Will better US-India economic ties follow security surge?

US Defence Secretary Lloyd Austin finished up on Sunday the first visit by the Biden team to India. His trip underlined the fast-growing security partnership between the world's two largest democracies, yet a key question is whether economic ties will flourish to a similar extent in coming years too.

It was only a half-decade ago in 2016 that New Delhi was officially declared a major US defence partner. US-India security deals have grown massively in the period since then, from close to zero in 2008 to an estimated US$20 billion today.

It is no surprise therefore that a key item on last week's agenda between Mr Austin, Prime Minister Narendra Modi, National Security Adviser Ajit Doval and Defence Minister Rajnath Singhare were several big ticket defence deals, including a proposal for 30 armed drones, estimated at over US$3 billion. Last November, the Indian Navy also inducted two MQ-9B Sea Guardian unarmed drones procured from Washington on lease for one year, and New Delhi is also looking to buy six additional P-8I long range maritime patrol aircraft to add to the 12 already contracted.

With India intent on upgrading defence equipment, the United States is keen to deliver this rather than it be procured from other nations. Indeed, one of the remaining irritants in the Washington-New Delhi dialogue in recent years has been US threats to levy sanctions if India continues to buy Russian military equipment.

The next steps in this partnership could see greater information sharing and the US allowing India access to cutting-edge technology in robotics, artificial intelligence, and even unmanned fighter jets. At present, New Delhi and Washington are running separate programmes for making unmanned jets.

Moreover, there is increasing joint US-Indian military exercises too. Take the example of the event planned with the other Quad powers, Australia and Japan, plus France too, in the Bay of Bengal from April 4-7. During these manoeuvres, New Delhi will deploy frontline warships and the P-81 maritime patrol aircraft from the Eastern Naval Command.

Underpinning this closer defence cooperation in recent years, the two countries signed the Communications Compatibility and Security Agreement in 2018 which then-defence minister Nirmala Sitharaman claimed elevated bilateral relations "to unprecedented heights". In 2018, the Trump administration also designated New Delhi with Strategic Trade Authorisation tier 1 status enabling the transfer of sensitive high-tech equipment.

The fact that these recent breakthroughs came in 2016 and 2018 under separate Democratic and Republican administrations in the US underlines how much the bilateral relationship has improved, on a broadly bipartisan basis, since the end of the Cold War. This was true under Democrat Bill Clinton, Republican George W Bush, Democrat Barack Obama, Republican Donald Trump, and now appears likely under Democrat Joe Biden.

Today, there is significant support across the political aisle in Washington in favour of a strong US-India relationship driven by the perceived strategic rationale for partnership, including shared concerns about China. Such US bipartisan support for New Delhi has not always been in evidence. For much of the second half of the 20th Century, for instance, when India was aligned with the Soviet Union, bilateral relations were difficult under Democrats as well as Republican presidents, including Republican Richard Nixon in the early 1970s.

Fuelling the growing US bipartisan support for New Delhi is a growing perception of it as a regional counterweight to Beijing, especially alongside other regional allies such as Tokyo and Canberra. Washington has therefore welcomed India's reciprocal military logistics pacts with these other Quad nations plus other nations such as South Korea, France and Singapore.

This point was emphasised by Mr Austin last week when he said that the goal of his meetings in New Delhi were promoting an agenda "for a free, prosperous and open Indo-Pacific and western Indian Ocean region". He also made clear that "our goal is to make sure that we have the capabilities and the operational plans. . . to be able to offer a credible deterrence to China or anybody else who would want to take on the United States".

BILATERAL ECONOMIC TIES

While defence was the primary focus of the visit, Mr Austin also conveyed a message from President Joe Biden that Washington wants to double down on the bilateral economic relationship too. Indeed, Mr Biden is, during his four-year term, likely to become only the eighth US president to visit the emerging market giant to promote a comprehensive trade deal which eluded the Trump team, despite much lobbying. Such an economic agreement would be a key prize for much of the US business community given the more than one billion Indian consumer mass market. Take the example of ICT where India boasts the largest open data market with more data, per capita, consumed than anywhere else in the world.

The US is already India's second largest trading partner after China and trade in goods and services was a record US$142.6 billion in 2018 up from US$11.2 billion in 1995. While this is largely celebrated, one challenge is that the US goods and services trade deficit with India shot up from US$2 billion to US$25.2 billion during the same period. This fuelled bilateral tensions during Mr Trump's presidency. One example was Washington's decision in 2019 to strip New Delhi of its US special trade status which saw the Modi team retaliate with tariffs on some 28 categories of US goods.

Yet, it was not just the clash of Mr Trump's 'America First' programme with Mr Modi's 'Made in India' agenda that muted the momentum for a deal. Incentives for an agreement have also been undercut by the slowdown in the global economy since the pandemic began. The Indian economy is estimated to have contracted by as much as 10 per cent in 2020.

Nevertheless, as the global economy rebounds in 2021, the Biden and Modi teams will want to see each other double down on negotiations for a deal with a view to building on the current warmth in security ties. Both leaders sense a strategic opportunity not just to reach a comprehensive trade agreement, but also to embed the wider bilateral alliance in the Asia-Pacific with Mr Biden and Mr Modi not having to go to the polls again until 2024.

• The writer is an associate at LSE IDEAS at the London School of Economics