chapter 3 deve gowda and indo-u.s. relations : political...
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Chapter 3
Deve Gowda and Indo-U.S. Relations : Political, Economic
and Security Issues (1996-97)
India’s eleventh parliamentary election in May 1996 saw no single political party
emerging as a clear winner. The elections produced a hung parliament. The Bharatiya Janata
Party (BJP) emerged as the largest party in parliament with 160 seats, the Congress (I) got
141 seats and the National Front-Left Front (NF-LF) combine, (a coalition of 15 political
parties) secured 120 seats. The President of India, Shankar Dayal Sharma, invited the BJP, as
the single largest party to form the government. Accordingly, a BJP-led minority government
with Atal Behari Vajpayee as its leader, was sworn in on May 16. But this government lasted
for only 13 days. Faced with the prospect of losing a no-confidence motion in parliament,
Vajpayee and his council of Ministers resigned. President Sharma then invited the NF-LF
combine to form a new government. After considerable deliberations among themselves, the
NF-LF leaders chose former Karnataka Chief Minister, H.D. Deve Gowda, as the new Prime
Minister of India. Deve Gowda and his council of Ministers assumed office on June 1, 1996.
The NF-LF combine was named as the United Front (UF) government. In the US, Bill
Clinton was re-elected as the President of the country. This chapter proposes to analyse the
course of India-U.S. bilateral relations during the Deve Gowda premiership. Three major
segments of the bilateral relationship, - namely, political, economic and security segments, -
would be analysed in detail in this chapter for a comprehensive view of India-U.S. relations
during 1996-1997.
The year 1996 was important for both India and the U.S. since it was an election year
in both countries. The term of the Narasimha Rao government in India was over. In the U.S.,
President Clinton was seeking a second term as the American President. In his election
campaign, Clinton emphasised non-proliferation, the CTBT and preservation of human rights
as the major areas of American foreign policy1. As mentioned in the previous chapter, all
these issues were of crucial importance for India-U.S. relations. India went to the polls in
May 1996 with serious corruption charges against the government of Narasimha Rao2. It was
1See, U.S. Information Service, “The Presidential Election, 1996”, Official Text (Calcutta, November 1995), pp
3-4.
2It was alleged that a leading share-broker of the country had paid Rs. one crore in cash to the Prime Minister. See in this connection, The Statesman (Calcutta), March 16, 1996, p.1.
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mainly due to these corruption charges, the Rao government was voted out of power, and the
Deve Gowda government assumed charge. A change of government in New Delhi after five
years brought new dimensions in domestic and foreign affairs. The course of India-U.S.
relations assumed significance in this altered perspective. The analysis in this chapter would
begin with India-U.S. political relations under the Deve Gowda government
Political Relations
Deve Gowda headed a coalition of 15 political parties that included mostly the
centrist and leftist political parties [like the Janata Dal, the Communist Party of India, the
Communist Party of India (Marxist), the Forward Bloc etc.]. I. K. Gujral was named as the
External Affairs Minister of this coalition government. Since the coalition included parties
that had divergent views, the UF, issued a policy statement that would act as a set of guiding
principles for this coalition government after it assumed office. The document entitled “ A
Common Approach to Major Policy Matters and A Minimum Programme ”, highlighted
priority areas of operation for the UF government. The document promised to strengthen
Indian federalism, support secular principles, improve infrastructural facilities, and increase
spending on social and humanitarian services such as health care, housing for the poor,
drinking water facilities in every village along with road and sanitation3. With regard to
foreign investment in India, a major departure from the earlier Rao government could be
observed in this ‘Policy Statement’. The document stated in clear terms that the UF
government would try to discourage foreign direct investment in low priority areas4.
However, the document emphasised upon the need of attracting foreign investment in other
areas5. The UF policy statement carefully avoided the contentious issue of economic
liberalization6. The statement however, noted the importance of pursuing macroeconomic
policies aimed at achieving higher growth. In foreign affairs, the ‘Policy Statement’ under-
scored the need to improve relations with India’s neighbours7. It also placed special emphasis
on good relations with the U. S., Russia, Japan and other countries. It stated, “While India has
good relations with all countries of the world, it has especially warm relations with the United
3See “United Front’s Policy Statement”, as reprinted in Mainstream (New Delhi, June15, 1996), pp. 13-19. 4 Ibid 5Ibid
6Ibid 7Ibid. pp. 17-18.
102
States and Russia as well as Japan… These warm relationships will be emphasised while
strengthening relations with all countries of the world”.8
One area where the UF government had set a new course was India’s efforts to
improve relations with her neighbours, including Pakistan. Good neighbourly relations in
South Asia were of crucial importance to U.S. foreign policy interests in the region
particularly because of its non-proliferation agenda at the time.9 The government of Deve
Gowda concentrated on improving relations with all of India’s neighbours. Shortly after
taking charge as India’s External Affairs Minister, I. K. Gujral said, “I am a strong believer in
regional co-operation… With the Indian economy being the largest in the region. I am willing
to have asymmetrical relationship… The central shift from my predecessors will be that I am
not am advocate of quid pro quo. I believe that larger nations must have larger hearts also”.10
While talking about his government’s foreign policy, the Prime Minister said, “Our priority is
to evolve better relations with our neighbours. We seek actively to promote cooperation both
bilaterally and within the framework of the SAARC”.11 These statements of the Foreign
Minister and the Prime Minister were not only political rhetoric, they were put to practice in
India’s efforts to improve relations with her neighbours.
Normalization of Relations in South Asia and the U. S. Response
The government of Deve Gowda worked hard to improve relations with China,
Bangladesh, and Pakistan. A landmark agreement was reached between India and China on
Confidence Building Measures (CBM) along their disputed borders. The agreement was
signed by the Chinese Foreign Minister Qian Quichen and I. K. Gujral in the presence of the
Chinese President Jiang Zemin and Indian Prime Minister Deve Gowda on November 29,
1996 in New Delhi.12 The Chinese President was on a historic tour of India, - the first ever
visit to India by a Chinese Head of the State. Apart from the Agreement on CBMs, three
other agreements were also signed between the two countries: (1) India-China Agreement on
cooperation for combating drug trafficking and other crimes; (2) Agreement concerning the
8 Ibid
9 See, n.1, pp.3-4.
10See I. K. Gujral’s interview with Raj Chengappar, in India Today (New Delhi), June 30, 1996,
p. 77
11Prime Minister Deve Gowda’s Independence Day Speech in New Delhi, August 15, 1996; visit, http://www.pmindia.nic.in/speech/content.asp. Accessed on October 3, 2002. 12 See, The Times of India (New Delhi), November 30, p.1.
103
maintenance of the Consulate General of India in Hong Kong; and (3) Agreement on maritme
transport. However, the Agreement on CBM was the most significant because it was a major
landmark in the de-escalation of hostilities in the South Asian region. Article 1 of the
Agreement provided that “ neither side shall use its military capability against the other
side”.13
Relations with Bangladesh were also strengthened. Prime Minister Deve Gowda sent
the West Bengal Chief Minister and veteran political leader, Jyoti Basu, to Bangladesh for
discussing the contentious Ganga river water issue. Basu’s visit and the initiative taken by
Deve Gowda paved the way for an agreement between the two countries on the sharing of the
Ganga river water. On December 12, 1996, the Indian Prime Minsister, and his Bangladeshi
counterpart, Sheikh Hasina signed “The Ganga Water Accord 1996”. The treaty, valid for
thirty years with a provision for review every five years or earlier, was also a landmark
agreement on long standing problem with India’s smaller neighbour.14
The Deve Gowda government also expressed its willingness to improve relations with
Pakistan. This was evident from Gujral’s attitude towards Pakistan. In his government’s
efforts to improve relations with Pakistan Gujral refused to respond to any adverse statements
emerging from Islamabad.15 This gentle approach of the Indian Foreign Minister helped to
reduce tension in the subcontinent.16 But the dismissal of the Benazir Bhutto regime in
November, 1996 put a spanner in India’s efforts.17 However, improvement in relations with
China, long time adversary, and Bangladesh, a not-so-friendly neighbour, pointed to the fact
that despite its short term (June 1996 to April 1997), the Deve Gowda government was able
to instill a sense of confidence regarding India’s goodwill among its neighbours.
India’s efforts in this area, and her attempt to de-escalate tension particularly in the
Sino-Indian border, and in South Asia, drew American attention and accolades. The Clinton
administration, interested as it was in peace and stability in South Asia, hailed these efforts of
the new Indian government. According to the U. S. Ambassador to India, Frank Wisner,
“Prime Minister Deve Gowda’s measured response has kept the door open to resumption of
dialogue at senior government levels. He has told me he offers sincerity and will meet
13.The Henry L. Stimson Centre, A Handbook of Confidence Building Measures for Regional Security (Washington, D. C, 1998), pp. 205-10. 14. See, The Telegraph (Calcutta), December 13, 1996, p.1. 15.Sumit Ganguly, “India in 1996 : A year of Upheaval”, in Asian Survey, Vol. XXXIV, No. 2 (Berkeley, University of California, February 1997), p. 131. 16. Ibid. 17.S. M. Naseem and Khalid Nadvi, The Post-Colonial State and Social Transformation in India and Pakistan (Karachi, Oxford University Press, 2002), pp. 51-52
104
sincerity with sincerity. I am cheered for I believe Pakistan brings the same spirit to the
table”.18 The Deve Gowda government tried sincerely to resume political dialogue with
Pakistan, and the U. S. viewed this as a positive step for bringing peace and stability in South
Asia.
The Deve Gowda government also gave special attention to the problems in Kashmir.
After assuming power, the UF government wanted to expedite the political process in
Kashmir. Prime Minister Deve Gowda visited Kashmir in June 1996 and talked to political
leaders and peoples’ organizations there. In his Independence Day Speech on August 15,
1996, he announced that elections to the state assembly would be held in September 1996.19
Deve Gowda also held talks with political leaders and some former militants in New Delhi
regarding restoration of peace and normalcy in the valley. All these efforts showed the
intention of his government to start a fresh dialogue over the future of Kashmir12
The U.S. welcomed these efforts to find a solution to the Kashmir militancy. Frank
Wisner told a gathering of defence officials in Pakistan : “an implicit dialogue has begun
between political leaders from Kashmir and the government in Delhi. Prime Minister Deve
Gowda has lent his support to dialogue last month… This new disposition to communicate
can serve to develop confidence between the parties, an essential element if a reconciliation
and peace are to emerge…”.20 The Deve Gowda government felt that efforts for peace in the
subcontinent required a political solution to the Kashmir problem. So the new Prime Minister
tried several strategies, including holding of the assembly elections, in Jammu and Kashmir,
which were held between September 30 and October 7,1996. Despite a call to boycott the
elections by the All Party Hurriyat Conference (An alliance of 26 political, social and
religious organisations, the All Party Hurriyat Conference was formed on March 9, 1993 as a
political front to further the cause of Kashmiri separatism. The amalgam has been
consistently promoted by Pakistan in the latter's quest to establish legitimacy over its claim
on the Indian State of Jammu and Kashmir) the turn out of voters was 55%, quite impressive
for a state tormented by violence.21 In spite of criticism within India and outside that the
Parliamentary (May 1996) and Assembly (Sept.-Oct. 1996) elections in Jammu and Kashmir
were not free and fair22, the U.S. defended the holding of such elections in Kashmir as a
18. United States Information Service, “Ambassador Wisner’s Speech at the Command and Staff College, Quetta, Pakistan” in Official Text (New Delhi, July 10,1996), p.3. 19. Prime Minister Deve Gowda’s Independence Day Speech in New Delhi, August 15, 1996, n. 11. 20.See n.18, p. 3 21.See Sumit Ganguly, n. 15, p. 133. 22.See in this connection, Ajith Pillai, “Vote Marshalled”, in Outlook (New Delhi) , June 5, 1996, pp. 10-15.
105
prelude to restoration of the political process in the troubled state.23 Some analysts were of
the opinion that the Deve Gowda government could be credited with initiating the peace
process in Kashmir after a long time. According to one observer, “it was not until 1996 that
the Indian government was able to repress the military successfully to hold both local and
parliamentary elections, and re-instal a civilian government in the state”.24
The United States also made it clear, despite provocations by the then Pakistani Prime
Minister Benazir Bhutto to internationalize the Kashmir issue25, that the Kashmir problem
must be solved through bilateral talks between India and Pakistan26. The U.S., as observed
earlier, seemed to endorse some of the policy decisions of the Deve Gowda government such
as improvement of relations with neighbours, and restoring normalcy and peace in Kashmir,
and the initiation of a political process in the state.
Diplomatic Tangle
A minor diplomatic tangle however, caused a few hiccups in India-U.S. relationship
during the Deve Gowda regime. The Indian government, in February1997, asked two Central
Intelligence Agency (CIA) officials in the U.S. Embassy in New Delhi to be withdrawn
following clandestine meetings with a senior Indian Information Branch (IB) official.27 The
U.S. retaliated within a fortnight when the U.S. administration asked two junior level officers
from the Research and Analysis wing (RAW) posted in the Indian consulate offices in San
Francisco and Chicago to leave the country.28 These incidents pushed an otherwise normal
India- U.S. relations some steps backward. The episode had, as one American official put it,
“a chilling effect”29 on Indo-U.S. intelligence cooperation. As one senior Indian diplomat
23.See Ambassador Wisner’s speech, n. 18, p.4. 24.Reeta Chowdhuri Tremblay, “Indo-U. S. Relations and the Kashmir Issue” in Ashok Kapur, Y.K.Malik, Harold A. Gould, and Arthur G. Rubinoff (eds.), India and the United States in a Changing World (New Delhi, Sage, 2002), p. 501 25. In her speech before the U. N. General Assembly on October 3, 1996, Benazir Bhutto asked the General Assembly to endorse a conference for peace and security in South Asia. Bhutto said that besides Pakistan and India, all five permanent members of the U. N. Security Council as well as Germany and Japan should participate in the said conference which would deal with, among other things, Kashmir and the Nuclear Arms issue. Source : Website of the US Department of state, http://www.usinfo.state.gov/regional /nea/sasia. Accessed on October 5,2002. 26. See Tremblay, n. 24, pp.525-529. This is an excellent account of the history of the Kashmir problem and the American views about problem since 1947. 27. For details, see, The Times of India (New Delhi), February 8, 1997, p.1. 28. See The New York Times, (New York), February 21, 1997, p.11. 29. See, India Today (New Delhi), March 15, 1997, p. 73.
106
remarked, “the ability to work together in areas like counter-terrorism through intelligence
sharing between the two countries is going to be impaired.”30 However, the U.S. Embassy in
New Delhi, in an official statement, tried to put relations back to normal track. The statement
sounded optimistic as it read, “We will put this behind us. We have to work out mutually
acceptable areas of cooperation”.31
Apart from this minor diplomatic row, India-U.S. relationship at the political level
during the Deve Gowda period was normal. The U.S., as observed earlier, welcomed India’s
initiatives to improve relations with neighbours, and to bring peace in Kashmir. The thrust
area of the Deve Gowda government’s foreign policy, mainly steered by the External Affairs
Minister I. K. Gujral, was improvement of relations with other South Asian countries. And in
this endeavour, the Deve Gowda government received support from the U.S. administration,
because American non-proliferation and human rights policies also required a peaceful and
politically stable South Asia. Since the interests of the two countries largely converged on the
peace process in South Asia, India-U.S. political relations during the Deve Gowda period did
not witness much trouble.
As observed in the earlier chapter, economic relations between the two countries got
closer during the Narasimha Rao period, due to Indian economic reforms. When the UF
government assumed office, there were doubts regarding the future of Indian economic
liberalization, because the Left parties within the UF, were not very favourable to economic
reforms.32 In this context, it would be important to analyse India-U.S. economic relations
during the Premiership of Deve Gowda.
Economic Relations
H. D. Deve Gowda came to power at a time when Indian economic liberalization
programmes were in full flow, when both India and the U. S. appeared optimistic that
economic liberalization would bring the two countries closer. After the Rao government that
initiated economic reforms, the Deve Gowda government was supposed to carry on the
second phase of economic reforms in India. The United Front’s Policy Statement was
30. Ibid 31. Ibid 32. The General Secretary of the Communist Party of India (CPI) said in an interview, “In the case of the U.F., formed by 13 parties of which four were Left parties, most parties represented either the regional bourgeoisie or the bourgeoisie in general. The economic Ministries were mostly in their hands and on many occasions, the Left differed with the Liberalisation policies”. See in this connection, interview with A.B. Bardhan, General Secretary of the CPI, Frontline, Vol. 15, No. 20 (Chennai, Sept. 26 – Oct. 09, 1998), pp. 63-64.
107
however silent on the issue of economic liberalization launched by the previous
government.33 The contentious issue of economic liberalization was not mentioned in the
policy document probably due to compulsions of domestic politics.34 The declaration in the
Policy Statement about discouraging foreign direct investment (FDI) in low priority areas
was also done to appease coalition partners, especially the left parties, in the government. The
policy document, however, stated the need of attracting foreign direct investment in other
areas and of attaining sustained macroeconomic growth.35 These contradictory approaches in
the Policy Statement raised doubts about the UF government’s commitment to economic
reforms, both within and outside the country.36
The UF Policy Statement was prepared in consultation with the coalition partners as a
set of guiding principles for the government. Since the coalition partners had a major say in
the formulation of the document, it was silent about economic liberalization in India. But
Prime Minister Deve Gowda took care to dispel doubts about his government’s commitment
to economic reforms. Soon after assuming charge, Deve Gowda said in clear terms that
Indian economic reforms would go on.37 This assurance was necessary to apprise the outside
world that India would not alter the path of economic liberalization. It was necessary, in fact,
for India’s large foreign trading partners and investors, like the U.S., to know that economic
reforms would continue in India, and the UF government was able to dispel all doubts about
its commitment to economic reforms within a short period of time. According to one Indian
journalist, “with the coalition government surer of its economic policy than expected, the U.
S. feels reassured that the trade relations will not go downhill”.38 In fact, trade relations with
the U.S. improved during the Deve Gowda period. The performance of the domestic
economy was also very satisfactory and India’s growing domestic sector gave a boost to her
external trade and commerce.13
The performance of the domestic economy can be measured in terms of the National
Income which rose from Rs. 936,548 crores (cr.) in 1995-96 to Rs. 1089,563 cr. in 1996-97
(in current prices)39. Per capita income also rose from Rs. 10,158 cr. in 1995-96 to Rs. 11,591
33. See “United Front’s Policy Statement”, n.3, pp.13-19. 34. Some partners in the coalition government, especially the left parties, were initially averse to economic reforms. See n. 32 35. “United Front’s Policy Statement”, n. 3, pp. 13-19. 36. See Sumit Ganguly, n. 15, p. 133. 37. See the Prime Minister’s interview with Javed M. Ansari in India Today (New Delhi) June 15, 1996, pp. 32-33 38. Raj Chengappa, “Cautions Optimism” in India Today , June 30, 1996, p. 78
39 See, Tata Services Ltd., Statistical outline of India : 2000-2001 (Mumbai, April, 2000), pp. 1-5.
108
cr. in 1996-97 (in current prices)40. The Agricultural Production Index (API) also rose
considerably during the Deve Gowda period. In 1995-96, the API (1981-82=100) was 160.7,
whereas in 1996-97, it was 175.741 Foodgrains production also increased during this time.
Total foodgrains production in 1995-96 was 180.4 million tones. It rose to a substantial 199.4
million tones in 1996-97.42 The Industrial Production Index (IPI) also registered upward
growth. The IPI (1980-81=100) was 122.3 in 1995-95, but it rose to 129.1 in 1996-97.43
Encouraged by a good performance of the domestic economy, overall Indian exports also
grew in this period. While Indian exports amounted to Rs.106,353 cr. in 1995-96, it
amounted to Rs. 118.817 cr. in 1996-97.44
Trade with the U. S.
The healthy growth of the domestic economy gave a boost to India’s trade relations
with other nations. As India’s largest trading partner, the U.S. was engaged in increased
trading activities with India since the early 1990s. As mentioned in the previous chapter,
among all the segments of India-U.S. relations, the economic segment performed reasonably
well after India’s economic liberalization in 1991. This strengthening of economic relations,
continued during the Deve Gowda period as well. Bilateral trade figures during the first UF
government bears testimony to this trend.
Table 3.1
India-U. S. Bilateral Trade: 1995-97 (In U. S. $ Billion)
1995 1996 1997
Exports 5736 6169 7321
% Growth +8.2 +7.5 +18.7
Imports 3296 3318 3616
% Growth +43.6 +0.7 +9.1
Balance (Export-Import) 2440 2851 3705
Source:Website of the Embassy of India, Washington, D.C, visit, C, http://www.indianembassy.org/indoustrade.asp .Accessed on October 6, 2002.
40. Ibid 41. Ibid 42. Ibid 43 Ibid 44. Ibid
109
According to Table 3.1, Indian exports to the U.S. grew at 7.5 per cent in1996, and at
18.7 per cent in 1997 compared to the growth of Indian exports at 8.2 per cent in 1995. This
indicates that there was a marginal fall in percentage growth of exports in 1996, compared to
1995, but a very significant rise in 1997. A noticeable concern in 1996 was the negligible
percentage growth (0.7) of Indian imports from the U.S. Although it improved in 1997 to 9.1
per cent, the gap between exports to the U.S. and imports from the U.S. persisted, indicating a
large trade balance in favour of India. This was not a very healthy trend in bilateral trade and
pointed towards an one-way trade. In this context, it may be worthwhile to look at India’s
trade balance with selected industrial countries over the years :
Table 3.2
India’s Trade Balance with Industrial Nations
(In Rs. Crores)
Year France Germany U.K. Japan Canada OPEC U. S. A.
1980-81 -133 -309 -336 -151 -270 -2,743 -676
1990-91 -538 -924 -766 -206 -278 -5,210 -448
1995-96 -313 -3,906 +311 -843 -253 -15,286 +5,550
1997-98 -142 -2,243 -1,126 -916 + 46 -21,869 +11,468
Source: Tata Services Ltd., Statistical Outline of India : 2000-2001 (Mumbai, April, 2000),
pp. 86-87
It can be observed from Table 3.2 that India shared a negative trade balance with all
the industrial nations up to 1990-91. This indicated that Indian exports to these countries was
less compared to India’s imports from these nations. Except for the U.S., this trend continued
after the cold war. India registered a positive trade balance with the U.S. after she opened her
economy in 1991. India also recorded a positive trade balance with the U. K. in 1995-96, and
Canada in 1996-98. As observed earlier, the increase in Indian exports to the U.S. after 1990-
91 helped India to register a positive trade balance with the U.S. But Indian imports from the
U.S. did not register the same rate of growth after the Cold War. As a consequence, a large
trade balance, favouring India, was created in relation to the U.S. after 1990-91. It should be
remembered, however, at this point that during the Deve Gowda period, Indian economic
reforms were at a very early stage. Therefore, it was not possible to plug all the loopholes in
Indian trade by this time. The consistent growth of Indian exports to the U.S. since 1991 was
110
however, a very welcome trend in India-U.S. bilateral trade. This trend was sustained during
the Deve Gowda period also, and Indian imports registered 9.1 percent growth during the
India-U.S. trade (Table 3.1). This indicted that the UF government was conscious about
achieving a strengthened trade relation with the U.S. during its short stay in office. Table 3.3
shows India-U.S. trade during the 11 month period of the UF government.
Table 3.3
Volume of India-U.S. Trade During Deve Gowda Period (In U.S. $ Million)
Year Month Exports Imports Balance 1996 June 445.90 228.90 217.00 July 564.00 259.40 304.60 August 583.80 250.40 333.40 September 590.10 273.40 316.70 October 637.90 387.40 250.50 November 478.90 390.00 88.90 December 426.40 240.20 186.20 1997 January 555.50 250.30 305.20 February 539.90 285.00 254.90 March 623.80 394.50 229.30 April 577.00 308.70 268.30
Source: Website of the Embassy of India, Washington, D.C., visit, D.C, http://www.indianembassy.org/indoustrade.asp. Accessed on October 6, 2002.
It can be observed from Table 3.3 that the export import gap was at its minimum in
November 1996. It was also not very high in December, 1996. Indian imports from the U.S.
also registered substantial growth in October 1996, November 1996, February 1997 and
March 1997. As a result, trade balance was reduced in these months compared to the
preceding months.
American Investment
Along with trade, investment constitutes an important area of bilateral economic
relations. Investment and trade are not competitive, but complimentary to each other in the
context of a liberalized economy. It is a recognized fact that international investment boosts
international trade.45 Since India’s economic liberalization in 1991, American business has
45. See in this context, A. Breton, Competitive Governments: An Economic Theory of Politics and Public Finance (New York, Cambridge University Press, 1995), pp. 56-57.
111
steadily invested in India. During 1996-97, U.S. investment constituted the bulk of the total
foreign investment in India. A major portion of the investment went into industries like
telecommunications, food processing, power and oil refinery, financial and non-financial
services, electrical equipment, electronics and computer software.46 Portfolio investment by
American financial and banking institutions also grew steadily in India since the opening of
the Indian economy. Table 3.3 charts the steady growth of American Portfolio Investment in
India :
Table 3.4 U. S. Portfolio Investment in India: 1993-97
(In $. Million)
1993 1994 1995 1996 1997
Total 827 2165 1191 3058 1747
U. S. 228 1382 587 1166 1144
Percent of total 27.6 63.8 49.3 38.1 65.5
Source: Website of the Embassy of India, Washington, D.C., visit, D.C, http://www.indianembassy.org/indoustrade.asp. Accessed on October 6, 2002.
It can be observed from Table 3.4 that Portfolio investment in India by U.S. financial
institutions has risen from U.S. $ 228 Million in 1993 to U.S. $ 1144 Million in 1997. In
1993, American investment amounted to only 27.6 percent of the total portfolio investment in
India. It increased to 65.5 percent of the total portfolio investment in India in 1997. The
growth in investment inflow was due to a major overhaul of India’s industrial policy in 1991.
In that year, the Rao government removed any prior approval of foreign equity up to 51
percent of the total for 35 industries. The Deve Gowda government added 13 more industries
to the list in 1996.47 The result of this bold step could be seen in the significant rise in
portfolio investment by the American financial institutions in 1997 (Table 3.3).
Apart from direct investment, collaboration by foreign companies is another form of
investment. During 1994 to 1997, foreign collaboration which involved foreign investment,
grew rapidly in India. In 1994, foreign collaborations involving foreign investment approved,
were to the tune of U.S. $ 4591 million. In 1995, such approved collaborations rose to U.S. $
9588 million. In 1996, they were to the tune of U.S. $ 9300 million. In 1997, approved
46. Prem P. Gandhi, “India-U.S. Economic Relations : A Perspective”, in Ashok Kapur, Y. K. Malik, Harold A. Gould and Arthur G. Rubinoff (eds.), n. 24, pp. 333.-339. Also visit the Indian Embassy website in Washington D. C., http://www.indianembassy.org/indoustrade.asp. Accessed on October 6, 2002. 47. Ibid
112
foreign collaborations involving foreign investment rose to U.S. $ 14795 million.48 Several
American Companies were involved in joint collaborations during this period. Noted among
them were Pepsi Cola, Coca Cola, H.J. Heinz, Kelloggs, General Motors, IBM, Gillette,
Philip Morris and others.49 The approved amount of foreign collaborations, Specially in 1996
and 1997 showed that the UF government was not averse to foreign direct investment in key
sectors of the economy, despite the negative views of some coalition partners in this regard.
In January 1997, the Deve Gowda Government took a bold step considering the
nature of the coalition government that included parties with opposing views on economic
liberalization. The limit of equity participation for a foreign company was raised to a
maximum of 74 percent from 51 percent approved by the previous Narashimha Rao
Government. For Non-Resident Indian (NRI) investors, this limit was raised to 100 percent.50
As a result, with the exception of some strategic ‘key’ industries such as defence, railways
and atomic energy, most of India’s industries were open to foreign equity participation.
Under the Deve Gowda government, India moved towards a system where most investment
proposals were approved very quickly and without obstructions.51 India’s Commerce and
Industry Minister, Murasoli Maran informed the Lok Sabha that “from August 1991 to
December 1996, a total number of 3583 proposals envisaging a foreign investment of Rs.
889.6 billion have been cleared by the Foreign Investment Promotion Board (FIPB)”.52 The
sharp increase in approved foreign collaborations in 1996- 97 may be attributed to this policy
decision of the Deve Gowda government.
However total foreign direct investment (FDI) in India was small in relation to India’s
size and potential. A big gap also existed between approvals and the actual flow of FDI into
India. Since these were early days of economic reforms in India, the foreign investors
appeared to be not too sure about the actual investment climate in India. This was also true of
the Narasimha Rao period, when the Indian economy was opened for the first time. During
the Deve Gowda regime too, approvals outnumbered actual FDI in India. Table 3.5 would
illustrate this trend :
48. For all these statistics see, n. 39, pp. 162-165. 49. See, Prem P. Gandhi, n. 46, pp. 343-346. 50. Ministry of Commerce and Industry, Government of India, Annual Report : 1996-97 (New Delhi, April, 1997), pp. 20-22. 51. This was acknowledged by the U. S. Department of State. See in this context, U. S. Department of State, India 1998: Country Report on Economic Policy and Trade Practices (Washington D. C. : U. S. Government
Printing Office, 1998), pp. 387-389. 52. The Lok Sabha Secretariat, Lok Sabha Debates, 11th Series, Vol. IX, No.7 (New Delhi, February 28, 1997), p. 149.
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Table 3.5
Foreign Direct Investment: Approvals and actual Flows14
Year Approvals Actual Flows Actual Flows: US $ million US $ million Per cent of
Approvals 1995 11,245 2,100 18.7
1996 11,142 2,383 21.4
1997 15,572 3,330 21.1
Source : Chronicle Year Book 2002, (New Delhi : Chronicle Publications, 2002), p. 361
As Table 3.5 above shows, actual flows of FDI marginally increased during the UF
regime, but they remained far below the approved amounts. Substantial macro economic
growth was partially affected as the result of this lack of adequate inflows of FDI during the
first UF government. The real GDP growth rate dropped from 7.1 percent in 1995, to 6.8
percent in 1996, and further lower to 7.0 percent in 1997.53
However, the initial confusion over the commitment of the UF government about
economic reforms disappeared as the government took steps to raise equity participation in
case of FDI and added more industries to the list of automatic approvals for FDI. Several
industries including electricity generation and transmission, mining services, construction and
maintenance of roads, bridges, ports, harbours and runways were open to 74 percent equity
participation in case of foreign investors. The Prime Minister also sent positive signals to
foreign investors about the inevitability of the economic reform process. In an interview with
a leading American news magazine, Deve Gowda said, “economic liberalization has become
a fait accompli. All political parties have accepted the policy… Reversing economic
liberalization is ruled out. I would like to make this very clear.”54 He reiterated this position
when he led a high power team that included Finance, Industry and External Affairs
Ministers, a number of senior bureaucrats, and leading businessmen to the Annual Meeting of
the World Economic Forum in Davos, Switzerland in February 1997. In Davos, he met
several Heads of Government, including a few from industrial nations (Japan,Canada, Russia)
and discussed trade and investment opportunities with them. Deve Gowda also tried to dispel
fears about his government’s commitment to economic reforms. In his address to the World
Economic Forum, Deve Gowda said, “We need to accelerate the reform process… there is no
53. Ibid 54. Prime Minister Deve Gowda’s Interview with Lally Weymouth, in News Week (New York : December 16, 1996), p. 41.
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question of delaying by bureaucracy… Fear should be removed from your minds”.55 The
actions of his government in respect of trade and investment policies, FDIs and equity
participation by foreign investors in India bore out the commitment of the Prime Minister to
economic reforms.
U. S. Aid
Another area where relations between the two countries had sometimes floundered
and at other times prospered, was U.S. aid to India. The United States remained the single
largest Aid giver to India during the period under study. In 1995, total U.S. aid to India was
$190 million whereas aid from other countries was $ 2.7 billion. In 1996, American aid to
India was $ 139 million as against $ 2.5 billion aid from other countries. In 1997, U.S. aid to
India amounted to $ 136.3 million.56 India’s total external debt stood at $ 90.8 billion in
March 1997. Debt service payments of $ 14.1 billion in 1996-97 dropped to around $ 12.6
billion in 1997-98.57 Roughly two-thirds of India’s foreign currency debt was composed of
multilateral and bilateral debt, much of it on highly concessional terms. The addition of new
debt slowed substantially during the fiscal year 1996-97, as the Deve Gowda government
maintained a tight check on foreign commercial borrowings and defence-oriented debt and
encouraged foreign equity investment rather than debt financing. As a consequence of this
policy, the ratio of total external debt to GDP fell from 39.8 percent in the fiscal year 1992-93
to 25.4 present in 1996-97.58
Differences Over the IPR
However, there were contentious issues between the two countries regarding
financial/legal matters, the most important being differences over Intellectual Property Rights
(IPR). The U.S. alleged that India’s patent protection was weak and this had adversely
affected American pharmaceutical and chemical firms.59 The U.S. government complained
that India’s patent act prohibited product patents for any invention intended for use or capable
of being used as a food, medicine or drug or relating to substances prepared or produced by
chemical processes. Consequently, the U.S. alleged that many American invented drugs
___________________________
55. Prime Minister Deve Gowda’s Address to the world Economic Forum in Davos, Switzerland as reprinted in India Today (New Delhi), February 28, 1997, p.25. 56. See, U.S. Department of State, n.51. pp. 390-95. 57. Ibid 58. Ibid 59. Ibid.
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were widely reproduced. This was viewed as ‘piracy’, and it resulted in an estimated annual
loss of $ 450 million to the U.S. pharmaceutical industry.60
The U.S. believed that as a signatory to the Uruguay Round of the GATT 61 which
included provisions on Trade-Related Intellectual Property Rights (TRIPS), India must
introduce a comprehensive system of product patents not later than 2005. But according to
the U.S., India moved very slowly towards enacting laws on product patents.62 In 1994, the
Rao government proclaimed a temporary ordinance for patent protection in accordance with
the WTO-TRIPS agreement.63 The ordinance however lapsed and the Indian Parliament did
not produce any further law. This irked the U. S. In July 1996, the U. S. initiated WTO
dispute settlement procedures over India’s failure to implement its TRIPS obligation. Later,
in late 1997, the second UF government of I. K. Gujral pledged to introduce a bill in the
Indian Parliament on this patent protection issue in accordance with the TRIPS obligations.64
During the Deve Gowda period, therefore, the IPR issue created a sense of dissatisfaction in
the U.S. regarding India’s stance on the issue.
On the whole, it may be said that India-U.S. economic relations during the Deve
Gowda period was quite satisfactory. The UF government, despite initial confusions,
successfully carried forward the reform process initiated by the previous Rao government.
The U.S. was pleased with the UF government’s decision to add more industries to the list of
automatic approvals for FDI, and raising the level of equity participation by foreign
companies up to 74 percent. The Deputy U.S. Trade Representative, Jeffrey Lang, who
visited New Delhi in October 1996, said that the U.S. considered India as a growing market
and as an important business partner.65 In his discussions with Indian leaders, Lang
addressed issues such as India’s balance of 15payments exemption, and opening up of the
consumer goods market. He praised India’s efforts at liberalizations of the economy, and
argued in favour of financial sector liberalization including the insurance industry.66 It can be
noted from Lang’s observations that the U.S. was placing more emphasis on expanding
60. Ibid 61. The General Agreement on Tariff and Trade (GATT) was originally created by the Bretton Woods Conference, after World War II. The GATT's main purpose was to reduce barriers to international trade. This was achieved through the reduction of tariff barriers, quantitative restrictions and subsidies on trade through a series of different agreements. The GATT was an agreement, not an organization. The functions of the GATT have been replaced by the World Trade Organization (WTO) which was established on January 1, 1995. For more on the Uruguay Round of GATT, and WTO, see, Petros C. Mavroidis, The General Agreement on Tariffs and Trade: A Commentary (New York, Oxford University Press, 2005), pp. 10-25. 62. U.S. Department of State, n. 51, pp. 390-95. 63. See, “Ordinance for Patent Production”, in The Economic Times (Calcutta), December 20, 1994, p. 1. 64. U.S. Department of State, n. 51, pp. 390-396 65. See, U.S. Information Service, “Deputy USTR Holds Trade Talks with India”, Official Text (Calcutta, October 1996), p. 2. 66. Ibid
116
economic relations with India. By acknowledging India as a ‘business partner’, the U.S. was
looking for strong economic relations with India.
Security Relations
While the economy provided the base for a strengthened relationship, nuclear and
security issues continued to bother India-U. S. relations during the Deve Gowda period.
Differences over the Comprehensive Test Ban Treaty (CTBT), that first cropped up during
the Rao premiership, became quite severe during the Deve Gowda regime. At the same time,
the nuclear cooperation between China and Pakistan which was fuelling an arms race in
South Asia, and the apparent failure or unwillingness of the U.S. to control or stop this
cooperation, also generated mistrust in India-U.S. bilateral relations. But the bone of
contention was definitely the CTBT, as it adversely affected bilateral relations.16
Differences Over the CTBT
By the time Deve Gowda assumed office, relations between India and the U. S. had
already become acrimonious over the CTBT issue. As discussed in the previous chapter, the
government of P. V. Narasimha Rao had taken an unyielding stance at the CTBT negotiations
in Geneva that started in 1994. The Rao government had made it clear at the Conference on
Disarmament (CD) in Geneva that discussed the CTBT that India would not sign the CTBT
as she thought that the treaty was discriminatory and against India’s national interests.67 This
has been the general consensus in India, and the Deve Gowda government too, pressed
forward with the same argument. On August 20, 1996, India formally vetoed the draft
text of the CTBT in Geneva, which had been prepared by Ambassador Jaap Ramaker of
the Netherlands and his team in the ad hoc committee. India opposed it on the grounds that it
did not address India’s security concerns. According to Ms. Arundhati Ghose, India’s
Ambassador to the CD, “the text did not serve the purpose of promoting the realization of the
universal disarmament goals. Continuing nuclear weapons development and proliferation in
our region which raise national security concerns for us, were in no way addressed by the
text”.68
67. See in this context, Pranab Mukherjee, “Should India Sign the CTBT?”, in World Focus (New Delhi), Vol. 19, Nos. 6-7, June-July, 1998, pp. 21-22. Mukherjee was Foreign Minister in the Rao government. 68. See, Website of the Indian Embassy in Washington D.C., ‘Statement by Ms. Arundhati Ghose at the Disarmament Conference”, August 21,1996, visit, http://www.indianembassy.org/speech-cd.asp. Accessed on October 10, 2002
117
Despite India’s opposition, the CTBT draft was eventually brought before the United
Nations General Assembly (UNGA), and on September 10, 1996 the UNGA passed the treaty
with 158 nations voting in favour of it.69 India, Bhutan and Libya voted against the treaty
while five other countries abstained from voting. The Indian External Affairs Minister, I. K.
Gujral, apprising Lok Sabha about the voting in the UNGA, said, “the vote was preceded by
an active debate which focused on the disarmament perspective in which CTBT should have
been placed… There was a widespread expectation of concern over the procedure adopted
and apprehension that it may erode the creditability of the conference on Disarmament. A
large number of countries expressed dissatisfaction with the entry into force provisions as
being unprecedented and an unwelcome departure from customary international law”.70
Gujral also told the House that his government would refrain from signing the CTBT unless
discriminatory provisions were eliminated from the treaty.71 17
The CTBT remained an irritant in India-U.S. relations from the very beginning. The
Clinton administration was keen to have the CTBT accepted universally. India, on the other
hand, had consistenly opposed the treaty saying that it was discriminatory. In fact, the two
countries nurtured opposite views (as discussed in detail in chapter 2 of this dissertation) on
nuclear and security issues. India opposed multilateral treaties like the NPT and the CTBT on
the ground that these treaties were against the interests of the nuclear ‘have-nots’ like India.
The U. S. on the other hand, viewed these treaties as essential for the achievement of a non-
proliferation regime. At the CD in Geneva, India particularly objected to the ‘entry into force’
clause in Art. XIV of the Draft of the CTBT because she felt that it would put unwanted
obligations on India.72 In almost all the CTBT Plenary meetings in Geneva, India objected to
the draft resolution of the treaty.73 Though the CD negotiations started in 1994, when P.V.
Narasimha Rao was the Prime Minister of India, it was during the Deve Gowda period that
the CTBT became a major contentious issue in India-U.S. relations, because the draft treaty
was brought to the UNGA where India opposed it, and when it was opened for signature, she
refused to sign it. According to Prof. Sumit Ganguly of Indiana University, who is an expert
on India-U.S. relations, the CTBT damaged India’s relations with the U. S. and lowered
India’s standing in multilateral fora. He also argued that India’s efforts to block the CTBT at
69. See The Times of India, September 11, 1996, p.1. 70. The Lok Sabha Secretariat, Lok Sabha Debates, 10th Series, Vol. XXII, No. 16 (New Delhi, September, 11, 1996), p. 156. 71. Ibid 72. The Lok Sabha Secretariat, Lok Sabha Debates, 10th Series, Vol. XXI, No.5 (New Delhi, August 26, 1996), p. 121. 73. Indian representative at the CD, Ms. Arundhati Ghose raised objections to the draft resolutions in different plenary meetings. Ambassador Ghose told this researcher during an interview in New Delhi on February 10, 2007 that India decided to oppose the CTBT in every international forum.
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the UNGA cost her a non-permanent seat in the Security Council for which she vigorously
campaigned in the Fall of 1996.74 For the U.S., the CTBT was a major foreign policy issue.
That the U.S. gave top priority to the CTBT was proved again when President Clinton signed
the treaty on September 24, 1996, - the first world leader to do so.75
The other issue on which India’s differences with the U.S. became apparent was
China, who conducted its 45th nuclear test on July29, 1996 when the CD was in progress in
Geneva. India condemned the test and said that it only strengthened the Indian position that a
partial disarmament effort like the CTBT would not lead to a complete elimination of the
weapons of mass destruction. India’s External Affairs Minister Gujral told the Indian
Parliament, “on one part, we are dismayed by the nuclear tests carried out by nuclear-
weapon-states, particularly as CTBT negotiations are in progress… These tests have
contributed to the nuclear arms race and shown that partial tests do not lead to nuclear
disarmament.”76 China’s nuclear test also had a bearing on South Asia and particularly India,
because according to American intelligence sources, China had sold M-11 missiles to
Pakistan, and possibly ring magnets, used for enriching uranium for nuclear weapons.77 This
had been revealed in June, 1996. Such revelations only created doubts about the success of a
non-proliferation regime in South Asia.18
The U.S. however, was not willing to accept India’s position on the CTBT. The U.S.
government suspected that India was opposing the non-proliferation regime because she
wanted to keep the nuclear weapons option open. Stephen J. Ledogar, the U. S. envoy to the
CD in Geneva, said that the ‘real reason’ for India’s opposition to the treaty was that the
government in New Delhi wanted to maintain the nuclear weapons options.78 Ambassador
Ledogar’s charge against India showed that the U.S. administration took serious exception to
India’s efforts at blocking the CTBT. Bilateral relations suffered as a consequence. Gujral
was very close to reality when he told the Indian Parliament that on CTBT India and the U.S.
“agreed to disagree”.79 These official statements revealed that India-U. S. bilateral relations
were put under strain during the Deve Gowda period due to differences of opinions of the
74. Sumit Ganguly, n.15, p. 132. 75. The CTBT, however, was not ratified by the U. S. Senate. The Senate rejected the treaty in October 1999. See in this connection, U. S. Information Service, Official Text (Calcutta, October 1999), pp. 1-7. 76. The Lok Sabha Secretariat, Lok Sabha Debates, 10th Series, Vol. XX, No. 9 (New Delhi, July 31, 1996), p. 252. Also see, The Hindu (New Delhi), August 1, 1996, p. 1. 77. See ‘China Supplied Nuclear Materials to Pakistan’ in The Hindu (New Delhi), June 17, 1996, p. 1. Also, Sumit Ganguly, n. 15, p. 132. 78. See U.S. Department of State, PDQ Document No. 39 (Arms Control - 1996), visit, http://www.usinfo.state.gor/reional/nea/sasia. Accessed on October 12, 2002. 79. See The Times of India (New Delhi), August 3, 1996, p. 1.
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two countries over the CTBT.
Defence Co-operation
Despite differences over the CTBT, India and the U. S. continued their co-operation
in defence-related areas. As outlined in chapter 2, the defence co-operation between the two
countries started during the Narasimha Rao government when the two countries signed the
Agreed Minute on Defence Relations (AMDR). In May-June 1995, Indian and American
military personnel had conducted joint exercises on land and at sea. A Joint Technical Group
(JTG) which was one of the senior bilateral forums between the Indian Ministry of Defence
and the U.S. Department of Defence was formed in January 1995, in accordance with the
AMDR. The JTG worked under the guidance provided by the India-U.S. Defence Policy
Group (DPG), an apex body providing direction on defence cooperation between the two
countries. The DPG continued to function effectively during the Deve Gowda premiership.
The second annual meeting of the DPG was held in the last week of October, 1996 in
Washington, D.C.80 At this meeting, the Indian Side was led by the Defence Secretary T. K.
Banerji while the U.S. side was led by Franklin D. Kramer, Assistant Secretary of Defence
for International Security Affairs in the Clinton government. Detailed discussions on
security perceptions in the Asia-19Pacific region were held between the two delegations at
the DPG meeting.81 In the sphere of Technology cooperation between India and the U.S.,
three ‘Mission Areas’ were identified by the DPG. These are : (1) Aircraft technology, (2)
Third generation anti-tank systems, and (3) Instrumentation of test sites and manpower
training. An India-U.S. Technology Advisory Group (TAG) was formed to monitor the
technology transfer between the two countries.82
The JTG also met from September 22 to October 01, 1996 in Bangalore and New
Delhi.83 In these meetings, the JTG, under the guidance of the DPG, deliberated upon the
three ‘Mission Areas’ of technology cooperation. The JTG revealed that while there had been
limited cooperation in the second mission area, satisfactory progress had been made in the
first and third mission areas.84 The JTG also monitored progress made during the last one
year in areas of defence cooperation between India and the U.S. A major joint venture
80. See in this context, Embassy of India, Washington D.C, India- U. S. Defence Co-operation: A Policy Statement, visit , http://www.indianembassy.org/indodefense.asp. Accessed on October 14, 2002. 81. Ibid 82. Ibid 83. Ibid 84. Ibid
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programme for the development of the Engineering Test Station (ETS) was started by
Lockheed Martin Control System of New York and the Aeronautical Development
Establishment, Bangalore in June 1996. The ETS was developed to test the Onboard Digital
Flight Computer for the light combat aircraft. These systems were delivered to Lockheed
Martin and would be jointly tested in the U. S.85 The JTG meetings in September-October
1996, also monitored the progress of work of the ETS.20
India-U.S. Defence co-operation also included Executive Steering Group (ESG)
meetings held annually between Indian army, navy, and air force officials and their
counterparts in the U.S. The ESG meetings of the army and navy were held in late 1976.86
These meetings took some important decisions with regard to defence co-operation between
India and the U.S. The ESG meetings decided in favour of : (1) progressive build-up in the
scope and content of joint naval exercises, and the enhancement of Co-operation in training
and other joint ventures; (2) Participation in joint exercises by the Indian army and the U. S.
army; and (3) extending invitations by the U.S. and Indian forces to their respective
counterparts to visit defence institutions in each other country to attend courses and training
programmes. The ESG meetings highlighted the idea that such defence cooperations would
enhance trust and confidence among the forces of the two countries.87
In the changed international political and strategic milieu after the cold war, defence
cooperation between India and the U.S. proved beneficial for both the countries. The U.S.
showed greater willingness, during 1995-97, in favour of releasing American equipment for
military sales (FMS).88 The FMS provided on opportunity for India to obtain leading edge
technologies in specific areas. The U.S. on the other hand, could gain vital geo-strategic
knowledge required for counter-terrorist activities through defence cooperation with India.
Also, the U.S. forces could gain access to important geo-strategic locations in South and
South-east Asia via joint military exercises. Both India and the U.S. possess a vast amount of
resources in their military and civilian sectors. These resources call for leveraging through
cost sharing and logistic support programmes. These could be achieved through defence
cooperation. Therefore, both India and the U.S. started to engage each other in defence after
the cold war. This cooperation continued during the Deve Gowda premiership as well.
85. Ibid 86. Ibid 87. Ibid 88. Ibid
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India-U.S. Relation in the Deve Gowda Period : An Assessment21
H. D. Deve Gowda was Prime Minister of India for little less than a year. Therefore,
he did not have time to make any significant change in the course of India-U.S. bilateral
relations, which had in fact become a little tense over nuclear, security and human rights
issues since the Rao premiership. During the Deve Gowda period too, differences over
nuclear and security issues continued, although there was no renewed misunderstanding over
human rights issues. The Deve Gowda administration favoured continuity in the major trends
in Indo-U.S. relations that had set in after the cold war. Bilateral economic relations
continued to prosper, while security relations remained contentious. A leading Indian news
journal summarised the performance of the Deve Gowda government when it wrote that
“In its short life, the United Front government scored impressive victories on three fronts: the
economy, ties with neighbouring countries, and Kashmir.89 These three areas of
‘achievement’ had a rebound effect on India- U.S. relations. The satisfactory performance of
the domestic economy attracted foreign investments to India. External trade, among other
phenomena, also helped the economy to perform well. As a leading trade partner, the U.S.
contributed impressively to India’s external trade. India’s relations with her neighbours,
especially, Pakistan and China, were always of interest to the U.S., one reason being the
nuclear factor. Improvement of India’s relations with China, and de-escalation of tension with
Pakistan during the Deve Gowda regime were major achievements of the UF Government.
The peace process initiated by this government in Kashmir was also a laudable effort. As
mentioned earlier in this chapter, the U.S. welcomed these developments in South Asia.
According to some analysts, the U.S. viewed her relations with India from four
perspectives: (i) a nation on the very periphery of the national interest; (ii) a rogue nuclear
state; (iii) a source for expanded trade, and (iv) a potential partner for international
cooperative effort.90 The third and the fourth views noted above, emerged after the cold war.
It may be mentioned here that the Deve Gowda administration also helped to fulfill the third
and fourth perspectives of India-U.S. bilateral relations, as mentioned above. America’s
economic relations with India continued to expand, and the economic and defence
cooperation between the two countries suggested that the U. S. was more willing to treat
India as a partner in various cooperative efforts. The CTBT differences notwithstanding, the
89. See, India Today (New Delhi), April 30, 1997, p. 28. 90. See in this context, David J Louscher, Alethia H. Cook and Victoria D. Berto, ‘Military Relations Between the U. S. and India: Assesment and Prospects’, in Ashok Kapur, et al (eds.), n. 24, p. 303.
122
Clinton administration, in its second term (which coincided with the Deve Gowda period),
decided to cooperate further with India in the economic and defence sectors.91 All these
showed that to the Americans the CTBT was not a spoiler that could paralyze relations with
India. India also believed that despite differences, bilateral relations with the U.S. would
continue to grow. The Indian External Affairs Minister I.K. Gujral told the Indian Parliament,
“I met Secretary of State Warren Christopher. I must say that it was a pleasant and friendly
meeting. While discussing a broad range of issues, we also discussed the CTBT… The
Secretary of State and myself took a broad view of India-U.S. relations which are positive
and serve the interests of both the countries. In this positive spirit both of us agreed that
differences on a single issue should not impact on what is otherwise a fruitful and mutually
advantageous bilateral relationship”.92 This statement clearly revealed that both India and the
U.S. were viewing their relationship in a broader perspective during the second term of the
Clinton presidency. The changing attitude was more visible during 1996-97, when neither the
U.S. nor India was willing to magnify a single issue of difference (CTBT) and endanger the
whole relationship.
Domestic political calculations however, did not favour Deve Gowda and his
government. The Congress (I) on whose support the minority UF government survived,
warned that it would withdraw support if the UF did not change its Prime Minister. Under
compulsion, the UF accepted the Congress (I) demand. The UF chose I.K. Gujral to head a
new government. Gujral took charge as the Prime Minister of a second UF government in
New Delhi on April 21, 1997. The next chapter will analyse India-U.S. relations in its various
aspects under I.K.Gujral.22
91. Ibid 92. The Lok Sabha Secretariat, Lok Sabha Debates, 10th Series, Vol. XX, No.9 (New Delhi, August 2, 1996), p. 310.