India-U.S. Nuke Deal is Key To Boosting Business Ties

Published February 28, 2006

| Associated Press

President Bush gets his first chance Wednesday to see the vast economic and social transformations that many say make India a key global partner for America.

Fords and Chevrolets now compete for space on the streets with auto-rickshaws; young men and women tap away at keyboards, writing software code for American companies.

Since Bush took office in 2001, India and the U.S. have made dramatic steps toward forging a strategic partnership after decades of Cold War animosity, a growing closeness that's based as much on trade as it is on politics.

But the U.S. still imports far more from India than it exports, and it's clearly hoped that Bush's visit, which ends Saturday, will help even out a U.S. trade deficit with India that nearly doubled to over $10 billion between 2001 and 2005.

A key step, many in the business community here believe, is a landmark nuclear agreement to provide India with much-needed nuclear fuel that stands as the cornerstone of the emerging alliance between New Delhi and Washington.

Talks to finalize the deal have been held up over which of India's nuclear facilities are civilian and which are considered military. But officials on both sides say they are close and will press on even if the pact isn't finalized during Bush's visit.

"We are doing very hard bargaining," Foreign Secretary Shyam Saran told reporters Monday.

The deal would open new arenas for U.S. businesses in India, not just in potential nuclear sales but in a variety of high-technology products — from jets to rocket launchers to radars.

"Once we have the nuclear deal, everything else will fall in place," said Tarun Das, a top official with the country's biggest business lobbying group, the Confederation of Indian Industry. "What we are going to see is a big agenda of cooperation on almost everything."

India has been shopping big, from civilian airliners to military hardware, driven by aspirations to become a global power and the demands of an economy that is growing at 8 percent annually. But U.S businesses have received few of those orders.

Mutual suspicion, rooted in frosty Cold War-era relations when India was seen as a Soviet ally, has long kept Indians from placing big military orders with U.S. companies. Washington's decision to impose sanctions after India held nuclear tests in 1998 further dampened ties.

Although relations have rapidly warmed in recent years, U.S. companies have won few major Indian deals, especially in military hardware and high-technology equipment. American firms received less than $100 million in military orders out of the $12 billion that India spent on defense purchases last year.

"The potential is huge for them both in sales and production," Das said.

The proposed nuclear agreement, announced during a visit by India's prime minister to Washington last July, has already helped translate the potential into reality.

The first signs of serious change came when the Indian Air Force shortlisted Lockheed Martin Corp. and Boeing Co. as potential suppliers for 126 new fighter jets it plans to buy. India has never used a U.S-made combat aircraft.

"One reason we are here is because we hope the strategic relationship will continue to grow," Lee Whitney, a Lockheed vice president, said during a recent defense show in New Delhi that drew more American weapons makers than ever before.

But military purchases are just one aspect of the new economic ties.

Last month, state-run carrier Air India placed an order to buy 68 planes from Boeing Co. in a deal valued at $11 billion.

"The Air India deal is only one example. There will be many others," said Montek Singh Ahluwalia, one of the prime minister's top economic advisers.

As India modernizes its aging infrastructure to sustain its economic boom, it is expected to spend about $150 million annually on everything from roads to bridges to airports.

"It would be very surprising to me if as a result of that (modernization) process the United States did not get a fair share of the additional orders," Ahluwalia said.

The Indian government also plans to open coal mining to foreign investment and increasingly explore non-conventional energy sources — both areas where American firms could step in.

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