Jairam Ramesh Secretary,
Economic Affairs Department
All-India Congress Committee

Presented in a personal capacity at the Roundtable on Indo-American
Relations organized by the Council on Foreign Relations and the Asia
Society, New York, November 1, 1999. Dedicated to the memory of Professor
Myron Weiner.

Introduction

I am grateful to my good friends Frank Wisner and Marshall Bouton for
inviting me to address such a distinguished audience. Sherpas normally
write speeches for summiteers. And so it has been with me for the past
few years. Now to actually sit down and actually compose one for oneself
is an altogether different experience. I hasten to add that whatever
I say this evening is purely in my personal capacity as someone deeply
interested in bringing our two countries closer together.

India may not be terribly important to the United States, as a recent
survey of the Chicago Council of Foreign Relations revealed only 36
percent of those surveyed in 1998 said that the United States has a
vital interest in India, (although this proportion was up from 31 percent
in 1994) and India s “thermometer” rating was 46 degrees C in 1998,
with anything more than 50 degrees being defined as a country towards
whom “warm” feelings were expressed. But the United States is tremendously
important for us. Porfirio Diaz bemoaned that Mexico s tragedy was that
it was so far away from God and so close to the United States.

Well, India s tragedy has been that it has been too close to God and
far away from the United States! I got to know Frank Wisner when he
was Ambassador in New Delhi and was very often at the receiving end
of his aggressive salesmanship. He was tough but transparent. He was
unyielding but sensitive. He was fearless but friendly. He was certainly
the right man at the right time to bring the two estranged democracies
together.

Marshall is virtually half-Indian and has indefatigably worked to include
India as part of Asia in the American consciousness, something that
we take for granted in my country but that is not always apparent to
Americans. It also turns out that he had known my father-in-law thirty
years ago when he was doing his doctoral work in Tamil Nadu.

We find the Americans over-bearing, preachy and sanctimonious something,
I would have thought, India had a global patent on, ever since the days
of Krishna Menon! We find the Americans meddlesome and partisan. We
find the Americans having no time for history. We find the Americans
insensitive to our needs, aspirations, challenges and threats. We find
the Americans impatient and not willing to give a land of the most multitudinous
diversity elbow room for crafting a durable consensus before taking
far-reaching decisions. We find the American policy towards India a
consequence to or an offshoot of American policy to “something else”
and not a policy that is based on an autonomous recognition of India
s own role. We think that America is far too enamored of Pakistan and
willing to give it a long rope. We find the Americans fiercely evangelical
on commercial and economic issues. Bad enough we have to combat Islamic
and Hindu fundamentalism; now we have the added burden of trying to
push back market fundamentalism being propagated by the ayatollahs of
Wall Street, the mullahs of the Treasury and the imams of the IMF. We
think that the British somehow knew how to manage their global role
in a very sophisticated fashion, but the Americans are seen to be crude,
brattish, insular, isolationist, and totally caught up with themselves
and their way of life, which is wreaking havoc on the planet.

But, at the same time, we crave your interest, attention, and affection.
We think we have a far greater justification to be at the head table
than at least seven of the G-8 countries. We want to be taken seriously,
not just as an emerging market but as a country that has something unique
to contribute to world affairs. We want America s support for fulfilling
our destiny on the world stage as reflected in a permanent seat in the
UN Security Council. We cannot understand why America gives us no brownie
points for our exuberant, boisterous but representative democracy and
for our plurality, no credit for our tough anti-narcotics record. We
find America bending over backwards to accommodate China but ever ready
to move forward to take issue with India on the slightest pretext. We
find it irritating that in a WTO-world, America clings to bilateral
punitive instruments and treats the WTO with disdain and indifference.
And most of all, we certainly deplore American attempts at imposing
restrictions on the movement of Indian skilled personnel to the United
States.

Indeed, I have often thought of what might happen if Americans did impose,
even temporarily, that ultimate weapon of sanctions on the Indian establishment,
especially its progeny namely visas.

Panga to Pragmatism

For the past decade and more, I have battled both in and out of government
for a more pragmatic approach to the United States, very often inviting
the charge that I take orders from Langley. I have trouble convincing
my Indian critics that Langley s record in cultivating and backing the
right people in developing countries is atrocious.

Many scholars have analyzed the ups and downs, mostly downs, of India-U.S.
relations. But I think it was the redoubtable former Indian Foreign
Secretary Mani Dixit who captured the essence of our relationship, at
least from the Indian side with a delightful Hindi word, that pithily
captures our mindset to the United States panga. It is difficult
to translate it exactly into English but roughly speaking, panga means
prickly, instinctive, petulant confrontation; confrontation for the
sake of confrontation; confrontation that reflects a desire on the part
of the weaker side to score a few “points” over the stronger protagonist
and put that protagonist in its place. When you are, in effect, a junior
partner and have great pretensions, then you look for opportunities
to flex your muscle so that you do not get taken for granted. That,
in essence, has been our approach; an approach that has not been grasped
in its psychological complexities by relatively simple-minded and bottom-line
oriented Americans.

Things have dramatically changed in India-U.S. relations, as I will
presently argue. But panga remains. I have been trying to confront this
and impress on my colleagues and friends in India five points as part
of this changed panga-to-pragmatism approach, an approach in which India
becomes more proactive rather than being merely reactive.

First, no country has become an economic powerhouse in the post-WWII
era without close economic cooperation with the United States. Even
China runs an annual trade surplus of close to $50 billion with the
United States, which is more than five times the volume of India-U.S.
trade. U.S. direct investment in China is probably around five times
that in India but if portfolio investment is also included, then it
is probably two to three times as much. India must engage the United
States more intimately and heavily in trade, investment, and commerce.
To do so, it must bring about changes in its own economic policies.
The single, most important reason why India has been unable to emerge
as an international supplier in fast-growing consumer industries is
because of our policies on small-scale reservation. When I was in the
United States some years ago, I saw stickers on cars proclaiming. Be
American, Buy American but behind the stickers was printed in small
font “Made in China.” That illustrates the bus that India has missed.

Second, investment is important but what gives leverage in the United
States is trade. Of course, trade and investment are closely interlinked.
Over one-third of international trade now is now intracompany sales.
If more American companies come to India, imports and exports will get
a fillip. But this is in the medium to long-term. In the short-term,
what sells in the United States is how much you buy from the United
States. Almost one quarter of a million jobs in the United States are
dependent on exports to China. One-sixth of Boeing s sales are to China.
That is a powerful argument that is used by the friends of China. India
needs to build up such a distinctive profile and position as well where
sales to it are crucial for the continued prosperity of American companies.

Third, America respects economic strength and open markets. Economic
strength and open markets are in India s own interests and we must liberalize
on that score alone. The added benefit would be that we sustain American
interest as a consequence. I had described it some years ago as the
“Use Rebecca Mark to neutralize Robin Raphel approach.” I hope you will
not think I suffer from gender prejudices!

Fourth, American policies are very often shaped and influenced by diasporas.
India has a great advantage in that its diaspora, though comparatively
recent, is extraordinarily resourceful, well-heeled, and well-placed.
If we could somehow leverage these networks, we could surely build bridges
with the United States.

Fifth, far too long we have allowed our bilateral relationship to be
a government-to-government one and whatever other dimensions we have
tried to have have often fallen prey to the vicissitudes of our political
ties. America and India must have a multifaceted relationship that is
durable enough to withstand political differences examples of France
and Israel come to mind.

I must admit that these points are slowly sinking into our consciousness.
Americans may feel frustrated at the pace of change but it cannot be
denied that our relationship is now on a much firmer and sounder footing
than it was in the 1970s and 1980s. Part of the problem is that America
very often expects too much from its newfound friends and when things
do not quite happen according to its wishes and plans, it gets disenchanted.
There was a time when Indonesia could do no wrong in American eyes now
it can do nothing right. American policy is handicapped by such pendulum
swings.

Some years back, Ambassador Shankar Bajpai drew my attention to a delightful
insight from de Tocqueville who else? who wrote “a democracy can only
with great difficulty regulate the details of an important undertaking,
persevere in a fixed design, and work out its execution in spite of
serious obstacles. It cannot combine its measures with secrecy or await
their consequences with patience. There is a propensity for democracies
to obey impulse rather than prudence, and to abandon a mature design
for the gratification of a momentary passion.”

This is a point I will come back to later when I discuss how both countries
must be less demanding of and more patient with each other as a key
to sustaining their relationship.

The Three Watersheds

1991 was a definite turning point and it would not be an exaggeration
to say that the corporate sectors of the two countries have discovered
each other and are pretty much on autopilot. There have been controversies.
But for every Enron there is a GE. For every McDermott there is a Microsoft.
Trade barriers have come crashing down in India at an unprecedented
rate, something that is not always recognized in Washington.

This has not only helped us, which is why we embarked on trade liberalization
in the first place but it has also opened a new dimension in our ties.
There was a time when the job of the American Ambassador in Delhi was
almost exclusively devoted to lobbying for lower tariffs on almonds
from California. Not any longer. India has taken momentous decisions
to phase out quantitative restrictions on imports by 2003 and also to
change her intellectual property protection laws by 2005 at the outside.
Sure, it has required American and WTO pressure to do what was in our
own interest to have done some years ago, but the fact that we have
done it in face of considerable political flak has not earned enough
plaudits in the United States.

The crucial point of economic reforms is that no government after Mr.
Rao left in May 1996, and there have been four governments, has reversed
the pace and direction of reforms. In fact, I have argued that reforms
after 1996 have been deepened and expanded very significantly. Liberalization
of the economy has also received great impetus from the regionalization
of the polity that has taken place in India in the past decade.

The most far-reaching economic reforms are now being taken by state
governments belonging to different political persuasions like, for example,
in the power industry. It was the chief minister of West Bengal who
spearheaded a historic water-sharing agreement with Bangladesh. Part
of the frustration of outside observers is that there is no unicentric
India anymore. We are evolving into a polycentric political system and
this, far from being a recipe for Balkanization of India, is actually
strengthening Indian society in ways that are still evolving.

1998 was a second watershed. Indian elites and intellectuals have always
believed that America will take India seriously only if it has military
might and if it is a nuclear power. I have been arguing that this is
a profoundly mistaken perception.

But may I be honest enough to admit that the way India has suddenly
become a flavor in think-tanks and on the seminar circuit does confirm
the impression that the Americans will take you more seriously if you
have nuisance value. Would no less a personality than Strobe Talbott
have engaged our Foreign Minister in eight excruciating rounds of talks
spread over twelve months if we had not gone nuclear overtly?

When Indians read about how Russia is a Bangladesh with nuclear arsenal,
they are justified to think that they will get a place on the head table
only if they have displayed nuclear pyrotechnics. I talked earlier of
how I use the example of China to convince my Indian friends that it
is economic might that counts in world. But please pause for a moment
and reflect on the fact that America s exports to China are probably
just around 2.4 percent of its total exports, about the same level as
exports to Australia or Belgium, as Gerald Segal reminded us in a recent
issue of Newsweek. An Indian looking at this statistic would be perfectly
justified to think that China is taken seriously, predominantly because
it is a nuclear and missile power.

The third watershed was May July 1999 when America took an uncharacteristically
balanced approach on the Kargil episode. Most Indians were pleasantly
surprised that the United States had shed its traditional even-handedness
and had actually tilted in favor of India. There may well have been
fears stoked about third-party intervention. But the dominant mood in
India was one of exultation that, finally, America had come to our support.
It wiped out memories created by our lack of understanding of how the
correspondence section in the White House routinely deals with letters
received by the President and by the hectoring that we think we are
being subjected to by Josef Korbel s daughter and her acolytes in Foggybottom.

Well, so much by way of background, history, and generalities. Where
do we go from here? Let me take each of the major issues on our mutual
radar screens one by one and discuss them in some detail. I plead guilty
to not bringing some “over-arching” vision, no grand theme, no great
macro-perspective. I find America looks at India largely through the
prism of bombs and missiles. India looks at America largely through
the prism of investment and visas. What has been missing is an “integrated”
perspective at a nuts-and-bolts level.

The Nuclear Issue

Many of my Indian and American friends have suggested that we must keep
the nuclear issue aside and make progress on other areas. I disagree.
Progress on non-nuclear issues need not be held hostage to progress
on nuclear issues but the nuclear dimension in our relationship must
be discussed openly and frankly. To an extent, this is happening but,
as I bemoaned a little while earlier, did it require Pokharan-II for
America to wake up? It would also help if America would acknowledge,
in the face of incontrovertible evidence that is now available, that
it was actually Pakistan that went nuclear first and without Chinese
support and American acquiescence this would not have happened. We could
do without hypocrisy on both sides in the nuclear dialogue.

A country whose prime minister first made a suggestion for a Comprehensive
Test Ban Treaty (CTBT)-type treaty way back in 1954 and a country that
cosponsored the CTBT resolution with the United States in the UN in
1993 can hardly turn its back on the CTBT.

On the other hand, for the Americans to pursue what the Washington-based
Institute for Energy and Environmental Research calls some form of “stockpile
stewardship” program to ensure maintenance of its own nuclear arsenal
and to pursue the path of thermonuclear explosions is both hypocritical
and, in the latter case, in violation of Article 1 of the CTBT. Our
concern is simply that whatever is applicable to America is automatically
applicable to our nuclear-neighbor China. I recall reading an article
by George Bunn and Roland Timarbaev, the men behind the Non-proliferation
Treaty (NPT), that the United States has not fulfilled its obligations
under the NPT.

America also does not recognize fully the tension that has always existed
between the competing schools of idealism and realpolitik in Indian
security policy. After all, please do not forget that just 36 years
ago, in 1963, India refused a suggestion from the United States that
it produce a nuclear bomb to counter the anticipated nuclear weaponization
of China. Also please do not forget that in 1967, India approached the
United States to inquire whether it would provide security guarantees
to India against a nuclear threat from China. The response was negative,
leading to the ascendancy of the realpolitik school.

Let me hasten to add that amnesia is not just an American trait. We
too have been guilty of this at crucial junctures. No single event has
done more to vitiate Indo-American relations than the dispatch of USS
Enterprise to the Bay of Bengal in 1971. Indians got terribly worked
up, conveniently forgetting that the very same aircraft carrier had
visited the Bay of Bengal nine years earlier at the time of the Sino-Indian
conflict.

There are no disagreements between India and the United States on the
need for India to institute and legislate strict export controls on
nuclear and missile technology. In fact, our record on this is impeccable
in spite of billion-dollar blandishments from Libya and Iraq. Again,
we are not given brownie points for this self-imposed ban. I believe
that we should legislate such controls at the earliest, although I am
aware that there is a school of thought in India that wants to link
this to some “concession” from America on sanctions and on the transfer
of technology.

There are no major disagreements on chemical and biological weapons
and India is already a signatory to global conventions. There are no
fundamental differences over the Fissile Material Cutoff Treaty (FMCT)
as well. India has repeatedly stated that it is prepared to negotiate
the FMCT in the Committee on Disarmament. The CTBT, therefore, is the
crux. We are watching the debate on the CTBT in the United States, China,
and Russia with great interest. My own sense is that by the time the
CTBT is ratified by the U.S. Senate we would also have made up our minds,
although I find it hard to imagine India acceding to the CTBT if China
has not actually ratified.

India has already announced a moratorium on nuclear tests. All political
parties have supported this position. This is a de facto commitment
to the CTBT. Formally, our position is that we will sign the CTBT but
as part of a process that includes major reduction, if not total elimination,
of nuclear weapons by the P5 countries. And do not forget that one of
the P5 shares a 2000-km disputed border with us and, in spite of border
agreements signed and confidence-building measures taken in 1993 and
1996, that P5 nation evokes not-so-nice memories in India.

Ideally, India should sign the CTBT since the security arguments for
not doing so have disappeared following the May 1998 tests. I am aware
that some scientists, both Indian and American, feel that both the quantity
and quality of the tests conducted in May 1998 were insufficient to
establish a credible nuclear deterrent, specially vis-�-vis China. But
I will go by the categorical assurances given by India s defense and
nuclear science establishment that the tests were, in fact, sufficient.

But until such a time India actually signs the CTBT, a suggestion made
by the Washington-based Economic Strategy Institute in 1998 is worth
considering that the Indian Parliament make a declaration citing the
key provisions of the Treaty and explicitly pledging that India will
comply with these provisions in the form of an undertaking to the United
Nations. The Institute links this to a “nuclear bargain,” which would
involve the transfer of American nuclear power technology subject to
international safeguards.

I find this a pragmatic recommendation. Although on nuclear power, I
just want to mention that our program has traditionally been based on
heavy-water moderated reactors, which means that the Canadians will
have to be an integral part of such a deal. Our nuclear power program
must continue to be based on heavy water since our ultimate objective
is to utilize our vast reserves of thorium. But light-water reactors
have a “gap filling role.” Nuclear power accounts for just 3 percent
of electricity supply in India, and if we are to reach a contribution
of at least 10 percent by 2015 then 500 MW light-water reactors become
important, especially since India has mastered only the 235 MW heavy-water
reactor design.

American laws have prevented the sale of nuclear reactors to India,
which is buying them from Russia instead, not a very happy prospect
given the Chernobyl saga. Indians are unable to understand how America
can contemplate selling reactors to China, which is in clear violation
of all Missile Technology Control Regime (MTCR) stipulations regarding
sale of missile technology to third countries. India puts this down
to the usual “double standards” adopted by America.

The CTBT debate in India suffers from a major misconception on the part
of its opponents that signature automatically means ratification. Actually,
there are three stepssignature, ratification, and deposit of the instruments
of the ratification. Now, in the Indian system Parliament does not ratify
an international treaty like the U.S. Senate. It is the executive s
privilege and prerogative. This is what has led to the confusion: the
same authority signs and ratifies.

This has led many commentators to argue that signature means automatic
ratification. This is simply not true. India signed the Chemical Weapons
Convention (CWC) in 1993. The same Cabinet that decided to sign the
CWC in 1993 then decided to ratify it in 1995. Another government s
Cabinet then decided to deposit the instruments of ratification in 1996.

This three-phased approach is what is needed for the CTBT as well. We
can sign on immediately, link our ratification with ratification by
the United States and China and the withdrawal of some of the curbs
on our research and scientific institutions, and further link our deposit
of the instruments of ratification with progress on a global accord
on a time-bound elimination of nuclear weapons. It is my belief that,
privately, all political parties have come around to the inevitability
of India signing the CTBT and that they are now looking for a honorable
way of resiling from the belligerent not now, neverposture that India
adopted two, three years back in Geneva.

In recent weeks, the publication of the nuclear doctrine document prepared
by the entirely nonofficial National Security Advisory Board has generated
a lot of adverse comment from the Americans. It has, incidentally, received
flak within India as well. It is extremely unfortunate that the Americans
have seen in the document a distinct thrust towards building a deterrent
against the United States itself. This is simply stupid, and I would
argue that it is vital for India to correct this impression.

A charitable explanation for India developing Indian Confidence Building
Measures (ICBMs) given recently to me by one of India s most knowledgeable
experts on nuclear economics and defense strategy, Brigadier (retired)
Vijai Nair, is that since Indian SSBNs (nuclear-fuelled ballistic missile
submarine) will be restrained from deploying in the Pacific Ocean, the
Submarine Launched Ballistic Missiles (SLBM) capability on board these
platforms operating off the Indian Ocean must be of Intercontinental
Ballistic Missile class. Even so, I would personally push for a categorical
statement by India that it does not seek to develop missile capability
in excess of 4,500-5,000 km range. This could form part of a mutual
no-first-use pact between the United States and India.

I entirely agree with Michael Krepon s memorable comment that except
for a pledge to no-first-use and a commitment to a “minimum credible
deterrent,” the document may well have been written in the Pentagon.
That India s deterrent is purely and unequivocally for a defensive,
retaliatory capability has to be made clearer and hammered home again
and again. But I hope friends and well-wishers like Mr. Krepon will
agree that if a minimum deterrent is to be credible, it has to pass
the test of survivability, which, in turn, necessarily entails a sea-based
deterrent. There is, I am afraid, no escape from the Triad concept.
I am sure that the draft doctrine document will be subject to greater
scrutiny in Parliament and by the new government itself. There are definitely
Cold War touches in the document and it would be suicidal for India
to go through what the Americans subjected themselves to for well over
three and a half decades. That the Soviet Union was destroyed by its
counter-actions should not be lost on India.

The expectation of many Indian security experts is that India can withstand
the economic costs of nuclearization and it is Pakistan that will be
destroyed when it mounts a Soviet-type reaction. This is wrong. To wish
for Pakistan s destruction itself is against India s interests. But
to argue that India can take more than a billion dollars of additional
expenditure per year for the next ten years for its nuclear deterrent
is being blind to India s socioeconomic realities. Actually, even this
additional amount will be straining our resources to the hilt, but my
feeling is that we could scrape through, but only just. This would call
for a steep cut in the subsidy bill that consumes 14-15 percent of GDP,
a massive program of privatization and a drastic reduction in the size
of government.

The Missile Issue

The nuclear and missile issues are closely interlinked. There is a firm
belief in India that the United States is doing its best to ensure that
India does not emerge as a missile power. The Americans have been pressuring
India to go slow on its missile program without appreciating fully the
reasons why India built up its missile capability. We have on our borders
an ICBM-power that does not subscribe to the MTCR. These violations
of the MTCR have been overlooked by the Americans even as they are telling
the Indians to abandon their own program. We see double standards in
this approach.

I myself, seventeen years ago in a series of articles in the Times of
India, had advocated India s missile program but purely for building
and demonstrating scientific and technological capability. I was then
twenty-eight years old, fresh from the United States and concerned with
the policies, programs, and projects to build India s technological
muscle in high-tech enclaves, which would then spin-off into civilian
industry as well.

Earlier I had collaborated with an Argentinian nuclear technologist,
Jorge Sabato, in a paper published in 1979 in the Bulletin of Atomic
Scientists, to provide a similar rationale for nuclear programs in countries
like India and Argentina. These arguments are no longer in vogue, but
it is important for my American friends to recall them when they pass
judgment on missile and nuclear programs in India.

The military dimension hardly entered my head when I wrote these articles,
which were spurred by a great deal of pride in the successful SLV-3
launch in the early 1980s and in the way charismatic figures like Dr.
Abdul Kalam were building indigenous scientific and technological expertise
in the face of heavy odds. I had actually all but forgotten about these
articles till my attention was drawn to them in a recent monograph produced
at the Stimson Center by W.P.S. Sidhu, which is a most lucidly detailed
discussion of India s missile development program.

By the mid-1980s, however, other considerations began to predominate
and the technology factor was gradually overtaken by military and strategic
factors as the main rationale for our missile program. Now, missiles
in South Asia are a fait accompli. The question is what directions India
s strategic missile program will take.

America would certainly like us to cap, roll-back, and eliminate missiles.
This, Sidhu argues in his monograph, would constitute the South Asian
version of the Intermediate Nuclear Force Treaty (INF) but which he
rightly rejects as being impractical and unviable for India and Pakistan.
The INF s aim was to eliminate an existing weapon system rather than
to prevent the emergence of one, which is the situation in our region.
And an India-Pakistan INF arrangement would be incomplete without China
and North Korea.

The second option would be induction without actual deployment. This
is the situation prevailing today. It is a state of virtual de-alert.
This could be institutionalized through a bilateral dialogue between
India and Pakistan and between India and China as well.

Military Issues

The United States military cooperation with Pakistan has always cast
a long shadow on India-U.S. relations. In fact, it might well be the
case that Kashmir would have been settled in the early fifties had not
SEATO and CENTO intervened. But, let us not become prisoners of history.

An economically strong, socially stable, and politically democratic
Pakistan is very much in India s interests. India must work towards
this objective. India must also encourage and support the United States
in this task. Indeed, I would argue that the main objective of American
policy in South Asia should be to prevent the collapse of Pakistan and
to make it a responsible regional player. But the question is whether
the transfer of advanced weaponry would help in resolving Pakistan s
basic problems and advance American interests in the region.

I need hardly recall to this audience George Santayana s oft-repeated
maxim those who forget the lessons of history are condemned to repeat
it. I would also agree with Leonard Spector in his dissent note to the
same Task Force report, when he says that to the extent that the United
States is looking for leverage and incentives for “good behavior” on
the part of both the Indians and Pakistanis, economic, commercial, investment,
and trade incentives should take precedence over military carrots.

On January 12, 1995, an Agreed Minute on Defence Relations between India
and the United States was released in New Delhi, signed by Secretary
Perry and Minister Mallikarjun. This minute talked about civilian-to-civilian
cooperation, service-to-service cooperation, and defense research and
production cooperation. It also sketched out an organization structure
to implement the provisions of the minute and promised to arrive at
a bilateral agreement on mutual protection of classified information.
Four and a half years have passed, but the minute remains virtually
where it was. India s location astride the strategic sea lanes of the
Indian Ocean and flanking the Asia-Pacific Rim and the Persian Gulf,
both of which are of critical importance to the United States, would
be a powerful argument dictating greater defense cooperation, both in
terms of software and hardware.

One point on India s defense budget must be made here. Right through
the 1980s, India s defense spending averaged 3.2 percent of GDP and
in the 1990s it has averaged 2.6 percent of GDP. Pakistan s defense
expenditure is now around 5 percent of GDP and China s is also around
4.7 to 5 percent of GDP. India s moderate level of defense spending
has not earned it “respect” and “support” in Washington. Now, following
Kargil there is a growing clamor in India for hiking defense budgets.
There is undoubtedly a modernization backlog. Add to that the annual
cost of a credible minimum deterrent, which I have estimated at roughly
about $1 billion a year for the next ten years.

The point I wish to make is this. For a variety of reasons competing
pulls on public expenditures, a genuine desire to cap the growth of
defense spending, which ballooned in the late 1980s and contributed
to our Balance of Payment crisis of 1990 – 91, and because of the very
nature of our defense procurement system modernization of India s armed
forces did take a back seat in the 1990s.

It is now almost inevitable that India s defense budget in the first
decade of the next century will average 3.2 to 3.4 percent of GDP. This
should not set the alarm bells ringing but must be seen as the very
minimum that will be needed to keep India s armed forces in a state
of preparedness, even after allowing for more active and purposeful
diplomacy and dialogue. Incidentally, increased defense spending by
India presents new business opportunities for India.

Most importantly, from India s point of view, the United States must
give India credit for its exemplary restraint and maturity exhibited,
quite unlike China. India would certainly like the United States to
distinguish satellite launch vehicles from missiles. India would like
America to exempt Prithvi as well, but I am not going that far. Prithvi
is a missile even though it may fall below the threshold of some definitions.
But islanding of the Indian Space Research Organization (ISRO) from
technology denials is absolutely imperative.

A categorical statement from the United States in this regard that an
Independent Kashmir is not its objective would certainly help, because
one of the factors that has kept the Hurriyat going in the Valley is
the notion that the Americans could be persuaded to support total independence.
Loy Henderson s ghost is very much alive in the Valley and was given
a facelift by Robin Raphel just a couple of years back.

Once independence is ruled out, we can discuss other options. Kashmir
is not Kosovo nor is it East Timor. It is sui generis and needs to be
recognized as such. But the question is whether the Americans have the
patience to understand the great complexities and nuances of the Kashmir
imbroglio. It is not as simple and straightforward as it is often made
out to be by Pakistan and its proxies.

What might the options be in Kashmir from an Indian point of view? I
do not see any Indian supporting handing over the Kashmir Vale lock
stock and barrel to Pakistan. A second partition would be disastrous
for the world s second-largest Muslim population that resides in India.
From India s point of view, converting the existing LOC into the international
border would be the ideal solution, with the border being either “soft,”
as Benazir Bhutto has recently suggested, or “hard.” But I realize that
this would be completely unacceptable to Pakistan. Another option is
to integrate Jammu and Ladakh into India and have a shared sovereignty
with Pakistan over a united Valley. The details of how this shared sovereignty
will work would need to be worked out. But will Pakistan play ball?

But all these and other options are, at the moment, academic. Two things
need to be done immediately. India has to seriously examine the question
of autonomy to Kashmir and the issue of regional autonomy within Kashmir
itself. True, the issue of autonomy to Kashmir cannot be divorced from
the larger issue of autonomy to all states, but the better must not
be allowed to become the enemy of the good. Voluminous reports on both
these issues autonomy to Jammu and Kashmir and autonomy within Jammu
and Kashmir have been prepared recently by committees. One alternative
is to go back to the 1952 Nehru-Abdullah Accord and strictly follow
Article 370 both in letter and spirit. India has to demonstrate greater
sensitivity to public opinion in the Valley and expand the constituency
with which it interlocutes. One of our weaknesses in the Valley is that
successive governments in New Delhi have depended exclusively on just
one family. That family has had a distinguished record of commitment
to secularism but we just cannot continue to view the Valley through
the prism of Mr. Farooq Abdullah alone. India s other problem in sensitive
states like Jammu, Kashmir, and Assam has been that corruption has been
used by the Centre as a mode of cohesion. Development funds get siphoned
off and a kleptocracy has developed. Indeed, the clamor for more development
funds is really a claim to this creamy cake. Autonomy has to be accompanied
by vastly improved governance.

Yesterday s terrorists have become today s mainstream politicians as
our own experience in the northeastern state of Mizoram has demonstrated,
where today, the terrorists of the 1970s are in power simply because
they were enabled to do so first by Indira Gandhi and later by Rajiv
Gandhi in an act of great statesmanship. But what makes Kashmir different
is cross-border terrorism and the presence of guest militants, the legacy
of superpower rivalry in Afghanistan in the 1980s.

I might add here in passing that the Americans need to think long and
hard on what their Afghan policy will be. This will have profound effects
on both Pakistan and India. In this context, it is most encouraging
that Indian officials, for the very first time, have had a bilateral
dialogue with their American counterparts on the Afghan situation following
the banning of Ariana flights from Amritsar to Kabul. India is also
beginning to realize that its objectives and American goals on counterterrorism
coincide and converge. We should work towards some major initiatives
in this area. Bin Laden has done more to bring India and the United
States together than an army of diplomats.

The Real ICBM Issue

So far I have talked about the nuclear, missile, and Kashmir issues,
all of which are interconnected and all of which raise the need for
a new generation of real ICBMs Indian Confidence Building Measures.
I was one of those who unequivocally welcomed the Lahore Summit and
the MOU that was signed on February 21, 1999, between the foreign secretaries
of Indian and Pakistan. The MOU is a big step forward and identifies
a series of measures on which detailed consultations and negotiations
must now commence with all seriousness of purpose.

Left to themselves India and Pakistan will engage in endless shadow-
boxing and sabre-rattling. I am convinced that the United States has
a role to play in “persuading” India and Pakistan to take the Lahore
MOU forward to serve as the foundation for a whole range of explicit,
transparent, and verifiable set of nuclear risk-reduction measures.
This is an unpopular stance to take and will immediately make me suspect,
more than I already am, among my political and other colleagues in India.
But the sad fact is that we epitomize Newton s First law tragically
that any body in a state of inertia will continue to be in that state
unless it is acted upon by some external force! Actually many of my
political colleagues privately agree with me but either lack the courage
or have too much at stake to say so publicly.

Kargil has certainly vitiated the atmosphere but there is no escape
to going back to the spirit of Lahore. There have been other risk-prevention
measures that have been proposed. India itself has advocated a no-first-use
pact as far as nuclear weapons are concerned. Also has been suggested
an agreement that includes population centers in the list of nuclear
installations that will not be attacked by each country s nuclear weapons.
Various publications and papers of American think-tanks, particularly
of the Washington-based Stimson Center, have put forward numerous other
ideas for nuclear and missile risk reduction. These have to be incorporated
into both the Track-I and Track-II Agenda. The point that has to be
grasped more fully in India as well as Pakistan is that confidence-building
measures cannot be just declaratory statements made in a casual manner
by either prime ministers. They have to be negotiated. They have to
be verifiable. They have to be monitored. And we cannot forget that
response times in an India-Pakistan or an India-China conflict situation
are going to be very, very short, unlike a China-U.S. or a U.S.-USSR/Russia
spat. It is this geographical contiguity among nuclear antagonists that
impart a sense of urgency to confidence-building measures.

The way Track-II diplomacy has been brought into disrepute in both countries
in recent months is tragic. Having gone nuclear overtly, India can no
longer tell the international community to back off. The fact is that
South Asia is a nuclear cockpit. Worse, in other troubled regions at
least the antagonists are talking to each other officially or unofficially.
It is only between India and Pakistan that dialogue, discussion, interaction,
exchange of envoys, and a genuine desire for peace is missing. The world
is right to get concerned.

India s changed attitude towards its neighbors has not gotten adequate
notice and credit in the United States. India has signed a major water-sharing
treaty with Bangladesh and it has also signed a number of agreements
with Nepal. It continues to support President Kumaratunga in her efforts
to bring peace to her troubled island country. I think we need a new
vision for SAARC, grand initiatives that will herald a whole new direction
to our people.

I have two specific ideas in mind. One, a SAARC Parliament, initially
nonlegislative to begin with but over time that could well evolve into
a European parliament-like institution. The impetus to this must come
from the SAARC countries themselves but friends, well-wishers, and financiers
from outside can certainly help. Two, the Himalayan River system is
need of a major development initiative along the lines of the Mekong
River initiative. The prosperity of over a billion people in four countries
is closely linked to such an initiative in the Brahmaputra-Ganga-Barak
basins.

It is beyond the capacity of individual governments to sustain such
an initiative on their own. The Indus Waters Treaty, an outstanding
monument to Indo-Pak cooperation that has survived three full-scale
wars was first conceived of by David Lillienthal, one of the catalysts
of the TVA. It was his perseverance and the World Bank s involvement
that made the Treaty finally possible in 1960.

I should say a few words on our relationship with China since that impacts
on the regional environment. As some of you may be aware, India and
China signed an historic border agreement in 1993 and followed it up
with another agreement on confidence-building measures in 1996.

It required great political courage and wisdom for Prime Minister Narasimha
Rao to go against the conventional wisdom and enter into these agreements.
Interestingly, these agreements have been hailed as major breakthroughs
by no less a person than Neville Maxwell himself, the journalist-scholar
who has been consistently arguing that India provoked China in 1962
and has refused to engage the Chinese in any meaningful negotiations.

The world has not taken note of these Accords, which, in my view, open
the way for a radical transformation of Sino-Indian relations provided
the two countries continue to talk to each other, especially on nuclear
and missile matters. There have been some hiccups with some ill-advised
statements from our side. China s restrained reaction during Kargil
may well change Indian mindsets.

The Trade Issue

There has been much opposition to the WTO in India. I have been countering
it with many arguments, one of which is that there is just one country
where the opposition is even more severe namely, the United States.
Most Indians even today see the WTO as some giant American plot to “Coca
Colanize” the world even though India has actually won some trade disputes
against the United States in the WTO forum. What I find disturbing is
that while gradually we have accepted and are getting used to the WTO
regimen, the United States is still deeply ambivalent. Marcus Noland
has captured the American negativism, suspicion, indifference, and hostility
to the WTO very well in a recent article in Foreign Affairs.

Specifically, as far as India is concerned, the narrow, legalistic approach
to trade issues adopted by the U.S. Trade Representative (USTR) has
given the impression that the United States is not particularly anxious
to arrive at a negotiated settlement of issues of interest to India,
though on issues of interest to them, they expect India to be very cooperative.

In the dispute relating to the phase-out of quantitative restrictions
(QRs), India was able to arrive at an amicable settlement with every
important country except the United States. The difference between India
and the United States was on one point. India was willing to remove
QRs over a six-year period starting from April, 1 1999, whereas the
United States wanted it done in five years.

India was willing to frontload agricultural items of interest to the
United States but the USTR was adamant and India was unnecessarily taken
to the dispute settlement panel. India has lost in the panel as well
as in the appellate body. But it does not matter since India is committed
to phasing out the QRs in its own economic interest. In fact, the phase-out
is turning out to be faster than envisaged but the United States intransigent
attitude has soured what has been a healthy working relationship. India
and the United States will now have to negotiate a reasonable period
of implementation. The deadline originally indicated by the Americans
was March 31, 2002, which is acceptable to India but now the United
States wants to further compress the schedule. This is needless muscle-flexing.

Many years ago, India being a major importer of food grains had bound
duties at very low levels rice at zero duty, for example. Now, following
its agri-successes achieved, I may add, with considerable assistance
from the Americans for which I agree we are not suitably grateful in
public, and following the procedure envisaged in Article XXVIII of the
WTO Agreement, India wants to increase these duties. India has arrived
at a settlement with the European Community and with Australia. But
even after two and a half years, the United States is not seriously
engaging itself in negotiations with India. The United States has itself
very high tariffs on many agri-commodities, and India has expressed
its willingness to pay reasonable compensation to the United States
by agreeing to reduce the bound tariff in respect of some products of
interest to the United States.

The Information Technology Agreement (ITA) is another source of friction.
India has joined ITA-I and agreed to zero tariffs without any reciprocity
from the United States. The EU, on the other hand, received a quid pro
quo. But let this pass. Now ITA-II is on and there is a stalemate because
the United States has refused to be sensitive to India s interests and
concerns, unlike its attitude towards the EU.

As things stand today, there will be no QRs on imports and clothing
by India by 2001 or so whereas the United States will continue to maintain
QRs on textiles and clothing products till January, 1, 2005. This is
highly iniquitous. The products in which India has enormous interest
will see quota abolition only on January 1, 2005. Accelerated liberalization
of the implementation of the Agreement on Textiles and Clothing is the
single, most important step that the United States can take to demonstrate
its commitment to free and fair trade and its readiness to shoulder
equal responsibility when it asks other countries, like India, to take
politically risky decisions.

Super/Special 301 of the United States 1988 Trade Omnibus Act is very
much alive. Paragraph 4 of Article XVI of the WTO Agreement says that
“each member shall ensure the conformity of its laws, regulations and
administrative procedures with its obligations as provided in the annexed
Agreements.” This implied that 301 will be rescinded. This has not happened.
In fact, section 300 action is threatened even when a country has complied
with its TRIPs obligations on the plea that the United States is not
satisfied with mere implementation of TRIPs obligations and that it
wants implementation of higher standards of intellectual property protection.
India continues to figure in the “watchlist,” “priority watchlist” even
though it is in compliance with its WTO obligations. Section 301 is
totally inconsistent with the WTO obligations of the United States,
and if the United States is serious about multilateral frameworks for
policing global trade, it must go.

The frequency with which America resorts to antidumping investigations
has compounded the problem. The arrogance with which you approach antidumping
investigations elsewhere is breathtaking. There is a particularly nasty
case going on in India for the past few years and this relates to complaints
of dumping by American soda ash manufacturers in India. The Indian government
agency has followed the EU s own experience and given a verdict. This
has been objected to in the most vituperative language by the powerful
soda ash lobby in the United States and even someone like me, who is
otherwise favorably disposed to the United States, winced when I read
the objections filed by the American cartel, and the sweeping and virulent
criticisms it made to the USTR of our antitrust agencies and of our
judiciary as well. Such high-handedness is not calculated to win friends
and influence people. It is no use saying that this is the exception
rather than the rule. It is the exceptions that get the maximum media
attention and mold public perceptions.

Under the WTO agreement we have time till January 1, 2005, to introduce
product patents for pharmaceuticals. This has been a major bone of contention
between India and the United States but now the United States must back
off. We take our international obligations seriously. We are not in
violation of any WTO ruling and we stand committed to doing what we
have agreed to do. You doubt our credibility. But why should we take
you on your word on textiles where the MFA abolition is so backloaded
that 51 percent of the quota vanishes on December 31, 2004. And there
is no guarantee on what tariffs you will impose on textiles even after
the MFA has been abolished. If the United States wants to build its
credibility on international trade, let it phase out textile import
quotas more rapidly than it has done so far and let it slash tariffs
as well. The same applies to agricultural trade liberalization as well
where the track record of the United States, EU, and Japan hardly inspires
any confidence that they are committed to honoring the Uruguay Round
pledges.

The social clause continues to be a bone of contention. In this connection,
economists like Jagdish Bhagwati have vociferously campaigned against
the U.S. position. I can hardly improve on their arguments. All I can
do is quote a paper of Richard Freeman, the noted labor economist who
shows that it is not imports from low-wage countries but changes in
technology that have destroyed American jobs, if at all. America s trade
with low-wage countries is just 3 percent of her GDP, compared to 2
percent in the 1960s.

As far as the upcoming Seattle Ministerial Meeting of the WTO is concerned,
India and the United States both have been resisting EU efforts to bring
investment and competition on the agenda for the next round of negotiations.
But the U.S. move to push for an agreement on transparency in government
procurement has raised hackles in India. I would think that as long
as there is categorical assurance from the Americans that this is not
the thin end of the wedge and would not be used to push for a broader
market access agreement, the transparency agreement would, actually,
be also in our interest.

I have already alluded to the social clause and the Americans are keen
on a working group on trade and labor in the WTO. This is simply unacceptable
to India, and for weighty economic, social, and political reasons. India
wants solutions at Seattle for some of the more significant of the implementation
concerns it has rightly expressed regarding the Uruguay Round commitments
and pledges, especially on TRIMs, antidumping and TRIPs. But the United
States has not been particularly forthcoming in spite of repeated Indian
requests. Actually, in the Seattle Round Indian and American interests
converge, unlike in the Uruguay Round. That is why, in addition to the
multilateral track, it is important to keep a bilateral track of discussions
and consultations always open.

The Visa Issue

Earlier I spoke about that magic “V” word magic from our point of view
and perhaps dreaded from yours: the issue of visas. The H1-B visa that
is given to our software professionals is not an issue right now but
it has a tendency of erupting every once in a while and therefore it
is important to come to grips with it. The current global limit for
H1-B imposed by the United States is 115,000, applicable in 1999 and
2000. Incidentally, the cap was exhausted in June 1999 itself. It comes
down to 107,500 in 2001 and 65,000 in 2002. The visa year is October-September.
Roughly one-third of the global limit is India s share.

To sustain a 40 to 50 percent dollar revenue growth in software exports
over the next four to five years, India will need to send about 200,000
professionals to the United States on H1-B visas. If current limits
are applied, then we are talking about a shortfall of anywhere between
70,000 to 80,000. It is also a matter of great concern that the 2002
global limit when our exports would have really consolidated and would
be ready for an even bigger leap comes down dramatically. The visa cap
has to be at 125,000 at least even beyond the year 2002.

There is a great deal of hypocrisy here. These are exactly the type
of professionals the United States wants and woos, and yet we hear cries
that these guys want to settle down in the United States. A bit of honesty
would do the United States no harm especially in view of the shrinkage
in U.S. science graduates. The H1-B itself suffers from many infirmities
and is not designed to promote international trade. For example, the
United States has stipulated wage parity on foreign skilled manpower
working in the United States for short durations. This is tantamount
to imposition of a nontariff trade barrier and eroding a country s comparative
advantage. India sees the visa issue not as an immigration issue as
the United States does, but as a trade issue. We need to be sitting
down calmly and working things out. But I find this is one issue on
which our BP s get unnecessarily raised.

The H category of visas is meant for those professionals who are employed
or are being employed in the United States. This is really not applicable
to Indian software professionals who are employed in India and who are
required to visit the United States only for short durations. Prior
to October 1992, such professionals could get the B-1 visa very easily,
often at a day s notice. The reintroduction of the B-1 visa is essential
for promoting offshore development, an objective that both India and
the United States share for different reasons.

There is also the problem of double taxation of social security, which
is making the Indian software industry noncompetitive. The total incidence
of such taxes is about 21.5 percent. Indian software professionals obtaining
wages in India are required to get their provident and other social
security taxes deducted at source. But they are also required to pay
additional, nonrefundable, social security taxes in the United States
even for short-term assignments.

The United States has signed what are called “Totalization Agreements”
with countries like Australia, the United Kingdom, France, and Korea
so as to avoid dual payments social security taxes. These agreements
normally provide that an individual be covered under the social security
system of only one country, usually the home country. A similar agreement
between India and the United States is now urgently called for. The
Double Taxation Avoidance Treaty that has been signed between the two
countries does not have this important provision.

The APEC Issue

India has been deeply disappointed by the American attitude to India
joining APEC. No doubt, ASEAN countries themselves are uneasy about
India s entry, especially given the legacy of the conflict over Kashmir.
But America has been lukewarm to India s case even though for the past
three to four years India has gone out of its way to court the APEC
nations. America supported Russia s case, while Japan supported Peru.
We could understand the Fujimori connection as far as Japan s stance
was concerned but America s espousal of Russia over India was inexplicable.

This is an issue that will remain alive. India itself has to build bridges
with ASEAN and other countries in the region and has to bring down its
tariffs to ASEAN levels in the next two to three years, a promise made
by successive finance ministers. This will mean roughly a halving of
the average import-weighted tariff. To the extent that we keep our promises
to continue with investment and trade liberalization, America too must
put its considerable weight behind India s candidature.

Environmental Issues

On the Montreal Protocol I do not see major differences between India
and the United States. The Convention on Biological Diversity (CBD)
is crucial for India. We have our own homework to do. We have to enact
legislation. We also have a vital stake in bringing about greater compatibility
between the CBD and the TRIPs Agreement. India has to ensure that IPRs
are not granted where the subject matter is already in the public domain
of the source country and where they are granted, the source country
is compensated suitably for its contribution of materials and knowledge.
This is one high-profile, high-visibility area where American support
and understanding can enormously add to its goodwill in India so as
to make progress on nuclear and missile issues easier.

But it is in regard to the 1997 Kyoto Protocol on Greenhouse Gases that
serious differences have arisen between the two sides. The crux of these
differences revolve around the CDM, the Clean Development Mechanism.
Through the CDM, a developing country will receive capital investment,
funding for projects and new technology while the developed country
investor will receive credit for some share of the pollution reductions
achieved.

India has many concerns. Why should America get credit for emission
reductions in India? Why should it not change its own lifestyle? Will
India not be short-changed and be left holding the bag, when after selling
its emission credits, it is time for India itself to become accountable
for emissions reductions? How do we ensure that obsolete technologies
are not dumped as part of the CDM mechanism? Will CDM bring about additional
resource flows? What should be the scope of projects to be included
in the CDM? When should it start and what should be the mix for a country
like America between emission reduction actions at home and buying off
emission rights abroad?

Within the next twelve months it will be decided whether the CDM will,
in fact, come into being. Right now, I can say that the CDM is looked
upon with a great deal of suspicion and mistrust among many Indian NGOs
and even in the government. Industry associations do see in the CDM
the possibility of new inflows of investment and technology. But the
gap between Indian and American perceptions on the very philosophy of
the CDM and on the way it will work and be monitored is considerable.
The CDM must be seen not just as a smart device for helping America
achieving its emission targets for greenhouse gases quickly but also
as a genuinely cooperative and synergistic mechanism to spur sustainable
development and the proliferation of clean technologies in countries
like India. I would suggest that a major Track II effort be mounted
to bring the two sides together. A former White House official has been
in India over the past year working with an independent energy research
organization trying to create a climate of opinion in India favorable
to the implementation of the CDM and the Kyoto Protocol. But this is
something that needs to be carried forward and strengthened.

This agreement was to last ten years. It has already run its course.
Attempts to revive the agreement and take it forward have been stymied
by the American stand on India s patent laws. Now that India is substantially
in line with the WTO stipulations and, in any case, we have time till
2005 to introduce product patents in drugs, I think it is simply silly
for the Americans to continue to play hard ball on a new comprehensive
S&T agreement. This should be a matter of the highest priority.

Energy is a particular area for increased cooperation. Within energy
I would place great stress on coal, which is our major resource. Incidentally,
if we are able to get a program going on the full fuel cycle of coal,
we will also be able to bring new investment into depressed and backward
regions of India our “rust belt,” as it were. I recall during his tenure
Frank Wisner took keen interest in trying to get Amoco to invest in
a major coal-bed methane project in Bihar since he thought this would
also be a good way of demonstrating that MNCs can contribute to the
development of a poor state.

Unfortunately, by the time the Indian Government could decide whether
coal-bed methane was a coal resource to be dealt with by the Ministry
of Coal or a natural gas resource to be dealt with by the Ministry of
Petroleum, Amoco got fed up and walked out of the project in September
1996. The coal-bed methane is still very much there.

How will such an agreement be funded? So far, we have been running the
rupee costs out of the accumulated PL-480 funds. Something like Rs 45
to 50 crore (about $10 million) has been spent over the past decade.
The PL-480 corpus has been exhausted and right now I believe something
like Rs 100 crore is left. We need to think of new innovative financing
mechanisms. We need to create a fund of about $25 million, which could
be used as seed money to launch a binational foundation for science
and technology cooperation, particularly in the noncommercial sector.
I believe such a foundation exists for cooperation between Israel and
the United States. I would suggest that the government of India put
up $10 million and the Indian diaspora come up with another $5 million.
The balance could then come from the American side.

I would urge some of the newer and younger generation of Indian entrepreneurs
or netrepreuners who have struck it rich in this country to spearhead
the project so that they would be doing something substantial for their
home country, which educated them at great cost to the public exchequer
that has never been recovered. If science and technology cooperation
is to form a major area for bilateral cooperation, then the United States
will have to review the curbs it has imposed on almost two hundred educational
institutions and laboratories following Pokharan-II. It seems to me
that this was an act of great pique on the part of the Americans. One
knows of one center the Nuclear Science Centre in New Delhi, which had
an excellent on-going association with Argonne Laboratories and it had
nothing whatsoever to do with the bomb. Some bureaucrat in Washington
must have seen red when he or she saw the name of the center. I recall
suggesting to the director that the name be changed to the National
Science Centre but by then the damage had been done. The review of the
“entities list” is absolutely essential. America has a right to be piqued
by Pokharan-II but it seems to me that the completely mindless manner
in which this “entities list” of Indian educational and research institutions
has been drawn up and made subject to restrictions on intellectual exchanges
was most unnecessary and the sooner it is nuanced the better.

Agriculture

I would make a very special plea for reviving cooperation in agriculture.
India has to double her food production in the next twenty years and
further double it in the next twenty years in order to be able to feed
a population of close to 2 billion by the turn of the next century.
The United States has had a close working relationship with India in
agriculture. Over 700 research projects have been supported. Something
like $40 million worth of rupees has been invested.

Over 2,000 scientists have been educated and trained. A large number
of research institutes in the public, private, cooperative, and not-for-profit
sectors have benefited. But now that entire program that is an outstanding
monument to the noblest sentiments that is cooperative endeavor is in
danger of coming to a halt. The U.S. Department s Foreign Currency Research
Program is winding down because of the depletion of the PL 480 rupee
funds that I mentioned earlier.

New programs and new sources of funding are needed to continue our collaborative
efforts. A new PL480 program based on India s import of say, maize and
soybean, might well be the starting point of a new push. The U.S. Department
of Agriculture is, I am informed, embarking on the farm equivalent of
the human genome project at Cornell University s biosciences center.
It seems to me that India must participate and play a key role in this
project, backing up its participation with financial commitments as
well.

I talked about product patents a while back. Let me share with you a
concern I have in this regard that does impact on our relationship.
India s Green Revolution has been an outstanding achievement. But if
the present mindsets on intellectual property rights protection in agriculture
especially were prevalent in the 1950s and 60s, the Green Revolution
would not have been made possible. The network of CGIAR institutions
like CIMMYT in Mexico City and IRRI in Manila played a key role in the
transfer of technology.

What I am worried about is that Borlaugian vision of the public role
of agricultural R&D is virtually dead, and if the Monsantos of the world
monopolize research, then countries like India are in serious trouble.
Indeed, if just one company were to monopolize say, transgenic cotton
and soybean, then not only India but America also would be in serious
trouble. I would urge my American friends not to jettison their support
for publicly funded R&D in key areas like agriculture and health. The
private sector does have a role to play but what we are seeing is a
dangerous theology. India has committed itself to legislate a protection
for plant varieties but the Americans should not forget that as per
the WTO agreement, this legislation has to be sui generis. I still believe
that cooperation in agriculture is a priority area for India. We want
to modernize our agricultural universities, which were modeled after
your land-grant college system. We have to upgrade our agricultural
research laboratories. I do not see this happening without a close American
involvement.

The Corporate Sector

By and large, I think that there are no big issues that divide our corporate
sectors. A new competition policy is on the anvil. The Companies Act
in being government equity in a number of companies is being reduced
to 26 percent the world calls this privatization, we call it “strategic
sales,” because if we call it privatization there will be huge hue and
cry. Such is the power of words. Insurance is bound to get opened up
in the next few months after almost three years of effort. A new telecom
policy has been announced and is being implemented. On telecom I happen
to believe that India must allow 51 percent equity to foreign companies,
but here I am in a hopeless minority perhaps, this should be linked
to some “concessions” by the Americans on textiles. One issue that is
agitating Indian corporates is that of 100 percent subsidiaries. Pfizer,
for example, has a joint venture already in the country. Now, it wants
to set up a 100 percent subsidiary. The fear is that the minority shareholder
will be short-changed, the joint venture will suffer, and ultimately
it will be the 100 percent subsidiary that will dominate. This is more
a fear with Japanese companies than with American companies, although
it is Pfizer s case that has drawn maximum public attention and invited
the most adverse comment.

There are weighty arguments both for and against what Pfizer has done.
All I want to say here is that foreign companies must be sensitive to
the local environment and should not do in India what would not be considered
good corporate governance elsewhere. The U.S.-India Business Council,
which I am reliably informed will soon be cochaired by Frank Wisner
himself, should take up this issue and at least listen to the differing
viewpoints.

I also want to raise a broader point relating to the role of regulation
in promoting competition. The Washington Consensus underscores deregulation,
privatization, and liberalization. Fine. But what about intelligent
regulation? The American competitive system is itself founded on an
institutional framework of the Justice Department, the FCC, the SEC,
the EPA, the FDA, ITC, OSHA, the PUCs, and a host of other regulatory
bodies that ensure that competition is free and fair, that very often
induce the adoption of new standards and of new technology and protect
the interests of consumers.

I think we have not had sufficient interaction between India and the
United States on this issue. It may appear paradoxical but it is the
regulatory aspects of a competitive, liberalizing, privatizing, globalizing
economy on which the United States can teach us a lot. A cooperative
program on regulatory institutions under the framework of USAID should
be started.

While on the Washington Consensus itself, India must reduce its fiscal
deficit substantially from the present level of around 8 percent of
GDP to around 4 percent of GDP in the next four to five years, move
faster on privatization and bring import tariffs down to global levels
by the middle of the next decade, and keep up the momentum of deregulation.
But after the East Asian meltdown, hopefully the Americans would have
realized the limits of the consensus, at least in so far as liberalization
of the financial sector is concerned. It has been an article of faith
in what Jagdish Bhagwati has called the Treasury Wall Street Complex
to treat capital movements on par with movement of goods and commodities
and to push for faster liberalization and globalization of the financial
sector. This has spelt disaster for many countries but India has escaped
because of its caution, which is unfortunately interpreted as being
antireforms. India just cannot afford an Indonesia-type disaster from
a social and political point of view. Caution and prudence is, therefore,
understandable. Hopefully, in the current discussions on global financial
architecture the lessons of East Asia, Russia, Brazil, and Mexico would
have been imbibed by the pundits of Washington. Very often the American
government tends to get involved in a very pushy fashion when the issue
is purely commercial. What then happens is that one specific commercial
dispute or controversy gets elevated in status and becomes the litmus
test of India s intentions from an American perspective. This has happened,
as for example, in the Enron case, which was a difficult and painful
learning experience both for India and Enron. The fact that Enron went
through something like twenty-six court cases over a two-year period
and won every time says something for our judicial process, a point
that rarely got highlighted throughout the imbroglio.

But just because we were driving a hard bargain did not mean that we
were against foreign investment or that we were being obstreperous.
Individual cases must be distinguished by the Americans from overall
policy. If McDonalds or Kentucky Fried Chicken is facing resistance,
heavens will not fall and Indo-American relations will not be disturbed.
Another good example that conveys the essence of my point is the issue
of accounting rates on long-distance telephone traffic. I recall telling
Frank Wisner: Relax, Franklet VSNL (our long-distance carrier) and U.S.
carriers carry on a bilateral negotiation without governmental intervention
from either side. But I recall that the Americans wrote stiff letters
to the Indian government and gave us the distinct impression that if
we did not reach an amicable settlement soon, there would be hell to
pay. I might add that VSNL has been negotiating a 10 percent decline
every year. The latest proposal is for a rate of $1.16 per minute, which
has yet to be agreed upon by the U.S. carriers. A gradual lowering of
rates is very important for India.

India on American Campuses

I now come to India s place on the American campus circuit. There was
a time when India was in vogue but not any longer. Our own restrictive
visa policies and our suspicious attitudes towards social science research
has turned away many American academics. I recall the late Myron Weiner
telling me once that the Indian government was singularly responsible
for the noted scholar Barney Rubin I think it was turning away from
our country. India s loss was Afghanistan s gain. The Indian diaspora
has not been very forthcoming in supporting India-related chairs and
programs. Some NRI businessmen have funded Vedic studies centers and,
indeed, some Indo-American initiatives have taken place at the universities
of Pennsylvania, Columbia, and Berkeley, although not at the scale originally
envisaged.

One of the most promising initiatives in this regard is the MIT India
Program, which has been launched because of the enthusiasm and energy
of Kenneth Keniston. No corporate or government funding is involved
as yet. But sixteen MIT students have already worked in India under
the program. Harvard s Jeff Sachs has a modest India program and Ezra
Vogel, also at Harvard, has spoken to me about his interest in bringing
India into the ambit of the Asia Research Center there. Of late Stanford
has emerged as a center where studies on the Indian economy are being
undertaken. But India s profile and place on American campuses, the
pillar of its intellectual establishment, needs major refurbishment
and a quantum leap.

Political Contacts

I have often wondered what might have happened to Indo-American relations
had an earlier generation of public personalities and political figures
crossed the Atlantic and had been educated in the Cambridge by the Charles
and not by the Cam or had been exposed to Ford, not Oxford. Two who
did cross the Atlantic made a great difference. Dr. Babasaheb Ambedkar
returned with a strange, deadly, and wholly welcome virus that was to
rock Indian society Constitutional Egalitarianism. Sardar Pratap Singh
Kairon returned determined to make Punjab a Kansas or an Iowa-clone
in farming at least. As far as I can make out, there was only one other
politician who went to America and returned those years but unfortunately
he went to Wisconsin during the Depression and returned a Marxist to
begin with. This was JP, Jayaprakash Narayan, for whom, I hasten to
add, I have the highest admiration. India is not like China where, I
am informed by my China-watcher friends, an earlier generation of Soviet-trained
middle-level political leaders has been replaced by an entirely new
generation of American-educated professionals. I see this in other countries
like South Korea as well. That it is not happening in India has to do
with the very nature of our politics and of career choices being made
by the educated and the professional classes.

One of the most important dimensions of our bilateral relationship which
has received a boost in the past two to three years is the visits made
by American political leaders to India. What is interesting is that
many of these visits are being actually sponsored by our apex industry
organization, the Confederation of Indian Industry (CII). The CII has
financed and arranged the trips of about thirty-eight congressmen, congresswomen,
and congressional staff members in 1998 and 1999.

This has helped improve perceptions of India on the Hill. I think it
was a hostile Rep. Torricelli who went to India and returned a friend.
There is nothing better than seeing and feeling for yourself what a
noisy democracy India is very much in the American mold, I might add.
The noise of Indian politics is the music of its democracy. But it is
not seen as such. American think-tanks, on their part, have to increase
their exposure to our political class, both at the national and regional
levels. I hasten to add that this is not a plea on my own behalf but
on behalf of so many of my colleagues who need to be better educated
of American decision-making and appreciative of American concerns. American
politicians outside of Washington, like governors of key states from
India s point of view, have to be made more aware of India. And India
should not be obsessed with the Pallones and the Ackermans it has, however
difficult that might be, to keep the pressure on the Helms and the Burtons.
Both sides tend to preach to the converted. We also tend to view each
other monochromatically. Many of the problems we face in our bilateral
relationship stems from a profound lack of understanding of how our
respective multilayered, pluralistic democracies work. The two political
parties in the United States have a number of policy and leadership
training institutes associated with them and it would be a fruitful
exercise for these institutes to launch a Track III dialogue with their
counterparts in different Indian political parties. The absence of political
leaders in Track II is striking.

I earlier paid tribute to the Jaswant Singh Strobe Talbott dialogue.
The fact that “rank” and “protocol” were set aside to keep this dialogue
going is a testimony to the distance India has traveled in her approach
to the United States. But I still feel that there is need to give an
institutional focus to such a dialogue and make it more broad-based.
For example, our scientists and military experts are not part of our
delegation. America has high-level binational commissions with Mexico
and Russia, I believe. A similar body with respect to India should be
considered seriously by both sides. Every year, at least four to five
senior cabinet ministers from both sides must engage in dialogue on
issues of mutual interest. And certainly we need to interest the president
and the vice president of the United States more deeply with India.

Earlier I mentioned the recent bilateral talks between an Indian official
delegation and American officials on Afghanistan. This is the type of
broader dialogue that India and America should be engaged in on a separate
channel altogether. We could periodically share our perceptions on issues
that are strictly not on the bilateral agenda but that nevertheless
are of great importance to both sides like, for example, developments
in China and Russia. This will also give India a feeling that the Americans
are interested in hearing our point of view on world affairs.

I should also mention that in recent times India has taken to sending
special envoys to the United States and talk to various interest groups.
I recall making this suggestion to Prime Minister Narasimha Rao way
back in June 1991 but for some reason it could not be operationalized.
But I find that following Pokharan-II, the government has actually backed
nonofficials to articulate India s concerns to various constituencies
in the United States. I think this is a most welcome trend and should
persist not just on security matters but also on other issues of mutual
concern.

The Indian Diaspora

No discussion on Indo-American relations will be complete without a
reference to the enormously creative, wonderfully innovative, highly
educated, and tremendously rich Indian diaspora in the United States.
The diaspora is not monolithic and is as variegated as are India and
the United States. There is an academic diaspora, a corporate diaspora,
a literary diaspora, a trade and commercial diaspora (the Patels who
run the motel business, for example), a scientific and technological
diaspora, and now, increasingly, an entrepreneurial diaspora. It is
a doubly privileged diaspora, coming from the priviligentsia in India
and belonging to the upper crust in the United States.

I agree that further liberalization and opening up of the Indian economy
will open new opportunities for the diaspora s closer involvement in
the Indian economy. No amount of government schemes can substitute for
this. But I cannot resist the temptation of some sweeping generalizations
that come to my mind as a close observer of the diaspora and its habits,
although I am well aware of some noteworthy initiatives that have been
taken by, for instance, Indian professionals in Silicon Valley. Fund-raising
for the Indian Institutes of Technology, one of the most dynamic export-oriented
and America-directed sectors of our economy has commenced in right earnest.
I am also well aware of the growing involvement of Indians in lobbying
for us on Capitol Hill the Indian finance minister could get to see
Senator Jesse Helms in October 1997 only because an Indian-American
from North Carolina could swing the appointment. Young second-generation
Indian-Americans are active on the Hill and in law firms working with
Congress.

The question is simple why is the Indian diaspora so different in its
mindsets and its commitments from, say, the Israeli or Chinese diasporas?
It is well known that 70 to 75 percent of the foreign investment flows
to China are from the overseas Chinese. In the case of India, the proportion
is about a sixth to a fifth but I should also add a caveat many of these
NRI (non-resident Indian) investments are actually resident Indian investment
flowing back. I find the diaspora wrapped up in itself. I find the diaspora
supportive of religious fundamentalism and insensitive to the plural
traditions and heritage of the society it has left behind. With some
honorable exceptions, the diaspora has displayed a singular lack of
social conscience. It is not enough for the diaspora to say that India
is not keen on it. There are not enough Sam Pitrodas who gave up everything
and decided to devote ten years of his productive life in the service
of the nation and he had made a difference.

It has to demonstrate greater sensitivity and a willingness for long-term
engagement on issues of concern to India. And it has to play a greater
role in supporting programs, projects, and institutions dedicated to
bringing our two countries together. The market cap of companies promoted
by Indian software professionals and listed on NASDAQ is over $16 billion
when I last did a survey some months back. It is not resources that
is in short supply but a will, a vision, a larger commitment.

I would also suggest that America take the lead in a Track III involving
Indian and Pakistani diasporas. If overseas Indians and Pakistanis,
especially of the younger generation, can be brought together on a sustained
basis, there may well be a new pressure point for peace and goodwill
in the subcontinent. At present, Indian-Americans and Pakistani-Americans,
with a few exceptions, mirror and reflect tensions and hatreds back
home.

A Final Word

While it is true that America must begin to take India seriously in
its own right and be more understanding of and sensitive to its concerns,
more importantly, India has to “get its act together” in relation to
the United States. It is up to us to manage the diplomatic theater,
to use Gerald Segal s phrase, which he has used in relation to China,
in such a manner that draws America into our web. It is not enough for
us to say that we desire closer ties. These ties will not materialize
out of thin air. We have to, using an Americanism, “hustle” on the basis
of better and more detailed homework.

I have not discussed bilateral contacts between NGOs and cooperatives
where there is great potential. I have not discussed mutual interaction
in the fields of arts, culture, and entertainment where too much can
be done. India could gain considerably by allowing The Wall Street Journal
and Time to publish out of the country, as they have been wanting to
do for the past few years but have been unable to do so because of opposition
from the local media barons who otherwise are all for competition and
globalization. I have not discussed the bilateral aid program that,
although small in relation to India s needs, in relation to what India
gets from countries like Japan, and in relation to what America spends
in countries like Egypt, is supporting key projects such as the important
family planning project in Uttar Pradesh. Indeed, America must not only
support greater bilateral and multilateral assistance in Uttar Pradesh,
Bihar, Madhya Pradesh, and Rajasthan poverty and stagnation bowl of
India but also link it with better governance and fiscal reforms.

The whole idea of this paper has been to lay out the menu on some of
the more prominent issues so that it is possible for us to identify
what we “like” and what we “dislike.” We cannot have everything our
way, and there is no point in India having an exaggerated notion of
its own importance or criticality. We are critical in South Asia but
we will need something more than mere demography to give us a niche
in world, for greatness comes not from promise but from performance.
India has to make up its mind what it wants from the United States in
an integrated framework and then go after it single-mindedly. It is,
I believe, as easy to woo America as it is to irritate it.

But as long as the Indian ruling elite is preoccupied with admissions
for its children in American colleges, I do not expect any miracles.
The establishment s hypocritical attitude of public confrontation and
private obsequiousness, of kick when in service but cosy up when retired
has cost the people of India dear.

If India seeks a global role for itself, it must play by global rules.
The problem has been that we want global recognition and American endorsement
but on our terms and conditions. This is simply not possible. India
wants rights but these rights come with responsibilities. The recognition
of this harsh reality is sinking in into our consciousness, albeit at
a pace not to the liking of our American friends and some of us within
the country as well.

The last decade has seen India and America set aside the bitterness
and hostility of the past and engage themselves in dialogue across a
broad spectrum. It is as if America and India are rediscovering themselves
with the intensity and curiosity of long-lost lovers. The passion, should,
however, not expend itself quickly. A jilted America is worse than an
indifferent America. A disillusioned India is worse than a suspicious
India.

It is in the interests of both countries that there be a sense of realism
on both sides, an honest recognition of differences, and an appreciation
that these differences emanate from differing perspectives and not any
knee-jerk obstructionism and bravado and a constant willingness to engage
each other in dialogue and discussion. India has to bring about a transformation
in its own mindset in relation to America just as America itself has
to understand where India is coming from. Most of all, there has now
to be a resolve to go beyond a preoccupation with the “optics” of the
relationship and to get down to nuts and bolts in a spirit of give and
take on both sides.