• Bloomberg


Barack Obama will do something in India on Monday that an American president almost never does in public: He’ll sit in one place, in a foreign country, for hours.

Obama will be the official “chief guest” at India’s Republic Day parade. The first U.S. president invited to attend, his presence will signal an increasingly close relationship between partners with a sometimes prickly history.

Though presidents avoid lingering in public for security and schedule reasons, Obama will remain on a reviewing stand alongside his host, Prime Minister Narendra Modi, in the view of thousands of spectators and a television audience of millions.

The unusual appearance, also making him the only two-time U.S. presidential visitor to India, caps a remarkable turnaround in bilateral ties since the December 2013 arrest of an Indian diplomat in New York.

“As we look forward at the kind of global priorities where we want to make progress the next two years, we literally cannot achieve our objectives without cooperation from India,” Ben Rhodes, Obama’s deputy national security adviser, told reporters earlier in the week.

For Obama, who’s scheduled to begin a three-day visit to India on Sunday, strong ties with New Delhi offer potential payoffs on multiple issues. Modi, an economic reformer elected in a May 2014 landslide, wants American cash, technology and expertise along with a potential hedge against China.

Obama’s arrival comes as the global spotlight is increasingly turned to this nation of 1.2 billion people. India next year will become the world’s fastest-growing major economy as China slows, according to the International Monetary Fund’s latest projections.

“The universe is conspiring to bring us ever closer,” said Baijayant Panda, an opposition member of parliament.

Pulling apart

While the universe may be pushing the Washington and New Delhi together, other forces are pulling them apart. U.S. support for India’s traditional enemy, Pakistan, is a chronic irritant. And for all the warmth between Obama and Modi, the Indian leader is no one’s junior partner. He seeks favorable relations with each of Asia’s powers while committing to none of them.

And U.S.-Indian economic ties, despite great potential, remain stunted. Total U.S. trade with China, which has approximately the same population as India, tops $560 billion, roughly nine times the size of Indo-U.S. commerce.

The two leaders will discuss defense cooperation, climate change, trade, counterterrorism and regional threats. They’ve also yet to resolve long-standing differences over the implementation of a landmark 2005 civil nuclear agreement.

Future power

For the U.S., any concrete results the visit produces may be less important than the long-term benefits of aligning with a country poised to be a future power. A thriving Asian democracy would be a counterpoint to the Chinese development model in a region where Washington and Beijing are competing for influence.

While in Delhi, Obama will give a speech, attend a chief executives’ summit, and join Modi for a question-and-answer session on state-run radio. The president and first lady Michelle Obama will also tour the Taj Mahal in Agra, the white marble mausoleum that is India’s best-known tourist attraction.

Obama’s high profile in India reflects the transformation of the two countries’ relationship from the barely veiled antagonism of the Cold War, when India championed the nonaligned movement and relied upon the Soviet Union for arms. Today, the U.S. is India’s top military supplier.

A warming that began in the early 1990s as India abandoned central planning subsequently cooled, roiled in part by the 2013 arrest in New York of Devyani Khobragade, an Indian diplomat accused of lying on a visa application. Relations have gathered renewed force since Modi took office in May.

“He sees the U.S. as a country that can be uniquely helpful in India’s domestic transformation,” said Alyssa Ayres, a former U.S. State Department official. “He’s taking domestic economic policy and developing his foreign policy on that basis.”

Welcoming Xi

Though Modi shares U.S. wariness over the potential implications of China’s rise, warmer ties between Washington and New Delhi don’t amount to an anti-Beijing alliance. During a visit to Japan in September, at a time of regional unease about Chinese maritime assertiveness, Modi publicly derided “18th century-style expansionist attitudes.”

Yet just two weeks later, he welcomed Chinese President Xi Jinping to New Delhi and sought Chinese investment alongside cash infusions from the U.S., Japan and elsewhere. In recent years, China overtook the U.S. as India’s top trading partner.

Russian President Vladimir Putin was also received warmly when he visited New Delhi last month. And India has balked at endorsing the U.S.-led sanctions on Russia following its military intervention in Ukraine.

“Modi’s a pragmatist,” said Samir Saran, a former vice president of Reliance Industries. “He does not find it contradictory to woo China for investment while being close to the U.S.”

Surprise invitation

Obama will reach India just four months after Modi called at the White House. The Indian leader surprised administration officials with his invitation for Obama to attend the Republic Day ceremony so soon after his U.S. trip.

Monday’s parade, commemorating the adoption in 1950 of India’s constitution, draws thousands of families to the center of New Delhi. A riot of color and pomp, the spectacle features military hardware such as tanks, helicopters and missiles, along with red-jacketed horsemen and even a detachment of border guards astride camels.

The sudden parade invitation was only the latest unexpected move by Modi, who became prime minister in May 2014 after nearly a decade of pariah status in the eyes of the U.S. government. In 2005, the U.S. denied him a visa for his alleged failure to respond adequately to religious violence in 2002 that killed almost 1,000 Muslims in his home state of Gujarat, which he governed as chief minister. Modi denied allegations that he had failed to protect local Muslims, and a subsequent Indian government investigation later found no evidence to support the charges.

Once in power, he put aside any personal pique to focus on how the U.S. could help transform the Indian economy.

Falling behind

Under the previous coalition government, growth fell below 5 percent for seven of the eight quarters before the 2014 election from an average of almost 10 percent in 2006-07. That left India, Asia’s third-largest economy, falling further behind China. In 2000, the Chinese economy measured in dollar terms was about 2.5 times the size of India’s; today, China is five times India’s size.

Modi campaigned on a promise to put the private sector at the center of an economic revival and to modernize the bloated state.

He faces a gargantuan task. Almost seven decades after independence, India isn’t even a genuine single market. Moving goods from Gujarat in the west to Assam in the east requires inspections and toll payments at multiple state borders. Indian trucks headed to market idle for 60 percent of the time they are in transit, according to the World Bank. Logistics costs are up to three times global standards.

Modi’s nation ranks 142nd on the World Bank’s “ease-of-doing-business” index, lodged between Uzbekistan and the Israeli-occupied Palestinian territories. India’s standing among investors plummeted when the previous government surprised several foreign companies with retroactive tax bills. IBM Corp. has gone to court to contest an $865 million levy it received in 2013. Domestic companies, too, complain of capricious official actions.

“There’s a multiplicity of ministries and they’re rarely on board with one another,” said Gautam Thapar, chairman of privately held Avantha Group. “The Ministry of Industry will say ‘this is fine’ and then the Ministry of Environment can come in and say, ‘no, this is incorrect.’ “

To attract investment, Modi has eased limits on foreign holdings in defense and railways and plans additional changes. Foreign direct investment of $16.2 billion in the six months ended in September was up 11 percent compared with the same period a year earlier, according to the Finance Ministry.

Modi has wooed U.S. investors since convincing Ford Motor Co. to invest $1 billion in an auto plant outside of Ahmedabad when he was chief minister of Gujarat. During his U.S. visit four months ago, he met the CEOs of companies including Pepsico Inc., Google Inc., General Electric Co. and Boeing Co.

“For the prime minister, if India is to get out of being a developing country, there are things the Americans can help him with that no one else can,” said Indrani Bagchi, a foreign affairs commentator with the Times of India.