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A. The U.S.-India Nuclear Deal
B. India’s Democracy
C. India’s Economy
D. India’s Grand Strategy
Maps and Tables

The nuclear deal agreed to in principle by Prime Minister Manmohan Singh and President Bush in March of 2006 marked a watershed in U.S.-India relations, with ramifications for almost every significant area of U.S. foreign policy. Under the terms of the deal, India would receive dual-use technology from the United States (which can be used to build nuclear bombs) and be able to buy nuclear fuel and technology from the world market for its civilian energy program in exchange for stricter inspections of its nuclear facilities, separation of its civilian and military nuclear programs, agreements to secure its nuclear technology from theft or sale, and allowing U.S. companies to build nuclear reactors in India.1 This agreement is revolutionary for two key reasons.

First, it typifies the gigantic about-face that U.S.-India relations have undergone over the past few years. After choosing to side with the Soviets or the Non-Aligned Movement during much of the Cold War, India found itself facing further American condemnation over its nuclear testing and the violence in Kashmir. The rapid warming of relations between the two sides under the Bush administration can be attributed in large part to the emergence of two common threats: Islamist extremism and rising China. India's position as the world's largest democracy is a further motivating factor and/or significant rhetorical window dressing for the budding alliance depending on who you ask. Second, the nuclear deal legitimizes India's nuclear arsenal, which was built outside the bounds of the NPT. It therefore creates a potential path for responsible powers to gain access to nuclear weapons while simultaneously potentially undermining the nonproliferation regime that the U.S. has worked so hard to maintain.

The U.S. nuclear deal still must be approved by the U.S. Congress and the Nuclear Supplies Group as well as the Indian government, all of which are far from guaranteed. In fact, in an unexpected turn the Indian government seems the most likely to nix the deal due to opposition from communists within Singh's governing coalition.2 However, the agreement itself already has serious ramifications for the U.S. relations with China, Iran, and other powers in the region, as well as those countries looking to sell or acquire nuclear technology. The growing Indian economy, the country's disputes with Pakistan over Kashmir, and India's grand strategy are all key issues for U.S. foreign policy. However, the nuclear deal is currently the key component in bilateral relations between the two nations as well as one of the key foreign policy issues on the entire U.S. agenda. Will it be a first step towards a lasting alliance or a misstep that leads to nuclear proliferation and renewed great power rivalry? This section will examine the nuclear deal and U.S.-India relations against the backdrop of India's shifting political and economic fortunes.

  1. The U.S.-India Nuclear Deal

    1. On July 18, 2005, Indian Prime Minister Manmohan Singh and President Bush reached an historic agreement on nuclear cooperation3
      1. Under the terms of the agreement, which still must be approved by the U.S. Congress, the Nuclear Suppliers Group, and the Indian government, India would be allowed to receive dual-use technology from the United States (which can be diverted to be used to build nuclear bombs) in exchange for stricter inspections of its nuclear facilities, separation of its civilian and military nuclear programs, agreements to secure its nuclear technology from theft or sale, and provisions for U.S. companies to build nuclear reactors in India (see Figure 2)
      2. This agreement is significant because it legitimizes India's nuclear arsenal, which was built outside the bounds of the NPT (and amidst heavy criticism from the U.S. and other world powers)
        1. Proponents of the plan claim that it will foster stronger ties between U.S. and India by engaging this growing power, improve India's energy platform in particular and its economy in general, reward India for being responsible in its commitment to nonproliferation of its technology, and allow tighter inspections of India's nuclear program4
        2. Opponents of the agreement argue that it rewards proliferation and India's "illegal" behavior, creates a double-standard and weakens America's nonproliferation position vis vis Iran and North Korea, angers Pakistan, which does not get the same deal despite getting nuclear weapons in the same fashion and being a strong ally of the U.S. since 9/11, angers other great powers who feel shut out and may be tempted to cut similar deals with Iran or North Korea. Generally, critics say, the U.S. gives up too much without getting much in return5
      3. By late 2007, four small communist parties in Singh's government continued to oppose the deal in the belief that it would make India subservient to U.S. interests in the region. Although the communists control only two of India's twenty-eight states, they have the power to bring down his slim majority government. It is unclear whether they will remove their opposition in exchange for other concessions from the central government, or whether new elections will have to be called to help determine the fate of the nuclear deal within the country that most observers thought would accept the terms as soon as possible.

  1. India's Democracy

    1. India is the largest democracy in the world, with over 1 billion inhabitants
    2. India is a true test of multiculturalism in action, with numerous significant ethnic and religious groups amongst its enormous population; see Figure 6 and Figure 7
    3. India employs a parliamentary system based largely on the British model, although India has many more significant political parties (especially on the local level) than any other democracy
    4. Although India's position as a geopolitical rival with both Pakistan and China make it an attractive ally for the U.S., its position as a democracy certainly helps its standing with the current administration (although interestingly enough, India was not a U.S. ally when it first became the largest democracy in the world during the Cold War)
    • Both China and Pakistan are wary of a burgeoning U.S.-India relationship in the belief that such ties could be motivated to balance their own ambitions (both have quietly opposed the nuclear deal)

  1. India's Economy

    1. "The country's economy grew at 6 percent a year from 1980 to 2002 and at 7.5 percent a year from 2002 to 2006-making it one of the world's best-performing economies for a quarter century. In the past two decades, the size of the middle class has quadrupled (to almost 250 million people), and 1 percent of the country's poor have crossed the poverty line every year. At the same time, population growth has slowed from the historic rate of 2.2 percent a year to 1.7 percent today-meaning that growth has brought large per capita income gains, from $1,178 to $3,051 (in terms of purchasing-power parity) since 1980. India is now the world's fourth-largest economy. Soon it will surpass Japan to become the third-largest."6 See Figure 5
    2. In contrast to the Asian model (exporting labor-intensive and low-priced manufactured goods), India has relied on high-tech services, consumption and domestic markets
      1. "Moreover, 30 to 40 percent of GDP growth is due to rising productivity -- a true sign of an economy's health and progress -- rather than to increases in the amount of capital or labor."7
      2. In India, entrepreneurs get more than 80% of all loans (compared to 10% for China)8
      3. The Indian state apparatus is holding back further Indian growth with inefficient education system, labor laws, and farming regulations, although the current Singh government has done much to liberalize what was a predominantly socialist infrastructure
      4. Major problems for the Indian economy include a high budget deficit (~9% of GDP), high tariffs and other barriers to foreign investment
    3. Trade between U.S. and India has increased significantly over the past five years, with both countries aiming to complete the WTO Doha Development Agenda before the end of 2006
    4. With nearly half of India's 1.1 billion people under the age of 25, there exists huge opportunity for growth, but also tremendous obstacles as India still has a number of serious kinks in it governing system and trade and labor laws that must be ironed out before India becomes a more stable environment for investment and long-term growth9
  1. India's Grand Strategy
    1. After halting growth for decades, India's economic rise and growing nuclear arsenal, in addition to its massive population and strategically significant geographic position, position the country to become a great power in the coming years
    2. India has worked to resolve border disputes with China and Pakistan, which require commitments of large numbers of Indian troops while hurting relations with India's two most powerful neighbors; see Figure 4
    3. India seeks security but also ascendance into the ranks of the great powers; the Bush administration seems ready to engage India as a potential ally in the region rather than a growing threat
      1. The two most commonly cited threats to U.S. security, Islamic extremism and a rising China, happen to be two of the largest (and most local) threats to India as well; therefore even an alliance founded solely upon mutual self-interest looks to be relatively durable
      2. India seeks a permanent position on the UN Security Council. However, Japan, Germany, and Brazil, as well as African countries South Africa, Nigeria, and Egypt are some of the other powerful countries seeking the same "promotion" to a seat at the table of great powers. British Prime Minister Gordon Brown proclaimed his support for a permanent seat at the UNSC for India in late January 2008, and support in various forms has been offered by officials from the U.S., France, and Russia.10 However, Chinese officials are hesitant, and even Brown's plan-which includes giving a permanent seat to Japan, Germany, Brazil, and one African country-does not offer veto powers to the new countries initially.
        1. Reports from some circles suggest that the U.S. and others are dangling a permanent seat on the UNSC in front of India in exchange for concessions on Kashmir.
    4. Pakistan/Kashmir
      1. India is engaged in talks with its main rival, Pakistan, over the status of northwestern region of Kashmir, which is a majority-Muslim region that remains largely under India's control
        1. Although Prime Minister Singh has publicly rejected the ceding of territory, the mutual interest the two sides have in resolving the simmering border dispute that threatens the stability of both nations has led to a warming of relations in recent years (see Figure 3)
        2. U.S./international assistance may be needed to resolve the conflict, which remains a key flashpoint for a large-scale conventional or even nuclear war11
          1. The conflict in Kashmir is a key issue for U.S.-Pakistani and U.S.-Indian relations, as well as the "War on Terror," since a number of groups on the State Department's list of Foreign Terrorist Organizations are involved in the conflict via training, launching attacks, or other forms of support12

Maps, Tables

Figure 1. India Political Map

Figure 2. India Nuclear Infrastructure

Figure 3. Kashmir Region

Figure 4. India and Her Neighbors

Figure 5: India's GDP, 1980-2007 (Annual Percentage Change)

Year % Change
1980 3.6
1981 6.4
1982 4.3
1983 6.2
1984 4.8
1985 5.3
1986 5.0
1987 4.4
1988 8.5
1989 7.2
1990 6.0
1991 2.1
1992 4.2
1993 5.0
1994 6.8
1995 7.6
1996 7.5
1997 4.7
1998 6.0
1999 7.0
2000 5.3
2001 4.1
2002 4.2
2003 7.2
2004 8.1
2005 8.3
2006 7.3
2007 7.0


Figure 6: India's Religious Groups (1987)

Figure 7: India's Languages and Minority Religions

Bibliography/Recommended Reading

Gurcharan Das, "The India Model," Foreign Affairs, Vol 85, Number 4, (July/August 2006).

C. Raja Mohan, "India and the Balance of Power," Foreign Affairs, Vol 85, Number 4, (July/August 2006).

Ashton B. Carter, "America's New Strategic Partner?" Foreign Affairs, Vol 85, Number 4, (July/August 2006).

Sumit Ganguly, Conflict Unending: India-Pakistan Tensions since 1947 (New York: Columbia University Press, 2001)

Sumit Ganguly, "Will Kashmir Stop India's Rise?" Foreign Affairs, Vol 85, Number 4, (July/August 2006).

S. Paul Kapur. "India and Pakistan's Unstable Peace: Why Nuclear South Asia Is Not Like Cold War Europe." International Security, Vol. 30, no. 2 (Fall 2005): 127-152.

International Crisis Group, Kashmir.

Pankaj Mishra, "Impasse in India," New York Review of Books 54:11 (June 28, 2007)

George Perkovich, "Faulty Promises: The U.S.-India Nuclear Deal" Carnegie Endowment for International Peace,

Ashutosh Varshney, "India's Democratic Challenge," Foreign Affairs, Vol 86, No. 2 (March/April 2007),

John Williamson, "The Rise of the Indian Economy,"


1. India was prohibited from making such deals for the past three decades due to its testing of nuclear weapons. Somini Sengupta, "U.S.-India Nuclear Pact Runs Into (Surprise!) Politics," New York Times (October 19, 2007).

2. Ibid.

3. For a description of the deal, see For a more thorough discussion of the agreement, see Ashton B. Carter, "America's New Strategic Partner?" Foreign Affairs, Vol 85, Number 4, (July/August 2006).

4. For a proponent's view, see Mohamed ElBaradei, "Rethinking Nuclear Safeguards," Washington Post,


6. For an opponent's view, see George Perkovich, "Faulty Promises: The U.S.-India Nuclear Deal" Carnegie Endowment for International Peace,; and Subrata Ghoshroy, "The U.S.-India Nuclear Deal: Triumph of the Business Lobby?" Audit of Conventional Wisdom, MIT Center for International Studies, September 2006.

7. Gurcharan Das, "The India Model," Foreign Affairs (July-August 2006): 1.

8. Ibid.

9. Ibid, 2.

10. See Ashotush Varshney, "India's Democratic Challenge," Foreign Affairs (March-April 2007).

11. Greg Hurst, "Gordon Brown Supports Permanent Seat for India on UN Security Council," The Times, January 21, 2008.

Sumit Ganguly, "Will Kashmir Stop India's Rise?" Foreign Affairs, Vol 85, Number 4, (July/August 2006).

"Foreign Terrorist Organizations,"

Massachusetts Institute of Technology