INDIA – US NUCLEAR DEAL – The Benefits
Ultimately the India – US Nuclear deal has to translate into economics, commerce, trade, development and FDI.
At the moment, Indian Opposition politicians think that the country’s independence and prestige have been sold out. Many US politicians are thinking that a gaping hole has been punched into the NPT regime. Yes, both are right, although the Indian side is stretching it a bit. In US, the Nuclear Lobby Group has gained an upper hand. When Manmohan – Bush finalized this deal in July of 2005, the Lobby Group mounted an instantaneous opposition. Unable to persuade the Bush administration to renege the deal, they changed tactics and have started a campaign against it with the US Congress (the elected body). This resulted in US sending a tough negotiator in Nicholas Burn to negotiate further details and possible concessions to salvage the deal in the US Congress. He did well and ended up in getting ironclad concessions prior to President Bush’s visit to India.
The opposition to this agreement is not dead yet. The Nuclear Lobby Group is making a last ditch effort to scuttle the deal in the Congress. But full backing of the President Bush and his able Secretary of State Condi Rice will ultimately help to get this deal through. On the other hand, most of the analysts and politicians opposing the deal in India are now lying low.
How does US benefit with this Deal?
President Bush is looking forward at the changing times. From 1970-78 when US sponsored NPT (Nuclear Proliferation Treaty) and its subsequent laws, it was their intent to punish India for exploding a nuclear bomb in 1974. They set a date of 1967 as criteria for inclusion in the select group. China was gleeful; as they had exploded their bomb in 1964, hence found their berth in this group automatically. So did France. To exclude India with a fifth of humanity and a bomb was a mistake. India at that time was economically weak.
For 25 years India endured its exclusion for not signing the NPT and was barred from any civilian use nuclear technology and materials. Later US politicians, to placate Pakistan, even blamed India for starting a nuclear arms race. In short, India was ignored. Although China was no better economically then, yet it was welcomed as one of the World powers.
Economic benefits to US
If India sets up 10 large size nuclear power plants, which is its intent in next 15 years, India will import technology and hardware from US for at least half of these projects (technology for the remaining may come from elsewhere). Each of these plants at a green field site will cost about $4 billion. In short, orders worth $15-20 billion could be placed with the US companies in next 6 to 8 years. Remaining orders may go to France, Germany, Canada and UK. Fund for these installations will come to India either in form of FDI or soft & commercial loans. Banks and equipment manufacturers abroad will be delighted to make this amount available to India. In return India will pay it back with goods and services export, in the same way China did it for the past 25 years. It is a win-win situation for the US lenders and US suppliers. Further expansion of business dealings on both sides will follow.
Another example of emerging Indo-US co-operation is in the area of aerospace industry. Order for $8 Billion worth of commercial airplanes has been placed with Boeing of Seattle. Another big order for 125 military planes is on the way. US parliamentarians have to work these big business deals in their thinking prior their vote.
The high tech manufacturing industry is at a take off stage in India. In last 3 months, announcements by big US companies totaling $7 billion dollars investment have been made. This has gone far beyond India’s expectations. This sector together with IT services and BPO will power the US industry and businesses into higher profitability and help India accelerate its growth.
Co-operation in auto parts, pharmaceuticals, R & D and defense industry cannot be ruled out. For each of these US is looking for a low cost supplier, that could be alternative to China.
Political Benefits to US
With a few strokes of pen, President Bush eliminated a major Cold War irritant from the scene. India is not politically and diplomatically aligned with US as Europe is, but India as a strategic partner in ensuring safety of sea-lanes of the Indian Ocean is very valuable. At the moment as long as US stays in Iraq and Afghanistan, the world will perceive US as a big bully. A major regional power, with a different outlook than the European and the US is needed to cool the tempers off. India has to step in to prevent further sliding of the Middle East into anarchy.
Military Benefits to the US
US benefits immensely with India as a major military power. Forty percent of worlds’ oil and commerce passes through the Indian Ocean sea-lanes. These today are unprotected. Pirates in the Red Sea and at the Malacca Straits prey on commerce. Indian cooperation will be helpful in keeping the sea-lanes free.
Another unstated benefit for US appears to be their assessment that India could be a counter weight to a “rising China” in the region. This is not the view of Indian policy makers who believe that a constructive engagement with China is more beneficial and not linked to any military or strategic relationship with USA.
Future military expansion in India to take up its role as a regional player bids well for the US military hardware suppliers. They will gain immensely over next 20 years.
What does India get out of the Deal?
Benefits to India are immense with this deal. First and foremost, is the de-facto recognition of India as a nuclear power? It is not clearly stated in the deal, but it’s an implicit understanding. India missed this opportunity in 1970-78. It is unlikely that this opportunity is to be missed again. Second, is future recognition of India as a permanent UN Security Council member? India has tried this in last three years. It has not succeeded. It is unlikely to succeed in next 10 years. But with a Trillion and a half dollar economy (8% growth over ten years), India will make this grade. When UN reforming movement gains strength in the future, India will be right there and waiting for this opportunity.
Economic benefits to India
There is an urgent need in India for capital to build its infrastructure and manufacturing base. And there is only one source to get it i.e. US & Europe. US and Europe at this moment are content with sending capital to China to supply them with consumer goods. The former very cleverly had avoided exporting manufacturing technology to supply high priced, high technology capital goods to China. This component together with auto-parts, pharmaceuticals and computer hardware could herald India into big leagues in ten years and beyond. Commercial Aircraft manufacture, ship building, factories to make giant power plants, steel making plants, mining & drilling hardware, petroleum & petrochemical plant building facilities could be ultimately shared with India. The latter within ten years will have a workforce sufficiently skilled to undertake all the foregoing. It will be beneficial to US. Labor costs in India, will always stay a third of US, and European costs. That will make India an ideal candidate for this technology transfer.
Opportunity of the KPO (Knowledge Process Off-shoring) is knocking at India’s door. Indian graduates of Science and Engineering will play a major role in this expansion. In about 5 years KPO Off-shoring will grow immensely. India stands to benefit most from it. Thanks to the edge, Indian science & technology graduates have established.
Political Benefits to India
After 50 years of isolation, India will have the opportunity to say something, in world forums like UN, WTO and World monetary lending institutions, and be heard. This was not the case previously. Reasons – India had no clout. With western economies in the future, tied more and more with India, the latter’s clout will improve. There will be frequent inter-government exchanges on matters of mutual interest. India could become a full member of the select group of G-8 members. Gone will be the days that US politicians will heap scorn on India, the way they are doing it today. The Indo – US Nuclear deal is in fact dumping the past and unlocking the hidden potential of the future. In addition Pakistan may get the cue and begin a rethink of its policies towards India.
Military Benefits to India
Indian military is in need to diversify its sourcing of military hardware. Russia has been a very reliable source for the past 40 years. This source has to be diversified. Ultimately all military hardware will have to be produced in India. But development time in India is too long and success factor is low. This has to be speeded up. The only way at India’s disposal is buy its immediate needs and import technology to develop its own weapon system. It is a bit expensive up front but pays dividend later as India joins the select group of countries as a source of military hardware.
Technological Leapfrog
The immediate benefit would be in getting the latest technology for nuclear power generation. Current progress in India on building its own nuclear power plants at best has a failing grade. Most of nuclear power plants in India are of other country’s design. The Indian Department of Atomic Energy falsely clings to the view that Fast Breeder Reactors will allow India to bridge the nuclear gap in the future. That future may be difficult to arrive. It may be too distant. This will hold economic development as hostage. Moreover developing nuclear technology is one thing, implementing it is another. For even homegrown technology, India will have to import critical components.
US Congress and its Support
The support of US Congress is crucial to the deal. This is a major headache, Bush Administration have to deal with. Currently, US Nuclear Lobby Group has the ear of the US Congress. The latter has become hostage to its past fallacies. They enacted bad laws in the past and are having difficulty modifying them. Now it is for the US Congress to redeem itself by changing the bad laws.
Conclusion
Thanks to diplomatic and political skills of President Bush and Prime Minister Manmohan Singh, we have a deal which could lift India into the Trillion-dollar club, faster. They both have worked hard. Ten years from now when electricity supply situation in India’s households, industry and farms is significantly better, we have to thank them both. Thank God, we are not struck with in one sided, Iran - Pakistan – India pipeline deal. This would have held India permanently hostage to Pakistan.
