India and the United States

1.India-US Relationship

India and the United States has been multifaceted and has evolved over the years. It covers various areas such as strategic, economic, technological, and cultural cooperation.
India and the United States have developed a strategic partnership, marked by regular high-level diplomatic engagements and cooperation on regional and global issues. Both countries share common values such as democracy and a commitment to a rules-based international order
Defense and security ties between India and the U.S. have strengthened. Both countries participate in joint military exercises, and there is ongoing collaboration in defense technology and procurement. The Logistics Exchange Memorandum of Agreement (LEMOA) and the Communications Compatibility and Security Agreement (COMCASA) are examples of agreements aimed at enhancing defense cooperation.
Economic ties have expanded, with both countries being significant trade partners. Bilateral trade has increased, and efforts have been made to address trade imbalances. The U.S. has been a major source of foreign direct investment (FDI) in India, and both sides have expressed interest in further deepening economic collaboration.

2. Key Elements of Partnerships of India-US

2.1.Technology partnership

Micron Technology, in collaboration with the backing of the India Semiconductor Mission, plans to allocate over $800 million for the establishment of a new semiconductor assembly and test facility in India, contributing to a total investment of $2.75 billion. Additionally, Applied Materials is set to construct a Semiconductor Centre for Commercialization and Innovation in India, aimed at enhancing the diversification of the semiconductor supply chain between the two countries. Simultaneously, Lam Research intends to facilitate the training of 60,000 Indian engineers through its “Semiverse Solution,” aligning with India’s objectives for accelerated semiconductor education and workforce development
India has recently joined the Minerals Security Partnership (MSP) led by the United States, aimed at expediting the establishment of robust and sustainable global supply chains for critical energy minerals. Commencing in June 2022, MSP already includes 12 other partner nations and the European Union. As part of this collaboration, Epsilon Carbon Limited from India is set to inject $650 million into the creation of a greenfield facility for electric vehicle battery components, marking the most substantial Indian investment to date in the U.S. electric vehicle battery sector.
India and the United States have initiated collaborative efforts through public-private Joint Task Forces dedicated to the advancement and implementation of Open RAN systems, as well as the progress of advanced research and development in telecommunications. The joint leadership of India’s Bharat 6G and the U.S. Next G Alliance in this public-private research endeavour is aimed at diminishing expenses, enhancing security, and fortifying the resilience of telecommunication networks.
India has officially endorsed the Artemis Accords, aligning itself with 26 other nations dedicated to fostering peaceful, sustainable, and transparent collaboration for the exploration of celestial bodies such as the Moon, Mars, and beyond. In a significant development, NASA is set to offer advanced training to astronauts from the Indian Space Research Organization (ISRO), with the objective of initiating a joint mission to the International Space Station in 2024. Furthermore, NASA and ISRO are actively working on establishing a strategic framework for cooperation in human spaceflight, with plans to finalize the agreement by the conclusion of 2023.
A collaborative effort has been instituted by both nations through the creation of a Joint Indo-US Quantum Coordination Mechanism. This mechanism is designed to streamline cooperative research endeavors involving the public and private sectors in both countries. Additionally, they have formalized an implementing arrangement to bolster joint research initiatives focusing on quantum technologies, Artificial Intelligence (AI), and advanced wireless technologies.
The National Science Foundation of the United States has disclosed 35 collaborative research projects in conjunction with India’s Department of Science and Technology. Additionally, a fresh cooperative agreement has been formalized between the U.S. National Science Foundation and India’s Ministry of Electronics and Information Technology, specifically targeting emerging technologies
Sterlite Technologies Limited of India has committed a $100 million investment towards establishing a manufacturing facility for optical fiber cables in close proximity to Columbia, South Carolina. This initiative is expected to support annual optical fiber exports from India amounting to $150 million

2.2.Defence Partnership

The Joint Statement expressed approval for the innovative proposal put forth by General Electric to collaboratively manufacture the F414 jet engine in India. General Electric and Hindustan Aeronautics Limited (HAL) have formalized a Memorandum of Understanding (MoU), and a manufacturing license agreement has been presented for Congressional Notification. This unprecedented initiative, marking the first time F414 engines will be produced in India, is poised to facilitate a more extensive transfer of U.S. jet engine technology than previously experienced
India has plans to acquire armed MQ-9B SeaGuardian Unmanned Aerial Vehicles (UAVs), aiming to enhance the country’s intelligence, surveillance, and reconnaissance capabilities
The U.S. Navy has finalized a Master Ship Repair Agreement (MSRA) with Larsen and Toubro Shipyard in Kattupalli (Chennai) and is in the process of completing agreements with Mazagon Dock Limited (Mumbai) and Goa Shipyard (Goa). These arrangements will permit U.S. Navy vessels to undergo maintenance and repair at Indian shipyards during their voyages.
The inauguration of the India-US Defence Acceleration Ecosystem (INDUS-X) took place on June 21, 2023. This network involves participants from universities, incubators, corporations, think tanks, and private investors. The program is designed to foster collaborative innovation in defense technologies and expedite the integration of India’s private sector defense industry with its U.S. counterpart

2.3. Cooperation in the Indo-Pacific

Titled ‘Taking the Lead on the Global Platform,’ the Joint Statement highlights several strategic actions undertaken by the two nations.

Indo-Pacific and Indian Ocean: The United States will become a participant in the Indo-Pacific Oceans Initiative, a regional effort initiated by Prime Minister Modi in 2015 to ensure a secure, stable maritime environment and advocate for its conservation and sustainable utilization. India will maintain its role as an observer in the Partners in the Blue Pacific. The U.S. and India plan to conduct an Indian Ocean Dialogue involving experts and stakeholders from the broader Indian Ocean region to enhance regional coordination.

2.4.Sustainable development

India and the United States will persist in their collaborative efforts to meet their individual climate and energy objectives. The United States appreciates India’s commitment to jointly spearhead the Hydrogen Breakthrough Agenda, a multinational initiative aimed at making affordable renewable and low-carbon hydrogen accessible worldwide by 2030
The Joint Statement underlines the mutual dedication of both nations to establishing inventive investment frameworks. These frameworks aim to reduce the capital costs and draw substantial international private financing for projects related to renewable energy, battery storage, and emerging green technologies in India. Additionally, the statement acknowledges efforts to decarbonize the transportation sector and highlights India’s establishment of the Global Biofuels Alliance, in which the U.S. is a founding member

2.5.Initiatives on health

The U.S. National Cancer Institute is set to encourage cooperation between American and Indian scientists through two recently awarded grants. These grants aim to create an Artificial Intelligence (AI)-enhanced digital pathology platform for purposes such as cancer diagnosis, prognosis, and forecasting therapeutic outcomes. Additionally, the grants will support the development of AI-driven automated radiotherapy treatment specifically for cervix, head, and neck cancers.
The U.S. National Institute of Diabetes and Digestive and Kidney Diseases is poised to enter into an agreement with the Indian Council of Medical Research. This collaboration aims to advance research in the realms of basic, clinical, and translational studies on diabetes. Additionally, the United States and India are set to convene a US-India Cancer Dialogue, facilitated by President Biden’s Cancer Moonshot initiative. This dialogue will serve as a platform for experts from both countries to identify specific areas of collaboration, accelerating the pace of progress in the fight against cancer.

2.6.Fighting terror and drugs

The Joint Statement reaffirmed the commitment of the United States and India to jointly combat global terrorism, condemning terrorism and violent extremism in all its forms. President Biden and Prime Minister Modi reiterated the need for concerted action against UN-listed terrorist groups, including al-Qa’ida, ISIS/Daesh, Lashkar e-Tayyeba (LeT), Jaish-e-Mohammad (JeM), and Hizb-ul-Mujhahideen.
They strongly denounced cross-border terrorism and the use of terrorist proxies. The leaders called on Pakistan to take immediate action to prevent any territory under its control from being used for launching terrorist attacks. Additionally, they urged for the perpetrators of the 26/11 Mumbai and Pathankot attacks to be brought to justice.

3.India-US Digital Trade

Current Status of India-US technology trade

In FY2023, the United States became India’s largest overall trading partner with a bilateral trade increase of 7.65% to $128.55 billion in 2022-23.
Digital or technology services did not play a prominent role in bilateral trade between the two countries.
The US ran a trade deficit of $27 billion in digital services with India in 2020.
The US and India have been strengthening their tech partnership through initiatives like the Initiatives on Critical and Emerging Technology (iCET) announced by President Joe Biden and Prime Minister Narendra Modi.
The iCET led to the establishment of a strategic Trade Dialogue between India and the US, focusing on addressing regulatory barriers and aligning export controls for smoother trade and deeper cooperation in critical areas.

CCIA’s Concerns in U.S.-India Economic Relationship

The CCIA (Computer & Communications Industry Association) acknowledges the efforts to enhance bilateral trade but raises concerns about the “significant imbalance” and “misalignment” in the U.S.- India economic relationship.
According to the CCIA, the Indian government has implemented protectionist industrial policies that favor domestic players over U.S. digital service providers, resulting in a tilted playing field.
One example highlighted by the CCIA is India’s guidelines on sharing geospatial data, which allegedly provide preferential treatment to Indian Companies.
The CCIA also expresses dissatisfaction with India’s departure from democratic norms and values, citing increased government censorship and control over political speech, making it challenging for U.S. companies to operate in India.

India’s Expanded Equalisation Levy on Digital Services

In 2016, India introduced an “equalization levy” of 6% on specific digital services received by non-residents without a permanent establishment in India from Indian residents.
In 2020, the “Equalisation Levy 2.0” was implemented, imposing a 2% tax n gross revenues received by non-resident e-commerce operators from providing e-commerce supplies or services to Indian residents or non-resident companies with a permanent establishment in India.
The initial introduction of the equalization levy in 2016 resulted in double taxation and complexity in the taxation framework. It raised concerns about constitutional validity and compliance with International obligations.
The 2020 amendment expanded the levy’s scope, making it sweeping and vague.
In 2021, instead of introducing an amendment, the Indian government issued a “clarification” stating that the expression “e-commerce supply or service” includes the online sale of goods, online provision of services, and facilitation of online sales or services.

Concerns Regarding India’s IT Rules 2021

The IT (Intermediary Guidelines and Digital Media Ethics Code) Rules 2021 have been flagged by a consortium of foreign tech firms as “problematic policies”.
The rules impose compliance burdens on social media intermediaries (SMIs) and platforms with five million or more registered users, affecting several U.S. firms.
Points of concern include impractical compliance deadlines and content takedown protocols. Intermediaries are required to remove content within 24 hours of receiving a government or court order.
The rules also require platforms to appoint a local compliance officer.
Amendments made to the rules oblige SMIs to remove information or communication links related to prohibited content categories within 72 hours of receiving a complaint.
Criticism is directed at the establishment of three-member Grievance Appellate Committees (GAC), which have the power to hear user complaints about content-related decisions by SMIs and can overturn those decisions.

Ambiguities in India’s Digital Personal Data Protection Bill

Foreign tech firms appreciate improvements in the fourth draft of the Digital Personal Data Protection Bill released in November 2022.
However, uncertainties remain regarding cross-border data flows, compliance timelines, and data localization.
India, with over 759 million active internet users, holds significant data and aims to become a hub for data processing.
India’s policy on data flow across borders will have global implications, similar to the impact of the European Union’s GDPR.
Data localization requirements can increase operating costs for companies and may be viewed as discriminatory by foreign firms.
The new draft has minimal information on cross-border data flows, stating that it will only be allowed to countries notified by the Indian government.
The basis for country notifications and the terms for data transfers are not specified, raising questions about the potential backlisting of non-notified countries.
The CCIA suggests a proactive approach supporting cross-border data flows through certifications, standard contractual clauses, and binding corporate rules instead of an opaque approach.

CCIA’s Concerns about the Draft Telecommunications Bill, 2022

The CCIA argues that the draft Telecommunications Bill has an expansive regulatory scope that would redefine “telecommunication services” to include internet-enabled services that differ significantly from traditional telephony and broadband services.
The current draft includes both Telecom Service Providers (TSPs) and Over-the-Top (OTT) communication services within the definition of ” telecommunication services.”
OTT communication services, such as messaging platforms (WhatsApp, Telegram, Signal, and Google Meet) utilize TSP’s network infrastructure to offer features that compete with traditional telecommunication services like voice calls and SMS.
If passed in its current form, the proposed law would impose burdensome obligations on platforms, including licensing requirements, government access to data, encryption requirements, internet shutdowns, infrastructure seizure, and potentially monetary obligations.
The CCIA argues that the law would introduce a global authorization/licensing requirement for digital firms, which is unprecedented.

Proposed “Digital Competition Act” and Estimated Taxes

The Parliamentary Committee on Finance proposed a “Digital Competition Act” last year to tackle anti-competitive practices by big tech companies.
The proposed act includes the implementation of estimated taxes specifically for significant digital intermediaries.
The CCIA suggests that the proposal seems to be primarily aimed at U.S. tech companies.
The details and specifics of the proposed act and estimated taxes are not provided in the given information.

4. India-USA Defence relationship

Evolution of India-US Defence Relations

Defence cooperation was the signing of the “Agreed Minute on Defence Relations between the United States and India in 1995.
The Next Step in Strategic Partnership (NSSP) released in January 2004 was critical to establishing a bilateral defence relationship.
The agreement was not related to core elements of bilateral defence trade but intended to augment cooperation in areas such as civil nuclear, civilian space programmes, high-technology trade and missile defence.
It led to expanded collaboration and eventually to the June 2005 ten-year defence framework agreement.
Today, the U.S. undertakes the largest number of military exercises which have gradually evolved in scale and complexity.
During the Cold War, more than three-fourths of India’s defence equipment was of Soviet Origin.
This gradually began to change, and in recent years, the U.S. and Israel emerged as major suppliers.
From a total of less than $ 400 million in defence acquisitions during 1947-2005, the U.S. has signed defence contracts of over $15 billion since.
Pathfinder projects have been identified under this Defence Technology and Trade Initiative (DTII).
To get around export control licensing and other bureaucratic hurdles, an India Rapid Reaction Cell in the Pentagon was set up. In 2016, India was designated as a “Major Defence Partner” country.
Another step forward in the middle of this year was the inclusion of India in the Strategic Trade Authorisation-1 (STA-1) category, putting it on a par with allies in terms of technology access.
This should enable the DTII to graduate to more ambitious projects.
UAV Technology sale to India approved. The transfer of state-of-the-art UAV technology to India will be the first significant progress after India enters into the exclusive Missile Technolgy Control Regime (MTCR) and after the US has designated India as a major defence partner.

Strategic Rationales

The India-US defence partnership has a strategic dimension with its most prominent implications for the Indo-Pacific region.
The strategic persuasions of a “free, open and secure” Indo-Pacific stem from the strong bilateral defence ties between the two countries.
The bilateral framework lays out four strands of defence cooperation in the Indo-Pacific: maintaining peace and security;
Defeating terrorism and violent extremism
Preventing the proliferation of weapons of mass destruction and associated materials, data, and technology and
Supporting a rules-based order that protects the free flow of commerce in the region.

India has at least three broad strategic objectives in promoting its defence relationship with the US.

It seeks to modernise its military by acquiring sensitive and advanced technologies necessary for its own national ambitions and regional interests.
It hopes to bridge its capacity-capability deficit by developing home-grown know-how and skill sets in both the armed forces and the defence industry through specific programmes of co-production and co-development.
The Initiative on Critical and Emerging Technologies (iCET) agreement between India and the US, reached in May 2022, identifies areas of mutual interest in technological cooperation.

Changes in US export law to Benefit India

The United States has made changes in its export control laws that will benefit India by facilitating a smoother transfer of technologies and arms.
These changes have been made on par with the recognition of India’s status as a major Defence partner.
The new rule creates a presumption of approval for Indian firms seeking to import Commerce Department-controlled military items, except weapons of mass destruction-related goods.
Henceforth, companies will not need a license at all after becoming a Validated End User (VEU).
Under it, India will be denied licences only in the rarest circumstances.

Foundational agreements between India and US

Logistics Exchange Memorandum of Agreement or Logistics Support Agreement (LSA).
Communications Interoperability and Security Memorandum of Agreement (CISMOA).
Basic Exchange and Cooperation Agreement (BECA).

Significance of Foundational Agreements

These agreements are the expected gains in defence co-production with the US as the latter eases the terms of technology transfer.
The signing of these agreements should be strictly made contingent on US assurance of the transfer of technology.

Challenges and Recommendations

The US-India defence relationship, despite its remarkable rise in the past two decades, is intermittently impeded by functions of political, bureaucratic, economic and strategic realities.
Although gaps have been bridged to a significant extent, some fundamental differences exist, casting their long shadow on the strategic partnership.
The entire F-16 assembly line to India in 2016, which came on the heels of the US announcement that it was selling eight F-16s to Pakistan. Despite the strength of such ties, India’s assessment of its threats will supersede the compulsions of any bilateral defence relationship.
Some of the persistent problems between the two countries in the defence sector include the verification of offset Credits and the imposition of penalties.

The decision to impose a ban on the export of critical supplies required for Covid-19 vaccines under the Defense Priorities and Allocations System Programme (DPAS) of the Defense Production Act (DPA) in 2021 directly affected India’s ability to manufacture vaccines.
India’s ties with Russia in the defence sector also remain a factor in the growth trajectory of the India-US defence relationship. Particularly in the backdrop of the war between Russia and Ukraine.

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