CRS Report for Congress
Prepared for Members and Committees of Congress
India: Domestic Issues, Strategic Dynamics,and U.S. Relations
K. Alan Kronstadt, Coordinator
Specialist in South Asian Affairs
Paul K. Kerr
Analyst in Nonproliferation
Michael F. Martin
Specialist in Asian Affairs
Bruce Vaughn
Specialist in Asian AffairsSeptember 1, 2011
Congressional Research Service
7-5700www.crs.govRL33529
India: Domestic Issues, Strategic Dynamics, and U.S. RelationsCongressional Research Service
Summary
South Asia emerged in the 21
st
century as increasingly vital to core U.S. foreign policy interests.India, the region’s dominant actor with more than one billion citizens, is often characterized as anascent great power and “indispensable partner” of the United States, one that many analystsview as a potential counterweight to China’s growing clout. Since 2004, Washington and NewDelhi have been pursuing a “strategic partnership” based on shared values and apparentlyconvergent geopolitical interests. Numerous economic, security, and global initiatives, including plans for civilian nuclear cooperation, are underway. This latter initiative—first launched in 2005and codified in U.S. law in 2008—reversed three decades of U.S. nonproliferation policy, but hasnot been implemented to date. Also in 2005, the United States and India signed a ten-year defenseframework agreement to expanding bilateral security cooperation. The two countries now engagein numerous and unprecedented combined military exercises, and major U.S. arms sales to Indiaare underway. The value of all bilateral trade tripled from 2004 to 2008 and continues to grow;significant two-way investment also flourishes. The influence of a large, relatively wealthy, andincreasingly influential Indian-American community is reflected in Congress’s largest country-specific caucus. More than 100,000 Indian students are attending American universities.Further U.S. attention on South Asia focuses on ongoing, historically rooted tensions betweenIndia and Pakistan. In the interests of regional stability, in particular as a means of facilitatingU.S.-led efforts to stabilize nearby Afghanistan, the United States strongly endorses an existing, but largely moribund India-Pakistan peace initiative, and remains concerned about the potentialfor conflict over Kashmiri sovereignty to cause open hostilities between these two nuclear-armedcountries. The United States also seeks to curtail the proliferation of nuclear weapons andmissiles in South Asia.President Barack Obama’s Administration has sought to build upon the deepened U.S.engagement with India begun by President Bill Clinton in 2000 and expanded upon during muchof the past decade under President G.W. Bush. This “U.S.-India 3.0” diplomacy was most recentlyon display in July 2011, when the second U.S.-India Strategic Dialogue session saw a largedelegation of senior U.S. officials visit New Delhi to discuss a broad range of global and bilateralissues. Many analysts view the U.S.-India relationship as being among the world’s mostimportant in coming decades and see potentially large benefits to be accrued through engagementon many convergent interests. Bilateral initiatives are underway in all areas, although independentanalysts in both countries worry that the partnership has lost momentum in recent years.Outstanding areas of bilateral friction include obstacles to bilateral trade and investment,including in the high-technology sector; outsourcing; the status of conflict in Afghanistan; climatechange; and stalled efforts to initiate civil nuclear cooperation.India is the world’s most populous democracy and remains firmly committed to representativegovernment and rule of law. Its left-leaning Congress Party-led ruling national coalition has beenin power for more than seven years under the leadership of Prime Minister Manmohan Singh, anOxford-trained economist. New Delhi’s engagement with regional and other states is extensiveand reflects its rising geopolitical status. The national economy has been growing rapidly— India’s is projected to be the world’s third-largest economy in the foreseeable future—yet poor infrastructure, booming energy demand, and restrictive trade and investment practices are seen tohamper full economic potential. Despite the growth of a large urban middle-class, India’s remainsa largely rural and agriculture-based society, and is home to some 500-600 million people livingin poverty. This report will be updated periodically.
India: Domestic Issues, Strategic Dynamics, and U.S. RelationsCongressional Research Service
Contents
Overview: U.S.-India Relations.......................................................................................................1
Notable Developments in 2011.................................................................................................4
Early Obama Administration Engagement................................................................................5
June 2010 Strategic Dialogue....................................................................................................6
President Obama’s November 2010 Visit to India....................................................................7
A Permanent U.N. Security Council Seat for India?...........................................................8
Reactions to the President’s Visit........................................................................................8
July 2011 Strategic Dialogue.....................................................................................................9
India’s Foreign Policy and Foreign Relations................................................................................10
Major Streams of Thought in Indian Foreign Policy...............................................................12
Rivalry and Conflict With Pakistan.........................................................................................13
The India-Pakistan Peace Process.....................................................................................14
Mumbai Terrorist Attacks and the LeT.............................................................................16
The Kashmir Dispute........................................................................................................17
India and the Afghan Insurgency.............................................................................................19
Partnership and Reconstruction Assistance.......................................................................19
Afghan Reconciliation, Security Concerns, and the U.S. Drawdown...............................19
India-China Relations: Asia’s Titanic Rivalry?.......................................................................21
Background and Context...................................................................................................21
India-China Commercial Relations...................................................................................24
Is There a Chinese “String of Pearls” Strategy in the Indian Ocean?...............................24
Recent Developments........................................................................................................25
India’s Other Regional Foreign Relations...............................................................................27
India-Sri Lanka..................................................................................................................27
India-Bangladesh...............................................................................................................28
India-Nepal........................................................................................................................30
India-Burma......................................................................................................................32
India-ASEAN....................................................................................................................33
India-Iran...........................................................................................................................34
India-Russia.......................................................................................................................36
India-Japan........................................................................................................................37
India-Africa.......................................................................................................................38
India’s Domestic Policy Setting.....................................................................................................38
National Political System, Elections, and Parties....................................................................38
National System and Elections..........................................................................................39
Major Political Parties.......................................................................................................40
Corruption Scandals and Congress Party Woes................................................................43
India’s Economy......................................................................................................................49
Overview...........................................................................................................................49
Poverty..............................................................................................................................50
Poor Infrastructure.............................................................................................................51
Corruption and Economic Freedoms.................................................................................52
Inflationary Pressures........................................................................................................52
Foreign Investment............................................................................................................53
Other Economic Issues......................................................................................................53
India’s Energy, Environment, and Climate Change Policies...................................................54
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