitaries to congratulate
Abe when he was reelected in 2012.\5\ The recent postponement of Modi's
visit to Japan is all the more perplexing, given the history of the
personal relationship between Abe and Modi.
    For his part, Abe has been a longtime supporter of stronger ties
between India and Japan, and initiated the idea of the Quad (the U.S.-
Australia-Japan-India security grouping) during his previous tenure in
2006. Abe was also one of the first leaders to acknowledge that the
Pacific and Indian Oceans should be linked strategically on the basis
of the need to preserve free and open seaways, thus helping to coin the
term ``Indo-Pacific.'' \6\
    While their economic ties pale in comparison to those between China
and India, Indo-Japanese diplomatic engagement has intensified in
recent years. Japanese Emperor Akihito paid a rare visit to New Delhi
in late 2013. Indian Prime Minister Singh made a historic 4-day visit
to Tokyo in May 2013, in which the two sides signed a joint statement
pledging nuclear cooperation and expanded joint naval exercises. Japan
also endorsed India for membership in the multilateral export control
regimes, signaling Tokyo's acceptance of India's nuclear status.
Russia
    India and Russia are likely to maintain their historically close
partnership under the new Indian Government. Russia remains India's top
defense supplier, providing about 70 percent of India's defense
requirements. The uncertainty surrounding the withdrawal of U.S. and
NATO forces from Afghanistan has brought New Delhi and Moscow even
closer in their shared goal to prevent a Pakistan-supported Taliban
from regaining power in Kabul.
    Differences in policies toward Russia could become a major irritant
in India-U.S. relations, particularly if Russian President Vladimir
Putin further extends Russian claims on Ukraine, and New Delhi
continues to provide unqualified support for Putin. India tacitly
supported President Putin's annexation of the Crimea on March 18, 2014,
by acknowledging Russia's ``legitimate interests'' there and deciding
not to back U.S. and EU sanctions against Russia.
Pakistan
    Modi has demonstrated interest in setting a positive tone in
relations with Islamabad by inviting Pakistani Prime Minister Nawaz
Sharif to his swearing-in ceremony, an unprecedented move by an Indian
leader. Still, a major terrorist attack in India with links to Pakistan
could quickly reverse the current positive trajectory in Indo-Pakistani
relations. Former Prime Minister Singh had shown a great deal of
forbearance toward Pakistan, and a personal commitment to maintaining
peaceful ties with Islamabad, even following attacks in India that were
traced back to Pakistan-based groups. Having criticized Singh for being
too soft on Pakistan, Modi would be under pressure to react strongly in
the face of a terrorist provocation.
    Moreover, there is growing concern about the impact on Indo-
Pakistani relations of the international troop drawdown in Afghanistan
and whether the Kashmir conflict could reignite. According to Indian
officials, there was an increase in militant infiltration from
Pakistani territory into Indian-held Kashmir in 2013. Last August,
Indo-Pakistani military tensions escalated for a brief period when a
series of incidents along the Line of Control (LoC) that divides
Kashmir led to the killing of five Indian soldiers and a Pakistani
civilian. The incidents led to charged rhetoric on both sides and
dashed hopes for a potential meeting of the Indian and Pakistani
leaders on the fringes of the 2013 U.N. General Assembly.
    Modi is attempting to strike a balance between sounding a tough
message on terrorism, while leaving the door open for improved Indo-
Pakistani economic relations. In an interview with The Times of India
in early May, Modi said that both countries faced the common enemy of
widespread poverty and that he would be ready to ``write a new
chapter'' in relations if Pakistan demonstrates that it is committed to
stopping terrorist attacks from being launched from its territory.\7\
    When Indo-Pakistani tensions have escalated in the past, such as
during the 2001-2002 military standoff and in the aftermath of the 2008
Mumbai attacks, the U.S. played a key behind-the-scenes role in walking
both countries back from the brink of conflict. But the U.S. inability
to convince Pakistan to cut support to anti-Indian militants over the
last several years may lead the new Indian Government to conclude that
it cannot rely on the U.S. to help de-escalate a potential future
crisis with Islamabad, and instead must address the threat from
Pakistan on its own.
                     defense trade and cooperation
    The U.S. should continue to position itself to help India fulfill
its defense modernization requirements and enable American companies to
pursue partnerships that support India's interest in developing its
domestic defense production sector. The BJP's election manifesto
highlighted the need to modernize India's Armed Forces and increase
research and development in the defense sector, with the goal of
developing indigenous defense technologies and ``fast-tracking''
defense purchases.\8\ The budget that was released in India last week
raised total defense spending by 12 percent to $38 billion for the
Indian fiscal year ending in March 2015.\9\ It also raised foreign
direct investment caps in the defense sector to 49 percent, up from the
current limit of 26 percent, but still short of what many defense
investors had expected. India's Department of Industrial Policy and
Promotion (DIPP) had recommended in May that the government make more
drastic changes with regard to FDI in the defense sector. The DIPP
proposed allowing 49 percent FDI in defense projects where no
technology transfer was involved; 74 percent in cases of technology
transfer; and 100 percent for manufacturing state-of-the-art
equipment.\10\
    The U.S.-India Defense Trade and Technology Initiative (DTTI),
launched in 2012, is aimed at breaking down barriers between the two
countries' defense bureaucracies and enhancing defense trade and
technology exchange. India is expected to spend over $100 billion on
defense equipment over the next 8 years. In 2013, U.S. military exports
to India totaled $1.9 billion with delivery of C-17 heavy transport
aircraft and P-81 long-range maritime reconnaissance and antisubmarine
warfare planes. The U.S. has signed over $13 billion in total defense
contracts with India over the past several years, but still lags behind
Russia as a defense supplier to India.
Maritime Issues
    India has the world's fifth-largest Navy and Asia's only
operational aircraft carrier.\11\ In its manifesto, the BJP made
special mention of the need to refurbish India's navy. A series of
mishaps on Indian submarines and ships over the past year have raised
questions about India's ability to achieve its naval ambitions. The
most serious problems have occurred with its Russian Kilo-class
submarines. There was an explosion on the INS (Indian Naval Submarine)
Sindhurakshak in August 2013 that killed 18 officers and sailors, and a
fire on the INS Sindhuratna in February, which led to the resignation
of the naval chief.\12\
Nuclear Issues
    The previous BJP-led government, under Atal Bihari Vajpayee,
surprised the world and invoked sanctions when it tested nuclear
weapons shortly after assuming office in May 1998. The bold action says
something about the BJP's willingness to assert India's national
security interests, but the decision must also be viewed in context.
Former Congress Party Prime Minister, Narasima Rao, was close to
conducting nuclear tests in 1995, until the U.S. Government preempted
the test by delivering a demarche to the Rao government based on
intelligence it had collected on Indian test preparations. The 1998
decision to test also was related to negotiations surrounding the
Comprehensive Test Ban Treaty (CTBT) and India's interest in ensuring
that it tested its nuclear weapons before the CTBT came into force.\13\
               potential stumbling block: communal agenda
    When U.S. President Barack Obama called Prime Minister Modi shortly
after the election results were announced to congratulate him on his
victory and to invite him to Washington, he sent a signal that the U.S.
is ready to do business with Modi and move beyond the issue of the 2002
Gujarat riots.
    The U.S. had revoked Modi's tourist visa in 2005 under the terms of
its International Religious Freedom Act for failing to halt Hindu-
Muslim riots in 2002 that killed more than 1,000 people--mainly
Muslims--over the course of 3 days in the state of Gujarat. The riots
followed an incident in which a group of Muslims set fire to a train
carrying Hindu pilgrims destined for Ahmedabad and passing through the
town of Godhra. Modi, who was Gujarat's chief minister at the time,
allowed funeral processions in the streets of Ahmedabad the next day,
and the state government failed to control Hindu mobs that went on a
systematic rampage murdering Muslims. Modi was accused of turning a
blind eye to the violence, or worse, although the Indian courts have
cleared him of criminal activity.
    U.S. officials should give Modi a chance to prove he will not be a
divisive leader and will work instead to improve the Indian economy for
everyone's benefit. Modi stayed away from communal politics during the
election campaign and focused instead on the economy and good
governance. In his first speech to the Indian Parliament on June 11, he
acknowledged that India's Muslims lagged behind the rest of the nation
in socioeconomic terms and noted the importance of addressing this
challenge, saying: ``If one organ of the body remains weak, the body
cannot be termed as healthy . . . We are committed to this . . . We
don't see it as appeasement.''
    In the past, the BJP has supported policy positions considered
divisive by the Muslim minority community. These include support for
the construction of a Hindu temple at Ayodhya, where a mosque was
destroyed by Hindus in 1992; the establishment of a uniform civil code,
rather than allowing Muslims to maintain certain personal laws based on
religious custom; and repeal of Article 370 of the Indian Constitution,
which provides the state of Jammu and Kashmir special autonomous
status. The BJP did not pursue these controversial issues when it held
power previously (1998-2004), mainly because it lacked support from its
coalition partners. Even though the BJP now holds a majority on its
own, Modi will have to consider the costs of prioritizing a
``hindutva'' (Hindu religious and cultural nationalism) agenda in terms
of political support at home and abroad, and the possibility that doing
so could undermine his goals of building a strong and prosperous India
with a positive global image.
    Christians, numbering about 25 million in India, have also faced
harassment and violent attacks by organizations following a hindutva
agenda. Christians feel especially vulnerable in states that have
adopted anticonversion laws. The anticonversion laws are aimed at
preventing ``forced conversion'' but have been misused by Hindu zealots
to harass Christians and to legitimize mob violence.
    It remains to be seen to what degree the BJP might focus on trying
to rebuild the Ram Temple. Hindus would like access to Ayodhya, as they
believe it to be the birthplace of the Hindu god Rama, where a
prominent Hindu temple (the Ram Temple) once existed. In 1992, BJP
leader L. K. Advani led a protest march to the Babri mosque at Ayodhya
that resulted in its destruction by Hindu zealots and ensuing communal
riots that killed nearly 2,000. In September 2010, a high court in
India ruled that the land at Ayodhya be divided into three segments:
one-third for the reconstruction of the Ram Temple; one-third for the
Islamic Sunni Waqf Board; and one-third for another Hindu group. The
2014 BJP manifesto expresses support for rebuilding the Ram Temple
within the confines of the Indian constitution.
                      u.s. policy recommendations
    The rise to power of the BJP, led by now-Prime Minister Modi,
creates an opportunity to end the malaise that has taken over India-
U.S. relations in the last few years. Modi's upcoming visit to
Washington on September 30 is an opportunity for the U.S.
administration to demonstrate its commitment to moving relations
forward with the new government. U.S. policymakers should consider
initiatives in the following areas.
The Asia-Pacific
    While Indian strategists assess Pakistan as posing the most
immediate threat to India, they increasingly view China as the more
important long-term strategic threat. Indian officials were initially
cautious in their response to the U.S. policy of rebalancing toward the
Asia-Pacific, but the Chinese border provocation in April 2013 may
prompt New Delhi to become more open to the idea of a robust U.S. role
in the region. A BJP government also will not be constrained or
influenced by leftist-leaning politicians who have a knee-jerk aversion
to strategic cooperation with the U.S., as was the case with the
Congress Party-led government. BJP leaders will continue to resist any
policy construed as ``containment'' of China, however. Modi's strong
equation with Japanese Prime Minister Abe also could open opportunities
for greater trilateral cooperation among the U.S., India, and Japan,
although it is unclear why Modi postponed a trip to Tokyo scheduled for
July 3.
Defense
    India and the U.S. should renew the 10-year defense framework
agreement they signed in 2005 and build on the progress of the Defense
Trade and Technology Initiative. Indian willingness to adhere to U.S.
technology protection agreements will be critical to moving the Indo-
U.S. defense relationship forward.
Civil Nuclear Cooperation
    The U.S. should make a fresh push to resolve the nuclear liability
issue. While in opposition, the BJP opposed the civil nuclear deal and
pushed for nuclear liability legislation that complicated U.S.
companies' ability to invest in civil nuclear projects in India. Now
that the BJP is in power, the party leaders may be willing to soften
their position and build a political consensus around a resolution to
the liability issue that would allow U.S. firms to invest in the civil
nuclear sector.
Nonproliferation
    The U.S. should continue to press for India's membership in the
four major multilateral nonproliferation groupings: the Nuclear
Suppliers Group (NSG); the Missile Technology Control Regime (MTCR);
the Australia Group (which seeks to control the export of chemical and
biological weapons); and the Wassenaar Arrangement (which seeks to
control the export of conventional arms and dual-use goods). The U.S.
and U.K. support India's admission to the NSG, but some NSG members
have expressed concern that admitting India will erode the credibility
of the Nuclear Nonproliferation Treaty (NPT), since India is not a
signatory of the treaty. India should continue to improve its export
control processes and the transparency of its strategic nuclear
programs to help bolster its case for full membership in the
multilateral nonproliferation groupings. The U.S. and other
international partners need to develop fresh thinking about India's
relationship to the NPT and nonproliferation system that takes into
account the reality that India will not join the NPT as a nonweapons
state. Though the NSG is closely associated with the NPT, it is also
fact that the NSG was originally created in a way that France could
join even though it had not yet signed the NPT.\14\
Afghanistan/Counterterrorism
    The U.S. should expand and deepen its counterterrorism dialogue and
cooperation with India. The future of Afghanistan should be a key
component of the Indo-U.S. counterterrorism dialogue, particularly
given the alarming situation in Iraq, where Islamist extremists are
making gains in the absence of a U.S. force presence in the country.
The U.S. should encourage India's economic and political involvement in
Afghanistan, which helps bolster the Afghan Government's efforts to
fight terrorism. To kick-start the effort, the U.S. should send a high-
level multiagency delegation (from the CIA, the Department of Homeland
Security, and the National Counterterrorism Center) to India to
exchange views on regional terrorist threats.
Indo-Pakistani Relations
    U.S. policymakers can take steps to reduce the possibility of
deteriorating Indo-Pakistani relations. While U.S. officials should not
seek a mediation role, they can work behind the scenes to encourage
Indo-Pakistani dialogue and inject ideas for moving a peace process
forward. Moreover, the U.S. must maintain pressure on Pakistan to crack
down on Kashmir-focused terrorist groups. The Mumbai terrorist attacks
of 2008 should be viewed as the culmination of U.S. failure to connect
the dots between Pakistani support for Kashmir-focused terrorist groups
and the broader international terrorist threat. Washington should also
remain vigilant in monitoring the human rights situation inside Jammu
and Kashmir, raising concerns with the Indian Government when
necessary. In the summer of 2010 protests that turned violent in
Kashmir led to the killing of 126 Muslim youth by Indian security
forces. The U.S. should encourage trade, joint economic projects, and
civil society engagement among the people from both sides of Kashmir.
Religious Freedom
    While the new Indian Government is in its early days, so far there
is reason for cautious optimism that it will focus on implementing
policies beneficial for the Indian economy and that enhance India's
international role. Still, the U.S. should engage India on religious
freedom issues to ensure that Modi follows through on his promises to
meet the needs of all Indian citizens and stays away from controversial
policies supported by hardliners within his party and associated
organizations.
                               conclusion
    The election of a BJP government is likely to have a positive
impact on the Indian economy and reestablish international confidence
in India as a global power. If the U.S. demonstrates its willingness to
establish close ties with the new government, it is likely that the BJP
will reciprocate and the two sides can refocus on achieving the vision
of a durable and strategic partnership.

----------------
End Notes

    \1\ The Heritage Foundation is a public policy, research, and
educational organization recognized as exempt under section 501(c)(3)
of the Internal Revenue Code. It is privately supported and receives no
funds from any government at any level, nor does it perform any
government or other contract work.
      The Heritage Foundation is the most broadly supported think tank
in the United States. During 2012, it had nearly 700,000 individual,
foundation, and corporate supporters representing every state in the
U.S. Its 2012 income came from the following sources: Individuals 81%;
Foundations 14%; Corporations 5%.
      The top five corporate givers provided The Heritage Foundation
with 2 percent of its 2012 income. The Heritage Foundation's books are
audited annually by the national accounting firm of McGladrey & Pullen.
A list of major donors is available from The Heritage Foundation upon
request.
      Members of The Heritage Foundation staff testify as individuals
discussing their own independent research. The views expressed are
their own and do not reflect an institutional position for The Heritage
Foundation or its board of trustees.
    \2\ Annie Gowan and Anne Gearan, ``U.S. Attorney Says Indian
Diplomat Arrested `in the Most Discreet Way Possible,' '' The
Washington Post, December 18, 2013.
    \3\ BJP Election Manifesto 2014.
    \4\ Ibid.
    \5\ Palash Ghosh, ``India 2014 Elections: BJP Leader Narendra
Modi's Bromance with Japan's Shinzo Abe,'' International Business
Times, March 10, 2014.
    \6\ Ambassador Karl F. Inderfurth and Ted Osius, ``India's `Look
East' and America's `Asia Pivot': Converging Interests,'' U.S.-India
Insight, Vol. 3, No. 3 (March 2013).
    \7\ Dean Nelson, ``India Election 2014: Narendra Modi Says India
and Pakistan Should Be Allies in War on Poverty,'' The Telegraph, May
6, 2014.
    \8\ BJP Election Manifesto 2014.
    \9\ Andrew MacAskill, ``Modi Eases Defense Investment Rules as
India to Rebuild Forces,'' Bloomberg, July 10, 2014.
    \10\ Dilasha Seth, ``DIPP proposes 100% FDI in Defence Sector,''
The Economic Times, May 30, 2014.
    \11\ Walter Ladwig, ``India Sets Sail for Leadership,'' The Wall
Street Journal, June 9, 2010.
    \12\ ``Indian Navy: 11 Accidents, 22 Deaths in Seven Months,''
DnaIndia.com, March 7, 2014.
    \13\ T. P. Sreenivasan, ``More Continuity, Less Change,'' The
Indian Express, May 11, 2014.
    \14\ Lisa Curtis, ``Enhancing India's Role in the Global
Nonproliferation Regime,'' CSIS South Asia Program and the Nuclear
Threat Initiative, December 2010.

    Senator Kaine. Thank you very much. Great testimony all
around, both the written testimony, which I found very
provocative, and the presentations.
    Two opportunities that I think are available to us that I
just want to mark here. Mr. Singh, you mentioned the idea of a
joint address to Congress. I am a cosponsor of a resolution we
are currently working in the Senate that talks about sort of
the new relationship with the United States and India, but it
also includes a resolution to invite the Prime Minister to
address Congress. I think that would send a very positive
signal.
    I also encourage and urge the administration to send a very
positive signal in its choice of naming an ambassador to India.
That is one of the strongest signals you can send. If you send
someone--the kind of person you send, the identity of the
person you send, the relationships that person already has in a
country, and especially in a country whose partnership means so
much to us, that is a very quick way to tell somebody how
important they are. I really urge the administration to do
that.
    We are wrestling with our own significant challenges here
in the Senate, frankly, about confirming ambassadors. It has
been really discouraging to me that so many nations in the
world with which we have so much business on the table right
now have had vacancies in their ambassadorial posts, largely
due to process issues here in the Senate that we ought to be
able to resolve.
    But to some degree, these matters also all begin with the
administration naming a person. I think this particular vacancy
gives the administration an opportunity to name someone that
right away communicates a level of seriousness about the future
of the relationship, and I encourage the administration to do
it.
    A couple of you have touched on an issue that I think is
interesting, which is if we are looking at a way to strengthen
this relationship going forward, there are positive things we
can work on, but the other way to look at it is, what are the
negative concerns that we ought to kind of sweep out of the
way? We have concerns on our side--intellectual property, et
cetera. But you are all experts at this and you all know the
way the Indian leadership class kind of looks at these issues.
What are concerns that they have right now with this government
and the kind of new reality about the United States, about the
relationship with the United States, that we ought to be
thinking about about moving aside in these meetings that are
coming up in the September visit of the Prime Minister here?
    So educate me on, from the Indian perspective, what are
concerns and issues that we ought to try to address and move
aside so that they are not obstacles to a very productive
future path? In whatever order you want. You do not have to go
in the order.
    Ambassador Wisner. I would be happy to throw the first
stone, Senator.
    Senator Kaine. Please.
    Ambassador Wisner. In my testimony I made a point that I
know is rooted in Indian perception. Indians are looking for a
definition of how we intend to manage our affairs in protecting
our security and the balance of power in Asia. They do not know
what that is and it makes them profoundly uneasy because they
do not know where they fit in, how we are going to manage
Chinese power, how we are going to deal with Afghanistan, what
are our plans toward Pakistan?
    If I pick, at the top of my list of risks it is the risk of
talking past each other. We select lots of specific initiatives
that we can launch, but Indians are looking for a framework, an
intellectual framework that will give them the ability to
predict how America will react in a very tough time in history.
That is what I hope the President and Kerry, the Secretary, and
Secretary Hagel will really focus on: Get that right and so
much will follow; risk number one.
    Risk number two is known to all of us who have dealt with
India over the years, and that is exaggerated expectations.
India is not your normal ally; which accepts American solutions
and from which we expect a degree of responsiveness to our
ideas. India is a very reluctant partner, a very careful
partner, a very suspicious partner.
    The way you make the relationship work is not by setting
your goals and expecting India to meet them, but a very careful
discovery of what Indian goals and yours are and coming up with
a meld. It is a different kind of diplomacy than the United
States has been used to exercising. But I would argue the
failure to do that puts a risk in the relationship, because
once again we will talk past each other.
    Mr. Rossow. I will just rattle off a couple of thoughts on
this real quick. I think getting an ambassador to post, but at
the same time I think what India would really like to see is
somebody at the Cabinet level in the United States that they
feel wakes up every day and thinks about India as one of the
first few things. I think Ash Carter played that role. India
felt that there was somebody in those high-level discussions
that would think about India and their interests. But right now
I do not know that they could point to somebody and say that
that is our person.
    I also think that for India's commercial interests the
immigration bill, which the Senate passed and the House may
take up at some point in the future, and its implications for
IT service firms, also they continue to raise. I know this
issue has never been quite elevated to that level of the
totalization agreement on social security payments.
    The last thing I will mention real quick, too, is there are
two things happening this fall that will have a very pointed
effect in the relationship. The USTR's out of cycle 301 review.
Is India going to amend its patents law in a way that
accommodates everybody's interests? I do not think that is
likely to happen. So the 301 is going to be out there. It is
going to be another roadblock we know is coming.
    And the International Trade Commission has a report on
India's trade barriers and I think even those of us that love
the relationship realize there is a lot of barriers in India.
The report is going to say that. So we have got two things
coming up, two that we know are going to be poking at the
relationship a little bit, mostly driven by things that the
last government did. So reactions to that at the next
government may be taken as unfair.
    Senator Kaine. Mr. Rossow, just to follow up before the
other witnesses answer the question, your point about the
failed expectations syndrome; I guess there would be a danger
if we as the United States deal with the new government kind of
out of the basis of our experience with the previous
government. That will be noticed and will not be appreciated.
Your point was we kind
of have to recognize that we have a big opportunity and if they

set aside some precedent and do not feel bound by it then we
should also approach it in a new way and not just based on past
expectations.
    Mr. Rossow. There is a very specific thing underlying that,
which is that we dealt with them the Manmohan Singh government
before, which was not the government of India. Sonya Gandhi,
president of the party--and when we talk about the fact that
the government could not get things done, if you were to look
at Sonya Gandhi's legislative priorities she had almost a
perfect batting record, including at the last minute, just
months ago, passing a bill through Parliament amending the
constitution to create a new state to try to save a few seats
in their election. A very incredible legislative record, but
that was not who we were dealing with, and that agenda was
different than ours.
    So the fact that we are dealing with the person in which
power is consolidated in Delhi is a huge difference.
    Senator Kaine. Thank you very much.
    Mr. Singh.
    Mr. Singh. I echo a lot of what my colleagues have said,
but I think the concerns of every Indian Government have been
somewhat similar over the years. That is that if you get too
close to the United States what does the United States get you
stuck in? Where do you find yourself in an uncomfortable
position? Where do you find yourself with deep ties, say on
defense, that prove unreliable at a controversial time?
    The mistrust that we have had over the years I think has
almost entirely been eradicated. In fact, before the Khobragade
incident I think that the sense was that we had basically
overcome all of that kind of mistrust. But because relations
are complicated between nations and because things like that
incident happened or Snowden revelations happened to friends
like Germany, really any relationship is subject to these kinds
of bumps in the road.
    But I think the Indians are particularly nervous about what
being too close to the United States would actually mean. The
shadow of nonalignment is not just a partisan thing. It is not
just a Congress Party thing. It is there. It is a more positive
vision when it comes from the current government, because it is
not what we are not going to do; it is that we are going to be
a nationalist government. And positive nationalism from this
government could be a very powerful, useful thing, because it
could give them a level of confidence to do things with us that
have otherwise been thought of as somehow risky or suspect or
things you would worry about.
    But I actually think that there is a bigger--their concerns
are not necessarily the main threats to us having a productive
relationship. I think a lot of those concerns are fairly
misplaced, especially now that you have such strong support for
India across the board. Just look at the dynamism not only of
your subcommittee, but look at the India Caucus on the Hill. It
is very robust. So you have sort of really broad bipartisan
support for the relationship.
    But I think the thing that is a little more worrying, and
it should be a concern to us and to them, is we are in a very
complicated--it is a very complicated relationship and it is
one where if it lacks leadership--that is to say, if the
President and the Prime Minister are not fairly regularly
making it clear to the two bureaucracies and the systems that
their expectations are high and that problems should be
resolved and that we should get through issues--we will not.
The issues will eat us up in this relationship. The things that
pop up, the obstacles, will--in anything we try to do, legal,
policy, and other obstacles will pop up.
    Those can either become insurmountable if they are sort of
left in a vacuum of leadership or they can probably be
relatively easily surmounted if there is regular leadership
from above. So it is not enough for the two leaders to meet now
and say we love each other, we want to have a good
relationship. There has to be some real consistent mechanism.
The infrastructure is there with the strategic dialogue, the
high-level dialogues on defense. There are all these pieces.
But somehow if it does not have that top-level leadership
consistently applied, I do not think----
    Senator Kaine. The bureaucracies are not capable of
managing the relationship.
    Mr. Rossow. Yes. They are very capable of bogging it down.
    Senator Kaine. Yes, right, right. Thank you.
    Ms. Curtis.
    Ms. Curtis. I think one of the biggest concerns I hear
coming from Indians is the future of Afghanistan and our
withdrawal. They are afraid we are going to withdraw too
quickly and that we are going to allow Pakistan to drive the
future of the country. I think there is major concern on this.
So anything we can do to allay those concerns would be useful.
    The second issue would be echoing what Rick mentioned in
terms of the immigration issue and U.S. restrictions on the H1B
visas and restriction on the numbers of highly skilled Indian
workers coming into the United States. I think those would be
the major issues.
    Senator Kaine. Let me ask one other question and then I
will see if Senator Risch has a question. I guess it was,
Ambassador Wisner, your testimony was about this very ambitious
economic goal of the 15 million jobs a year. Or, Mr. Rossow,
was that your testimony? I cannot remember. So that is a huge
and ambitious goal. So, going back to Ambassador Wisner's
answer to my previous question, if the idea needs to be not
just here is what we want, but let us really listen to what it
is that this new government of India says it wants and then try
to meld all of our goals together, if they are placing a very
high priority on economic development, and in a pretty specific
way--they have got a metric that is out there, a need to create
15 million jobs a year to deal with the changes in the
population, the move of a rural population to the cities--that
could be a focus of ours.
    If we know that is their most significant goal, then there
is a whole series of things--a manufacturing initiative, Mr.
Rossow, you talked about--that we could do that I think would
be mutually beneficial both for our interests and for theirs.
But I am just kind of curious. Do all really see that
significant economic acceleration as the primary goal right now
that the Modi government wants to pursue and should we organize
much of our thinking? We are not going to set side the good
defense work we are doing, et cetera. Should we organize much
of our thinking about how to work together around that very
aggressive economic development goal?
    Ambassador Wisner. Well, I think it is certainly one of the
key objectives we have to reach for. I do not want to ignore
other requirements. We have got real security interests in the
continent. We want to work with India on those. We have issues
that have to be addressed in terms of the broad economic
picture, not just India and not just job creation.
    But it really is vital, and it is going to be very tough.
It is certainly a terrific focal point around which we can talk
to Modi. Now, what really lies ahead? Fifteen million jobs,
that is daunting. But at least we know that Modi is about
growth. He is not about distribution first; he is about growth.
So what kind of growth policies are going to work? He is
looking for those. He is articulating them, and he has shown
that once he finds them he uses the power of the office of the
chief executive and he puts that strength behind it. He deals
directly with his administration. His ministers really brand
Modi's product the Civil Service Implements. Modi's India is
more an executive model, less the classic Westminister model of
Collective Cabinet Responsibility.
    But to get there, Senator, I am going to repeat myself in
one regard. I do not think simply investments in
infrastructure, education, health are going to get 15 million
jobs in India. We are all going through a complex time in the
world in which job generation is very difficult to achieve.
Now, how is India going to do it? Here again, if it models
itself on the rest of the world as an open, competitive
economy, where it invites the best of examples on how to grow
and it does not hide behind barriers and tries to preserve a
protective trade regime, then it has a chance of making that 15
million.
    But if it does not do that, it is going to be a struggle. I
think one of our top priorities ought to be, helping India
think about how to open herself so she is competitive, taking
the best examples around the world, adopting them herself, and
then forcing them through.
    Senator Kaine. Other thoughts about how the United States
can help India achieve this goal? Mr. Singh?
    Mr. Singh. We often talk about what our businesses need,
what we need to be able to do these sorts of things. I think
Indian leaders have had historically a failure of explanation
to their own people about why they need reforms to do things
that Indian businesses need, that Indian workers need, that
will actually help bring jobs.
    That is not something we can articulate for them, but I do
think that we should be poised to encourage the new government
to do something that I think has really never been done before.
Reforms were made, but they were almost made like: Do not look
here; we are still going to do more of the social security
safety net, we are still going to do more handouts, we are
still going to maintain subsidies, we are still going to do all
these other things; but, oh, we have got the opportunity to do
some reforms.
    What you have seen over the last 20 years is a plowing
back. A lot of the economic benefit that came from the reforms
started in the early nineties got plowed back into
nonproductive activity. So they did not build themselves a
virtuous cycle and they hoped for growth. They hoped for
endless growth, and when growth stopped or stagnated they were
caught even more unaware than some other countries in 2010. I
think that was really a pretty rude awakening.
    So the challenge is for a country that is used to a huge
public sector in defense it is particularly daunting. Defense
public sector undertakings in India are massive and inefficient
and not very well suited to the kind of future that they are
talking about wanting. And it is not just this government; the
previous government, too. But they have not been able to
politically see their way through that.
    They have got to tell a good story. Modi has got to take
the narrative ``I will deliver good governance'' and turn it
into ``And this is what that takes.'' He has said a lot of
``This is why we have to do hard things,'' but what are those
hard things and how do they deliver for the Indian people? And
then he will have to show results.
    The jobs thing is one indicator. He has also said he wants
electricity to every Indian home in about a decade. There are
300 million Indian homes without electricity, so that is the
equivalent of trying to produce electricity to the entire
United States of America. That is daunting, and it can only be
done if, as Ambassador Wisner says, they make real reforms.
    Senator Kaine. Senator Risch had a back and forth with Ms.
Biswal on the first panel about intellectual property and I
thought she made an interesting point, and that was: We have
very significant concerns about the intellectual property
argument, but one of the ways that we would achieve what we
would want is if the Indian private sector also came to
realize, wow, better intellectual property protection is really
going to help us as well. She seemed to indicate that there was
a growing desire for more intellectual property protections
within that domestic technology leadership in particular.
    Do you share that? Do you see more of an embrace of
intellectual property protection as driving policy with this
new government?
    Mr. Rossow. There is a couple of areas where industry has
driven. We say ``IP,'' but you are talking about patents.
    Senator Kaine. Yes.
    Mr. Rossow. That is what has driven this discussion. But if
you look broadly at IP, pharma is an area where India lives
based on generics production. It has never been leading edge in
creating new molecules. But in other sectors that focus on IP--
movies, TV, things like that, software, where India has been a
leader--industry has done a lot of work to make sure that their
government--that their interests are protected.
    So I think it is going to be tougher in patents. We say
``IP.'' I think in other areas of IP beyond patents there is a
lot that has been done. For instance, on cable TV. There was
rampant theft and illegal distribution of the channels that
American companies and others created. They focused on
digitization of cable TV, something that is being rolled out
across the nation now, and 140 million homes have cable TV.
This is a really big deal. And focusing on set-top boxes,
making sure you knew who got what channels, that kind of stuff.
    On films, it used to be that printed copies of films would
be available on markets. So what India has done, industry-led,
is digitization. So press of a button, they can transmit the
films directly to the studios. So there is lots of work that
the private sector has done and I think that kind of shows the
case.
    But in pharmaceuticals the problem is they are not there
yet. They are not thinking this is going to be in their
interest yet. So they are much further behind. But there is
work--the domestic sector did get the message. They have shown
to be quite leading edge.
    Ambassador Wisner. Senator, to add a quick thought on what
Rick said to you, to make it even sharper, we tend to say
``intellectual property rights'' and he is quite right, you
have got to focus on those areas. One of the hottest topics for
our pharmaceutical industry and what causes the most complaints
is mandatory licensing. In fact the Indians have been involved
in it only on rare occasions, but where they have done it they
have frightened badly the international pharmaceutical
industry. It believes steps taken in India will have
international repercussions.
    So when the USIBC chairman saw Modi on our recent trip he
said: Prime Minister, the really key point is to have
transparency and predictability, not to surprise people. He
actually suggested, and Modi liked the idea, of putting
together an Indian, international, and Indian Government panel
to look at pharmaceutical issues and review them before the
government makes its choices. Government is sovereign; what
industry wants is a fair hearing.
    So I think it is not going to be one law that can be
written that is going to correct this, but a habit of
consultation that will make a difference.
    Senator Kaine. Senator Risch, questions.
    Senator Risch. Thank you. I am going to yield back, Mr.
Chairman. My questions were answered. So thank you very much.
    Senator Kaine. Thank you.
    Let me ask a question about Iran. This is partly directly
related to the India-Iran relationship, which there is a
cultural tie that it has had that relationship over time. We
give Iran a waiver to our sanctions regime--we give India a
waiver to the sanctions regime for use of Iranian energy,
largely out of a recognition partly of that cultural tie, but
also partly because of the tremendous Indian need for energy.
    What are the opportunities we might have to work with
India--the civil nuclear power issue has been raised, or other
areas--
to help them develop their own native energy economy that might
ultimately lead them to reduce their reliance upon Iranian
energy? What opportunities are there?
    Mr. Rossow. Well, I think India's got tough decisions to
make for herself first, which is deregulating price controls of
petroleum products. Most foreign companies will not go in and
develop the resources. And the resources may be there. We have
seen some large-ish natural gas and petroleum strikes over
other rounds of licensing for private blocks for exploration
and development. But foreign companies mostly have stayed away
from doing that because you just do not know, with such a
heavily regulated sector, as to whether or not whatever you
find you are going to be able to market effectively at a price
that makes it right.
    So they have made steps. Even the Congress government made
steps on loosening some price controls and reducing subsidies
in this area. A lot more needs to be done, though. Until it is
a fully transparent market where the government is not putting
their finger on the scale every day, I think a lot of companies
are going to stay away from really taking the dive and doing
that in a bigger way.
    Senator Kaine. But we would have an argument to make in
consultation that the relaxation of that sort of overregulation
or price control could achieve the 15 million year a goal of
job growth. We could show our own track record of developing a
really strong domestic energy economy and its connection to
jobs if we are trying to help India reach that goal.
    Mr. Singh.
    Mr. Singh. We mentioned the R&D and the work we are doing
through the energy partnership on solar, which of course got
subjected to local content requirements, which resulted in it
being a trade dispute, basically. But trade disputes can bleed
over into the energy cooperation.
    There are huge potentials for cooperation in the energy
sector, both in R&D, but also the Department of Energy could
help India with technology for its own potential exploration,
for the gas reserves that might be there that Rick was talking
about.
    It is interesting to note that I think one of the great
signs of progress in our relationship was that India did make a
concerted effort to reduce its purchasing from Iran when we
were asking that that be something--when we were making it
clear that that was something that was very important to the
United States. And they did it in a way that I think really
showed the maturing of the relationship as a strategic
partnership. It does not prove that we are where we could be,
but it was interesting to see how they handled that.
    They really did try. They really were transparent. It was
sort of, here is what we think we can achieve, and then we were
able to come back and the administration was able to work
closely with Congress to say, okay, we have got to figure out a
way to square the circle here.
    But they need energy growth and they need diversification
and they need greater independence. So I think there is a lot
of potential.
    Senator Kaine. Lisa.
    Ms. Curtis. What immediately comes to mind is access to
U.S. LNG exports. I think including them in that circle is
something that is of interest.
    But just to mention, with the relationship with Iran it is
not just cultural, it is not just economics. They have
strategic interest in the relationship with Iran because of
their rivalry with Pakistan, but also because of the situation
in Afghanistan, and their desire to prevent the Taliban from
taking over there. They cooperated in the nineties against the
Taliban in Afghanistan. So I just want to note that India also
has strategic reasons for wanting to engage with Iran.
    Senator Kaine. One last question that I have, and I raised
this briefly with the first panel: Counterterrorism
cooperation, the Mumbai attack, the presence of LET and the
continued concerns about what their designs might be. What is
the current status of the relationship between the United
States and India in the counterterrorism area and what are some
opportunities that we would have, that I think would be
appreciated if we approached them with seriousness to help them
really deal with that challenge? Because, as Ms. Curtis
indicated in her testimony, any kind of an attack in the
future, given the campaign sort of promises of P.M. Modi, he
might have to respond in a particular way. So the best thing we
could do is do everything we could to avoid that happening, and
that involves CT cooperation.
    What is the current status of the relationship?
    Mr. Singh. I will speak to it briefly. Post-Mumbai, we
really transformed both law enforcement and intelligence
cooperation. It has been really one of the more successful
areas. The homeland security dialogue within the framework of
the strategic dialogue is very productive. The intelligence
relationship has been much more productive than people would
have expected prior to 2008. We really do share a lot. We share
threat information, but we also are sharing a lot of best
practices for counterterrorism and other engagement. FBI, DHS,
it is broad engagement, and it is good.
    I think one area is cyber and intelligence-sharing, cyber
in particular. I think the need for us to figure out a way to
work more closely on cyber security could not be greater, and
it has counterterrorism implications. We have a cyber security
sort of information-sharing regime which sort of got going in
2010 or 2011, I think. It is the kind of thing that it needs to
be updated almost constantly. Our engagement on cyber is really
not something that you can just sort of do once and then say,
okay, we are done. You have got to keep revisiting it. I think
that would be an area to look to do more together.
    So homeland defense, cyber, and intel-sharing are all areas
in which we could have very productive additional engagement
over what we are doing now.
    Senator Kaine. Ms. Curtis.
    Ms. Curtis. I think we need to increase our engagement on
regional terrorist threats. In talking about the Lashkar-e-
Taiba, which is, of course, a threat to India, it also is
important to remember the group is a threat to the United
States--to the international community. The United States
putting out a $10 million reward for information leading to the
arrest or conviction of the leader of the LET, Hafiz Muhammad
Saeed, was helpful because it showed that we are on the same
page as India in terms of cracking down and trying to shut down
these terrorist groups that are in the region.
    Senator Kaine. Any additional thoughts on that, on that
question? [No response.]
    Well, let me just say this. This has been fantastic
testimony. The written testimony was superb, provocative
thoughts. We could stay here for hours and hours, but I want to
take advantage of folks time. I really appreciate you all being
here and helping us work through it.
    It is an exciting moment in the relationship and I think we
need not let the burdens of past expectations, failed
expectations syndrome, wear us down. I think we can approach it
as a fresh moment and think, not incrementally, but with a
bigger vision about where we can go. You have made that very,
very plain. We appreciate your being here today and look
forward to more work together.
    If there are members of the panel who do have questions to
submit in writing, I will have them do that by 5 o'clock on
Friday and would appreciate your solicitude in answering them
should those questions occur.
    With that, the hearing is adjourned.
    [Whereupon, at 4:59 p.m., the hearing was adjourned.]
                              ----------


              Additional Material Submitted for the Record


                 Response of Nisha Biswal to Question
                  Submitted by Senator Robert Menendez

    Question. Ambassador Wisner suggested in his testimony that in an
effort to promote transparency, Prime Minister Modi may be open to the
establishment of a panel made up of the Indian Government as well as
international and domestic private sector representatives that would
review pharmaceutical issues before the Indian Government took
decisions that impacted the industry.

   Has the U.S. raised the possibility of the establishment of
        this panel?
   Please describe the nature of U.S. engagement with the new
        Indian Government on intellectual property issues, particularly
        in the pharmaceutical field.

    Answer. Protection of intellectual property rights (IPR) is a
priority issue in the U.S.-India economic relationship. In our high-
level engagements with India, notably in the Strategic Dialogue, Trade
Policy Forum, and U.S.-India CEO Forum, we stress the benefits of
creating an investor friendly environment, including by addressing IPR
issues.
    Transparency in the Government of India's decisionmaking process is
one of the key issues detailed in the 2014 Special 301 Report. The
United States would welcome any effort by the Government of India to
make its system for protection and enforcement of IPR more predictable,
transparent, and inclusive, including through the use of mechanisms
such as panels, that would allow industries and service sectors,
including the pharmaceutical sector, that rely on IPR to contribute to
the policy- and decision-making process.
    The U.S. interagency is planning to conduct an out-of-cycle review
of U.S.-India engagement on IPR later this year and we will continue to
work closely with our stakeholders across the IPR spectrum to identify
ways to enhance IPR protection in India. These efforts will set the
agenda for our work with the new Indian Government on IPR issues,
especially as they affect the pharmaceutical sector.
                                 ______


 Response of Nisha Biswal to Question Submitted by Senator Marco Rubio

    Question. I am deeply disturbed by the 2-month investigative
detention of U.S. citizen and Amway India CEO, Bill Pinckney, on what
are basically civil issues. He has been imprisoned since May 26 on
charges related to Prize Chits and Money Circulation Scheme (Banning)
Act-1978.

   Can you give me an update on his status and describe what
        the Department of State is doing to secure his release?
   In your recent visits to India, have you brought up Mr.
        Pinckney's case with your Indian Government counterparts?

    Answer. I am happy to report that Amway India CEO William S.
Pinckney was released on bail on July 26. The U.S. Embassy in New Delhi
and the U.S. Consulate General in Hyderabad remain in close touch with
Mr. Pinckney, Amway, and the Indian authorities, and Mr. Pinckney is
being provided with all appropriate U.S. consular services.
    Mr. Pinckney's 2-month detention greatly concerned me and other
U.S. Department of State officials, and we raised our concerns with the
highest levels of the Indian Government. We welcome his release and
will continue to monitor the situation closely.