Order Code RL33529
India-U.S. Relations
Updated January 3, 2007
K. Alan Kronstadt
Specialist in Asian Affairs
Foreign Affairs, Defense, and Trade Division

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India-U.S. Relations
Summary
Long considered a “strategic backwater”from Washington’s perspective, South
Asia has emerged in the 21st century as increasingly vital to core U.S. foreign policy
interests. India, the region’s dominant actor with more than one billion citizens, is
now recognized as a nascent major power and “natural partner” of the United States,
one that many analysts view as a potential counterweight to China’s growing clout.
Washington and New Delhi have since 2004 been pursuing a “strategic partnership”
based on shared values such as democracy, multi-culturalism, and rule of law.
Numerous economic, security, and global initiatives, including plans for “full civilian
nuclear energy cooperation,” are underway. This latter initiative, launched by
President Bush in July 2005 and provisionally endorsed by the 109th Congress in late
2006 (P.L. 109-401), reverses three decades of U.S. nonproliferation policy. It would
require, among other steps, conclusion of a peaceful nuclear agreement between the
United States and India, which would itself enter into force only after a Joint
Resolution of Approval by Congress. Also in 2005, the United States and India
signed a ten-year defense framework agreement that calls for expanding bilateral
security cooperation. Since 2002, the two countries have engaged in numerous and
unprecedented combined military exercises. The issue of major U.S. arms sales to
India may come before the 110th Congress. The influence of a growing and relatively
wealthy Indian-American community of more than two million is reflected in
Congress’s largest country-specific caucus.
Further U.S. interest in South Asia focuses on ongoing tensions between India
and Pakistan, a problem rooted in unfinished business from the 1947 Partition,
competing claims to the Kashmir region, and, in more recent years, “cross-border
terrorism” in both Kashmir and major Indian cities. In the interests of regional
stability, the United States strongly encourages an ongoing India-Pakistan peace
initiative and remains concerned about the potential for conflict over Kashmiri
sovereignty to cause open hostilities between these two nuclear-armed countries. The
United States seeks to curtail the proliferation of nuclear weapons and ballistic
missiles in South Asia. Both India and Pakistan have resisted external pressure to
sign the major nonproliferation treaties. In 1998, the two countries conducted
nuclear tests that evoked international condemnation. Proliferation-related
restrictions on U.S. aid were triggered, then later lifted through congressional-
executive cooperation from 1998 to 2000. Remaining sanctions on India (and
Pakistan) were removed in October 2001.
India is in the midst of major and rapid economic expansion. Many U.S.
business interests view India as a lucrative market and candidate for foreign
investment. The United States supports India’s efforts to transform its once
quasi-socialist economy through fiscal reform and market opening. Since 1991, India
has taken steps in this direction, with coalition governments keeping the country on
a general path of reform. Yet there is U.S. concern that such movement remains slow
and inconsistent. Congress also continues to have concerns about abuses of human
rights, including caste- and gender-based discrimination, and religious freedoms in
India. Moreover, the spread of HIV/AIDS in India has attracted congressional
attention as a serious development.

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Contents
Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Context of the U.S.-India Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Current U.S.-India Engagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
India’s Regional Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Pakistan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Other Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Political Setting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
National Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
The Congress Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
The Bharatiya Janata Party (BJP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Regional Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Bilateral Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
“Next Steps in Strategic Partnership” and Beyond . . . . . . . . . . . . . . . . . . . 13
Civil Nuclear Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Civil Space Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
High-Technology Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Security Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
U.S.-India Security Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Nuclear Weapons and Missile Proliferation . . . . . . . . . . . . . . . . . . . . 21
U.S. Nonproliferation Efforts and Congressional Action . . . . . . . . . . 22
India-Iran Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
India’s Economy and U.S. Concerns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Trade and Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Barriers to Trade and Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Multilateral Trade Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
The Energy Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Regional Dissidence and Human Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
The Kashmir Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
The Northeast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Maoist Insurgency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Hindu-Muslim Tensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Human Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
HIV/AIDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
U.S. Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Economic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
List of Figures
Figure 1. Map of India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

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List of Tables
Table 1. U.S. Assistance to India, FY2001-FY2007 . . . . . . . . . . . . . . . . . . . . . . 35

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India-U.S. Relations
Most Recent Developments
! On December 22, two days of India-Pakistan talks on the militarized
Sir Creek dispute ended with agreement to conduct a joint survey.
In mid-November, the India-Pakistan “Composite Dialogue” re-
commenced when the Indian and Pakistani foreign secretaries held
formal meetings in New Delhi, the first such meetings since New
Delhi’s suspension of the peace process in the wake of July 11
terrorist bombings in Bombay. New Indian Foreign Secretary Shiv
Shankar Menon called the talks “very useful and constructive” and,
along with Pakistani Foreign Secretary Riaz Khan, further developed
the planned joint anti-terrorism mechanism mandated by Prime
Minister Singh and Pakistani President Pervez Musharraf on the
sidelines of a September Nonaligned Movement summit in Cuba.
The foreign secretaries also reviewed the peace process and
developments in Kashmir, but made no announcements on long-
standing territorial disputes or the status of investigations into the
Bombay bombings (in October, Prime Minister Singh said India had
“credible evidence” of Pakistan’s involvement in those bombings).
! On December 18, President Bush signed into law H.R. 5682, the
Henry J. Hyde United States-India Peaceful Atomic Energy
Cooperation Act of 2006 (P.L. 109-401), to enable civil nuclear
cooperation with India. Days earlier, a conference report (H.Rept.
109-721) had been issued to accompany the bill; congressional
conferees had reconciled House and Senate versions of the
legislation and provided a 30-page explanatory statement. The
Indian government welcomed the developments while also claiming
the legislation contained “extraneous and prescriptive provisions,”
and Prime Minister Singh said “clearly difficult negotiations lie
ahead.” Vocal critics of the initiative in its current form include
India’s main opposition Bharatiya Janata Party, influential Left Front
leaders, and some members of the country’s nuclear scientific
community, who express various concerns about potentially negative
effects on India’s scientific and foreign policy independence. (See
also CRS Report RL33016, U.S. Nuclear Cooperation With India.)
! On December 15, Prime Minister Singh paid a visit to Tokyo,
where India and Japan inked 12 bilateral agreements to forward their
“strategic partnership,” including negotiations toward a future free
trade agreement. Tokyo withheld endorsement of India’s entry into
the civilian nuclear club.

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CRS-2
! On December 8, day, Under Secretary of State Nicolas Burns met
with Foreign Secretary Shiv Shankar Menon in New Delhi to
discuss “progress in all the areas” of U.S.-India relations.
! On December 4, Pakistani President Musharraf said Pakistan is
“against independence” for Kashmir, instead offering a four-point
proposal that would lead to “self-governance,” defined as “falling
between autonomy and independence.” Many analysts saw the
proposal as being roughly in line with New Delhi’s Kashmir
position. Prime Minster Singh later welcomed Musharraf’s
proposals, saying they “contribute to the ongoing thought process.”
! On November 28, a delegation of 250 American business
executives arrived in Bombay on a mission to explore new
opportunities to invest in India and develop new partnerships with
companies there. The delegation, led by Under Secretary of
Commerce Franklin Lavin, represented 180 companies from a
variety of sectors and is the largest-ever to visit India.
! On November 23, Chinese President Hu Jintao ended a four-day
visit to India, the first such visit by a Chinese president since 1996.
Two days earlier, India and China issued a Joint Declaration which
outlined a “ten-pronged strategy” to boost bilateral socio-economic
ties and defense cooperation, and to “reinforce their strategic
partnership.” The two countries, which declared themselves
“partners for mutual benefit” rather than rivals or competitors, also
signed 13 pacts on a variety of bilateral initiatives. The Joint
Declaration notably contained an agreement to “promote cooperation
in the field of nuclear energy.” Outstanding border disputes,
including China’s continuing claim to 35,000 square miles of Indian
territory, remain unresolved.
! On November 18, Agriculture Secretary Mike Johanns was in
New Delhi for meetings with top Indian officials in New Delhi to
discuss trade issues and to “get the Doha talks back on track.”
Secretary Johanns urged India to further open its farm markets to
exports from other countries.
! On November 17, Iranian Foreign Minister Manouchehr Mottaki
held talks with top Indian officials in New Delhi, where he said
Tehran would “very soon” begin exports to India of liquid natural
gas under a $21 billion, five million tons per year deal. According
to New Delhi, India and Iran agreed that “the economic potential of
the relationship needed to be actualized in the maximum.”
! Also on November 16, a two-day meeting of the U.S.-India
Defense Policy Group ended in New Delhi, where Under Secretary
of Defense Eric Edelman and other U.S. officials expressed
optimism about the potential for major arms sales to India in 2007.

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CRS-3
! On November 5, a series of bombings in the northeastern Assam
state left at least 15 people dead and dozens more injured. Police
blamed the separatist the United Liberation Front of Assam (ULFA).
A spike in violence in the region follows New Delhi’s September
withdrawal from a six-week-long truce with ULFA after militants
shot dead a policeman and a civilian.
Context of the U.S.-India Relationship
Background
U.S. and congressional interests in India cover a wide spectrum of issues,
ranging from the militarized dispute with Pakistan and weapons proliferation to
concerns about regional security, terrorism, human rights, health, energy, and trade
and investment opportunities. In the 1990s, India-U.S. relations were particularly
affected by the demise of the Soviet Union — India’s main trading partner and most
reliable source of economic and military assistance for most of the Cold War — and
New Delhi’s resulting need to diversify its international relationships. Also
significant were India’s adoption of significant economic policy reforms beginning
in 1991, a deepening bitterness between India and Pakistan over Kashmir, and signs
of a growing Indian preoccupation
with China as a potential long-term
INDIA IN BRIEF
strategic rival. With the fading of
Population: 1.1 billion; growth rate: 1.4% (2006
Cold War constraints, the United
est.)
States and India began exploring the
Area: 3,287,590 sq. km. (slightly more than one-
possibilities for a more normalized
third the size of the United States)
relationship between the world’s two
Capital: New Delhi
Head of Government: Prime Minister
largest democracies. Throughout the
Manmohan Singh (Congress Party)
1990s, however, regional rivalries,
Ethnic Groups: Indo-Aryan 72%; Dravidian
separatist tendencies, and sectarian
25%; other 3%
tensions continued to divert India’s
Languages: 15 official, 13 of which are the
attention and resources from
primary tongue of at least 10 million
people; Hindi is primary tongue of about
economic and social development.
30%; English widely used
Fallout from these unresolved
Religions: Hindu 81%; Muslim 13%; Christian
problems — particularly nuclear
2%; Sikh 2%, other 2% (2001 census)
proliferation and human rights issues
Life Expectancy at Birth: female 65.6 years;
male 63.9 years (2006 est.)
— presented irritants in bilateral
Literacy: female 48%; male 70% (2003 est.)
relations.
Gross Domestic Product (at PPP): $4.24
trillion; per capita: $3,870; growth rate
India’s May 1998 nuclear tests
8.5% (2006 est.)
were an unwelcome surprise and seen
Currency: Rupee (100 = $2.27)
Inflation: 5.6% (2006 est.)
to be a policy failure in Washington,
Military Expenditures: $22.8 billion (2.9% of
and they spurred then-Deputy
GDP; 2005)
Secretary of State Strobe Talbott to
U.S. Trade: exports to U.S. $21.9 billion;
launch a series of meetings with
imports from U.S. $9.9 billion (2006 est.)
Sources: CIA World Factbook; U.S. Commerce Department;
Indian External Affairs Minister
Economist Intelligence Unit; Global Insight
Jaswant Singh in an effort to bring

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CRS-4
New Delhi more in line with U.S. arms control and nonproliferation goals. While
this proximate purpose went unfulfilled, the two officials soon engaged a broader
agenda on the entire scope of U.S.-India relations, eventually meeting fourteen times
in seven different countries over a two-year period. The Talbott-Singh talks were
considered the most extensive U.S.-India engagement up to that time and likely
enabled circumstances in which the United States could play a key role in defusing
the 1999 Kargil crisis, as well as laying the groundwork for a landmark U.S.
presidential visit in 2000.
President Bill Clinton’s March 2000 visit to South Asia seemed a major U.S.
initiative to improve relations with India. One outcome was a Joint Statement in
which the two countries pledged to “deepen the India-American partnership in
tangible ways.”1 A U.S.-India Joint Working Group on Counterterrorism was
established that year and continues to meet regularly. During his subsequent visit to
the United States later in 2000, Prime Minister Atal Bihari Vajpayee addressed a
joint session of Congress and issued a second Joint Statement with President Clinton
agreeing to cooperate on arms control, terrorism, and HIV/AIDS.2
In the wake of the September 2001 terrorist attacks on the United States, India
took the immediate and unprecedented step of offering to the United States full
cooperation and the use of India’s bases for counterterrorism operations.
Engagement was accelerated after a November 2001 meeting between President Bush
and Prime Minister Vajpayee, when the two leaders agreed to greatly expand U.S.-
India cooperation on a wide range of issues, including regional security, space and
scientific collaboration, civilian nuclear safety, and broadened economic ties.3
Notable progress has come in the area of security cooperation, with an increasing
focus on counterterrorism, joint military exercises, and arms sales. In late 2001, the
U.S.-India Defense Policy Group met in New Delhi for the first time since India’s
1998 nuclear tests and outlined a defense partnership based on regular and high-level
policy dialogue.
Prime Minister Manmohan Singh paid a landmark July 2005 visit to
Washington, where what may be the most significant joint U.S.-India statement to
date was issued.4 In March 2006, President Bush spent three days in India, discussed
further strengthening a bilateral “global partnership,” and issued another Joint
Statement.5 Today, the Bush Administration vows to “help India become a major
world power in the 21st century,” and U.S.-India relations are conducted under the
rubric of three major “dialogue” areas: strategic (including global issues and
defense), economic (including trade, finance, commerce, and environment), and
energy. President Bush’s 2002 National Security Strategy of the United States stated
that “U.S. interests require a strong relationship with India.” The 2006 version
1 See [http://www.usindiafriendship.net/archives/usindiavision/delhideclaration.htm].
2 See [http://clinton4.nara.gov/WH/new/html/Wed_Oct_4_105959_2000.html].
3 See [http://www.state.gov/p/sca/rls/rm/6057.htm].
4 See [http://www.whitehouse.gov/news/releases/2005/07/20050718-6.html].
5 See [http://www.whitehouse.gov/news/releases/2006/03/20060302-5.html].

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CRS-5
claims that, “India now is poised to shoulder global obligations in cooperation with
the United States in a way befitting a major power.”6 (See also CRS Report
RL33072, U.S.-India Bilateral Agreements.)
Recognition of India’s increasing stature and importance — and of the growing
political influence some 2.3 million Indian-Americans — is found in the U.S.
Congress, where the India and Indian-American Caucus is now the largest of all
country-specific caucuses. Over the past six years, legal Indian immigrants have
come to the United States at a more rapid rate than any other group. In 2005 and
2006, the Indian-American community, relatively wealthy, geographically dispersed,
and well-entrenched in several U.S. business sectors, conducted a major (and
apparently successful) lobbying effort to encourage congressional passage of
legislation to enable U.S.-India civil nuclear cooperation.7
Current U.S.-India Engagement
Following President Bush’s March 2006 visit to New Delhi — the first such
trip by a U.S. President in six years — U.S. diplomatic engagement with India has
continued to be deep and multifaceted:
! A two-day meeting of the U.S.-India Joint Working Group on
Counterterrorism was held in April in Washington, where
Counterterrorism Coordinator Henry Crumpton led the U.S.
delegation.
! Indian Power Minister Sushil Shinde paid an April visit to
Washington for meetings with top U.S. officials.
! The fourth meeting of the U.S.-India Trade Policy Forum took
place in May in New Delhi, where talks focused on trade barriers,
agriculture, investment, and intellectual property rights.
! In June, the Chairman of the U.S. Joint Chiefs of Staff, Gen. Peter
Pace, met with top Indian officials in New Delhi to discuss
expanding U.S.-India strategic ties.
! Also in June, new U.S. Trade Representative Susan Schwab met
with Indian Commerce Minister Kamal Nath in Washington,
agreeing on initiatives to strengthen and deepen bilateral trade.
! In July, President Bush met with Prime Minister Singh on the
sidelines of the G-8 Summit in St. Petersburg, Russia, to discuss the
7/11 Bombay bombings and planned U.S.-India civil nuclear
cooperation.
! In August, a delegation of U.S. officials, including President Bush’s
top energy and environment advisor, visited New Delhi to meet with
top Indian officials and business leaders to discuss energy security
and the environment.
6 See [http://www.comw.org/qdr/fulltext/nss2002.pdf] and
[http://www.comw.org/qdr/fulltext/nss2006.pdf].
7 Walter Andersen, “The Indian-American Community Comes Into Its Political Own,” India
Abroad, Sep. 1, 2006; “Indian Community Burgeoning in America,” Associated Press, Oct.
22, 2006.

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CRS-6
! Also in August, a meeting of the U.S.-India Financial and
Economic Forum was held in Washington, where officials
discussed Indian efforts to liberalize its financial sector, among other
issues.
! In September, U.S. and Indian army troops conducted joint counter-
insurgency exercises in Hawaii.
! Defense Minister Pranab Mukherjee led an Indian delegation to the
U.N. General Assembly session later in September and met with top
U.S. officials in New York.
! In October, a meeting of the U.S.-India CEO Forum was held in
New York City. Along with numerous U.S. and Indian business
leaders, high-level government officials joining the session included
Commerce Secretary Carlos Gutierrez and Assistant to the President
for Economic Policy Allan Hubbard from the American side, and
Commerce Minister Kamal Nath and Planning Commission Deputy
Minister Montek Singh Ahluwalia from India.
! Assistant Secretary of State Richard Boucher made a lengthy visit to
India in November for meetings with top Indian leaders.
! In mid-November, U.S. Under Secretary of Defense Edelman met
with Defense Secretary Dutt in New Delhi for the eighth session of
the U.S.-India Defense Policy Group, where officials discussed
bolstering bilateral cooperation in military security, technology, and
trade.
! Also in mid-November, the U.S. Environmental Protection Agency
announced establishment of a Methane to Markets Partnership to
promote development of coal bed and coal methane projects in India.
! Later in November, Agriculture Secretary Michael Johannes visited
New Delhi to discuss bilateral and multilateral trade issues with top
Indian leaders.
! In late November, Under Secretary of Commerce Franklin Lavin led
a delegation of 250 American business executives to Bombay on a
mission to explore new opportunities to invest in India and develop
new partnerships with companies there.
! In December, Under Secretary of Commerce and Director of the
U.S. Patent and Trademark Office Jon Dudas visited New Delhi to
discuss intellectual property rights and copyright protections with
India leaders.
! Also in December, Under Secretary of State Nicholas Burns met
with Foreign Secretary Shiv Shankar Menon in New Delhi to discuss
progress in all areas of U.S.-India relations. (See also CRS Report
RL33072, U.S.-India Bilateral Agreements.)
India’s Regional Relations
India is geographically dominant in both South Asia and the Indian Ocean
region. While all of South Asia’s smaller continental states (Pakistan, Bangladesh,
Nepal, and Bhutan) share borders with India, none share borders with each other.
The country possesses the region’s largest economy and, with more than one billion
inhabitants, is by far the most populous on the Asian Subcontinent. The United
States has a keen interest in South Asian stability, perhaps especially with regard to

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CRS-7
the India-Pakistan nuclear weapons dyad, and so closely monitors India’s regional
relationships.
Pakistan. Decades of militarized tensions and territorial disputes between
India and Pakistan have seriously hamstrung economic and social development in
both countries while also precluding establishment of effective regional economic or
security institutions. Seemingly incompatible national identities contributed to the
nuclearization of the Asian Subcontinent, with the nuclear weapons capabilities of
both countries becoming overt in 1998. Since that time, a central aspect of U.S.
policy in South Asia has been prevention of interstate conflict that could lead to
nuclear war. In 2004, New Delhi and Islamabad launched their most recent
comprehensive effort to reduce tensions and resolve outstanding disputes.
Current Status. The India-Pakistan peace initiative continues, with officials
from both countries (and the United States) offering a generally positive assessment
of the ongoing dialogue. In May 2006, India and Pakistan agreed to open a second
Kashmiri bus route and to allow new truck service to facilitate trade in Kashmir (the
new bus service began in June). Subsequent “Composite Dialogue” talks were held
to discuss militarized territorial disputes, terrorism and narcotics, and cultural
exchanges, but high hopes for a settlement of differences over the Siachen Glacier
were dashed when a May session ended without progress. June talks on the Tubal
navigation project/Wullar barrage water dispute similarly ended without forward
movement.
Compounding tensions, separatist-related violence spiked in Indian Kashmir in
the spring and summer of 2006, and included a May massacre of 35 Hindu villagers
by suspected Islamic militants. Grenade attacks on tourist buses correlated with a
late May roundtable meeting of Prime Minister Singh and Kashmiri leaders, leaving
at least two dozen civilians dead and devastating the Valley’s recently revitalized
tourist industry. Significant incidents of attempted “cross-border infiltration” of
Islamic militants at the Kashmiri Line of Control continue and top Indian leaders
renewed their complaints that Islamabad is taking insufficient action to quell terrorist
activities on Pakistan-controlled territory.
The serial bombing of Bombay commuter trains on July 11, 2006, killed nearly
200 people and injured many hundreds more. With suspicions regarding the
involvement of Pakistan-based groups, New Delhi suspended talks with Islamabad
pending an investigation. However, at a September meeting on the sidelines of a
Nonaligned Movement summit in Cuba, Prime Minister Singh and Pakistani
President Musharraf announced a resumption of formal peace negotiations and also
decided to implement a joint anti-terrorism mechanism. Weeks later, Bombay’s top
police official said the 7/11 train bombings were planned by Pakistan’s intelligence
services and, in October, Prime Minister Singh himself said India had “credible
evidence” of Pakistani involvement.
To date, India is not known to have gone public with or shared with Pakistan
any incriminating evidence of Pakistani government involvement in the Bombay
bombings. In November 2006, Composite Dialogue resumed with its third round of
foreign secretary-level talks when Foreign Secretary Shiv Shankar Menon hosted a
New Delhi visit by his Pakistani counterpart, Riaz Khan. No progress was made on

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CRS-8
outstanding territorial disputes, but the two officials did give shape to a joint anti-
terrorism mechanism proposed in September. Such a mechanism is controversial in
India, with some analysts skeptical about the efficacy of institutional engagement
with Pakistan in this issue-area even as Islamabad is suspected of complicity in anti-
India terrorism. The India-Pakistan peace process is slated to continue in early 2007
when External Affairs Minister Pranab Mukherjee is to visit Pakistan.
Background. Three wars — in 1947-48, 1965, and 1971 — and a constant
state of military preparedness on both sides of the border have marked six decades
of bitter rivalry between India and Pakistan. The bloody and acrimonious nature of
the 1947 partition of British India and continuing violence in Kashmir remain major
sources of interstate tensions. Despite the existence of widespread poverty across
South Asia, both India and Pakistan have built large defense establishments —
including nuclear weapons capability and ballistic missile programs — at the cost of
economic and social development. The nuclear weapons capabilities of the two
countries became overt in May 1998, magnifying greatly the potential dangers of a
fourth India-Pakistan war. Although a bilateral peace process has been underway for
nearly three years, little substantive progress has been made toward resolving the
Kashmir issue, and New Delhi continues to be rankled by what it calls Islamabad’s
insufficient effort to end Islamic militancy that affects India.
The Kashmir problem is itself rooted in claims by both countries to the former
princely state, now divided by a military Line of Control (LOC) into the Indian state
of Jammu and Kashmir and Pakistan-controlled Azad [Free] Kashmir (see “The
Kashmir Issue,” below). Normal relations between New Delhi and Islamabad were
severed in December 2001 after a terrorist attack on the Indian Parliament was
blamed on Pakistan-supported Islamic militants. Other lethal attacks on Indian
civilians spurred Indian leaders to call for a “decisive war,” but intense international
diplomatic engagement, including multiple trips to the region by high-level U.S.
officials, apparently persuaded India to refrain from attacking.8 In October 2002, the
two countries ended a tense, ten-month military standoff at their shared border, but
there remained no high-level diplomatic dialogue between India and Pakistan (a July
2001 summit meeting in the Indian city of Agra had failed to produce any movement
toward a settlement of the bilateral dispute).
In April 2003, Prime Minister Vajpayee extended a symbolic “hand of
friendship” to Pakistan. The initiative resulted in slow, but perceptible progress in
confidence-building, and within months full diplomatic relations between the two
countries were restored. September 2003 saw an exchange of heated rhetoric by the
Indian prime minister and the Pakistani president at the U.N. General Assembly;
some analysts concluded that the peace initiative was moribund. Yet New Delhi
soon reinvigorated the process by proposing confidence-building through people-to-
people contacts. Islamabad responded positively and, in November, took its own
initiatives, most significantly the offer of a cease-fire along the Kashmir LOC. A
major breakthrough in bilateral relations came at the close of a January 2004 summit
session of the South Asian Association for Regional Cooperation in Islamabad. After
8 See Polly Nayak and Michael Krepon, “US Crisis Management in South Asia’s Twin
Peaks Crisis” at [http://www.stimson.org/southasia/pdf/USCrisisManagement.pdf].

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CRS-9
a meeting between Vajpayee and Pakistani President Musharraf — their first since
July 2001 — the two leaders agreed to re-engage a “composite dialogue” to bring
about “peaceful settlement of all bilateral issues, including Jammu and Kashmir, to
the satisfaction of both sides.”
A May 2004 change of governments in New Delhi had no effect on the
expressed commitment of both sides to carry on the process of mid- and high-level
discussions, and the new Indian Prime Minister, Manmohan Singh, met with
President Musharraf in September 2004 in New York, where the two leaders agreed
to explore possible options for a “peaceful, negotiated settlement” of the Kashmir
issue “in a sincere manner and purposeful spirit.” After Musharraf’s April 2005 visit
to New Delhi, India and Pakistan released a joint statement calling their bilateral
peace process “irreversible.” Some analysts believe that increased people-to-people
contacts have significantly altered public perceptions in both countries and may have
acquired permanent momentum. Others are less optimistic about the respective
governments’ long-term commitment to dispute resolution. Moreover, an apparent
new U.S. embrace of India has fueled Pakistan’s anxieties about the regional balance
of power.
China. India and China together account for one-third of the world’s
population, and are seen to be rising 21st century powers and potential strategic rivals.
The two countries fought a brief but intense border war in 1962 that left China in
control of large swaths of territory still claimed by India. Today, India accuses China
of illegitimately occupying nearly 15,000 square miles of Indian territory in Kashmir,
while China lays claim to 35,000 square miles in the northeastern Indian state of
Arunachal Pradesh. The 1962 clash ended a previously friendly relationship between
the two leaders of the Cold War “nonaligned movement” and left many Indians
feeling shocked and betrayed. While Sino-Indian relations have warmed
considerably in recent years, the two countries have yet to reach a final boundary
agreement. Adding to New Delhi’s sense of insecurity have been suspicions
regarding China’s long-term nuclear weapons capabilities and strategic intentions in
South and Southeast Asia. In fact, a strategic orientation focused on China appears
to have affected the course and scope of New Delhi’s own nuclear weapons and
ballistic missile programs. Beijing’s military and economic support for Pakistan —
support that is widely understood to have included WMD-related transfers — is a
major and ongoing source of friction; past Chinese support for Pakistan’s Kashmir
position has added to the discomfort of Indian leaders. New Delhi takes note of
Beijing’s security relations with neighboring Burma and the construction of military
facilities on the Indian Ocean. The two countries also have competed for energy
resources to feed their rapidly growing economies; India’s relative poverty puts New
Delhi at a significant disadvantage in such competition.
Analysts taking a realist perspective view China as an external balancer in the
South Asian subsystem, with Beijing’s material support for Islamabad allowing
Pakistan to challenge the aspiring regional hegemony of a more powerful India.
Many observers, especially in India, see Chinese support for Pakistan as a key aspect
of Beijing’s perceived policy of “encirclement” or constraint of India as a means of
preventing or delaying New Delhi’s ability to challenge Beijing’s region-wide
influence.

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CRS-10
Despite historic and strategic frictions, high-level exchanges between India and
China regularly include statements that there exists no fundamental conflict of
interest between the two countries. During a landmark 1993 visit to Beijing, Prime
Minister Narasimha Rao signed an agreement to reduce troops and maintain peace
along the Line of Actual Control that divides the two countries’ forces at the disputed
border. A total of 30 rounds of border talks and joint working group meetings aimed
at reaching a final settlement have been held since 1981, with New Delhi and Beijing
agreeing to move forward in other issue-areas even as territorial claims remain
unresolved.
A 2003 visit to Beijing by Prime Minister Vajpayee was viewed as marking a
period of much improved relations. In late 2004, India’s army chief visited Beijing
to discuss deepening bilateral defense cooperation and a first-ever India-China
strategic dialogue was later held in New Delhi. Military-to-military contacts have
included modest but unprecedented combined naval and army exercises. During
Chinese Prime Minister Wen Jiabao’s April 2005 visit to New Delhi, India and China
inked 11 new agreements and vowed to launch a “strategic partnership” that will
include broadened defense links and efforts to expand economic relations.9 In a
move that eased border tensions, China formally recognized Indian sovereignty over
the former kingdom of Sikkim, and India reiterated its view that Tibet is a part of
China. Moreover, in 2006, dubbed the “Year of India-China Friendship,” the two
countries formally agreed to cooperate in securing overseas oil resources. In July of
that year, India and China reopened the Nathu La border crossing for local trade. The
Himalayan pass had been closed since the 1962 war. Sino-India trade relations are
blossoming — bilateral commerce was worth nearly $19 billion in 2005, almost an
eight-fold increase over the 1999 value. In fact, China may soon supplant the United
States as India’s largest trading partner.
Indo-Chinese relations further warmed in November 2006, when Chinese
President Hu Jintao made a trip to India., the first such visit by a Chinese president
since 1996. There India and China issued a Joint Declaration outlining a “ten-
pronged strategy” to boost bilateral socio-economic ties and defense cooperation, and
to “reinforce their strategic partnership.” The two countries, which declared
themselves “partners for mutual benefit” rather than rivals or competitors, also signed
13 new pacts on a variety of bilateral initiatives. The Joint Declaration notably
contained an agreement to “promote cooperation in the field of nuclear energy,”
although no details have been provided on what form such cooperation might take.
Other Countries. India takes an active role in assisting reconstruction efforts
in Afghanistan, having committed $650 million to this cause, as well as contributing
personnel and opening numerous consulates there (much to the dismay of Pakistan,
which fears strategic encirclement and takes note of India’s past support for Afghan
Tajik and Uzbek militias). Among Indian assistance to Afghanistan are funding for
a new $111 million power station, an $84 million road-building project, a $77
9 See John Lancaster, “India, China Hoping to ‘Reshape the World Order’ Together,”
Washington Post, Apr. 12, 2005, at [http://www.washingtonpost.com/wp-dyn/articles/
A43053-2005Apr11.html].

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CRS-11
million damn project, and construction of Kabul’s new $67 Parliament building, to
be completed in 2010. The United States has welcomed India’s role in Afghanistan.
To the north, New Delhi called King Gyanendra’s February 2005 power seizure
in Nepal “a serious setback for the cause of democracy,” but India renewed non-
lethal military aid to the Royal Nepali Army only months later. India remains
seriously concerned about political instability in Kathmandu and the cross-border
infiltration of Maoist militants from Nepal. The United States seeks continued Indian
attention to the need for a restoration of democracy in Nepal.
To the east, and despite India’s key role in the creation of neighboring
Bangladesh in 1971, New Delhi’s relations with Dhaka have been fraught with
tensions related mainly to the cross-border infiltration of Islamic and separatist
militants, and huge numbers of illegal migrants into India. The two countries’ border
forces engage in periodic gunbattles and India is completing construction of a fence
along the entire shared border. Still, New Delhi and Dhaka have cooperated on
counterterrorism efforts and talks on energy cooperation continue.
Further to the east, India is pursuing closer relations with the repressive regime
in neighboring Burma, with an interest in energy cooperation and to counterbalance
China’s influence there. Such engagement seeks to achieve economic integration of
India’s northeast region and western Burma, as well as bolstering energy security.
International human rights groups have criticized New Delhi’s military interactions
with Rangoon. The Bush Administration has urged India to be more active in
pressing for democracy in Burma.
In the island nation of Sri Lanka off India’s southeastern coast, a Tamil Hindu
minority has been fighting a separatist war against the Sinhalese Buddhist majority
since 1983. The violent conflict has again become serious in 2006, causing some
three thousand deaths. More than 60 million Indian Tamils live in southern India.
India’s 1987 intervention to assist in enforcing a peace accord resulted in the deaths
of more than 1,200 Indian troops and led to the 1991 assassination of former Indian
Prime Minister Rajiv Gandhi by Tamil militants. Since that time, New Delhi has
maintained friendly relations with Colombo while refraining from any deep
engagement in third-party peace efforts. The Indian Navy played a key role in
providing disaster relief to Sri Lanka following the catastrophic December 2004
Indian Ocean tsunami.
Political Setting
India is the world’s most populous democracy and remains firmly committed
to representative government and rule of law. U.S. policymakers commonly identify
in the Indian political system shared core values, and this has facilitated increasingly
friendly relations between the U.S. and Indian governments.
National Elections. India, with a robust and working democratic system, is
a federal republic where the bulk of executive power rests with the prime minister
and his or her cabinet (the Indian president is a ceremonial chief of state with limited
executive powers). As a nation-state, India presents a vast mosaic of hundreds of
different ethnic groups, religious sects, and social castes. Most of India’s prime

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CRS-12
ministers have come from the country’s Hindi-speaking northern regions and all but
two have been upper-caste Hindus. The 543-seat Lok Sabha (People’s House) is the
locus of national power, with directly elected representatives from each of the
country’s 28 states and 7 union territories. A smaller upper house, the Rajya Sabha
(Council of States), may review, but not veto, most legislation, and has no power
over the prime minister or the cabinet. National and state legislators are elected to
five-year terms.
National elections in October 1999 had secured ruling power for a Bharatiya
Janata Party (BJP)-led coalition government headed by Prime Minister Vajpayee.
That outcome decisively ended the historic dominance of the Nehru-Gandhi-led
Congress Party, which was relegated to sitting in opposition at the national level (its
members continued to lead many state governments). However, a surprise Congress
resurgence under Sonia Gandhi in May 2004 national elections brought to power a
new left-leaning coalition government led by former finance minister and Oxford-
educated economist Manmohan Singh, a Sikh and India’s first-ever non-Hindu prime
minister. Many analysts attributed Congress’s 2004 resurgence to the resentment of
rural and poverty-stricken urban voters who felt left out of the “India shining”
campaign of a BJP more associated with urban, middle-class interests. Others saw
in the results a rejection of the Hindu nationalism associated with the BJP. (See CRS
Report RL32465, India’s 2004 National Elections.)
The Congress Party. Congress’s electoral strength reached a nadir in 1999,
when the party won only 110 Lok Sabha seats. Observers attributed the poor
showing to a number of factors, including perceptions that party leader Sonia Gandhi
lacked the experience to lead the country and the failure of Congress to make strong
pre-election alliances (as had the BJP). Support for Congress had been in fairly
steady decline following the 1984 assassination of Prime Minister Indira Gandhi and
the 1991 assassination of her son, Prime Minister Rajiv Gandhi. Sonia Gandhi,
Rajiv’s Italian-born, Catholic widow, refrained from active politics until the 1998
elections. She later made efforts to revitalize the party by phasing out older leaders
and attracting more women and lower castes — efforts that appear to have paid off
in 2004. Today, Congress again occupies more parliamentary seats (145) than any
other party and, through unprecedented alliances with powerful regional parties, it
again leads India’s government under the United Progressive Alliance (UPA)
coalition. As party chief and UPA chair, Sonia Gandhi is believed to wield
considerable influence over the ruling coalition’s policy decision-making process.10
The Bharatiya Janata Party (BJP). With the rise of Hindu nationalism, the
BJP rapidly increased its parliamentary strength during the 1980s. In 1993, the
party’s image was tarnished among some, burnished for others, by its alleged
complicity in serious communal violence in Bombay and elsewhere. Some hold
elements of the BJP, as the political arm of extremist Hindu groups, responsible for
the incidents (the party has advocated “Hindutva,” or an India based on Hindu
culture, and views this as key to nation-building). While leading a national coalition
from 1998-2004, the BJP worked — with only limited success — to change its image
from right-wing Hindu fundamentalist to conservative and secular, although 2002
10 See Indian National Congress at [http://www.congress.org.in].

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CRS-13
communal rioting in Gujarat again damaged the party’s credentials as a moderate
organization. The BJP-led National Democratic Alliance was overseen by party
notable Prime Minister Atal Vajpayee, whose widespread personal popularity helped
to keep the BJP in power. Since 2004, the BJP has been weakened by leadership
disputes, criticism from Hindu nationalists, and controversy involving party president
Lal Advani (in December 2005, Advani ceded his leadership post and Vajpayee
announced his retirement from politics). In 2006, senior BJP leader Pramod Mahajan
was shot and killed in a family dispute.11
Regional Parties. The influence of regional and caste-based parties has
become an increasingly important variable in Indian politics; the May 2004 national
elections saw such parties receiving nearly half of all votes cast. Never before 2004
had the Congress Party entered into pre-poll alliances at the national level, and
numerous analysts attributed Congress’s success to precisely this new tack, especially
thorough arrangements with the Bihar-based Rashtriya Janata Dal and Tamil Nadu’s
Dravida Munnetra Kazhagam. The newfound power of both large and smaller
regional parties, alike, is seen to be reflected in the UPA’s ministerial appointments,
and in the Congress-led coalition’s professed attention to rural issues and center-state
relations. Two significant regional parties currently independent of both the ruling
coalition and the BJP-led opposition are the Samajwadi Party, a largely Muslim- and
lower caste-based organization highly influential in Uttar Pradesh, and the Bahujan
Samaj Party of Bihar, which also represents mainly lower-caste constituents. State
assembly elections in Uttar Pradesh — home to more than 170 million Indians — are
slated for February 2007 and may be an important indicator of national political
trends, especially in gauging satisfaction with the current center coalition.
Bilateral Issues
“Next Steps in Strategic Partnership” and Beyond
The now-concluded Next Steps in Strategic Partnership (NSSP) initiative
encompassed several major issues in India-U.S. relations. The Indian government
has long pressed the United States to ease restrictions on the export to India of dual-
use high-technology goods (those with military applications), as well as to increase
civilian nuclear and civilian space cooperation. These three key issues came to be
known as the “trinity,” and top Indian officials insisted that progress in these areas
was necessary to provide tangible evidence of a changed U.S.-India relationship.
There were later references to a “quartet” when the issue of missile defense was
included. In January 2004, President Bush and Prime Minister Vajpayee issued a
joint statement declaring that the U.S.-India “strategic partnership” included
expanding cooperation in the “trinity” areas, as well as expanding dialogue on missile
defense.12 This initiative was dubbed as the NSSP and involved a series of reciprocal
steps.
11 See Bharatiya Janata Party at [http://www.bjp.org].
12 See [http://www.whitehouse.gov/news/releases/2004/01/20040112-1.html].

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CRS-14
In July 2005, the State Department announced successful completion of the
NSSP, allowing for expanded bilateral commercial satellite cooperation,
removal/revision of some U.S. export license requirements for certain dual-use and
civil nuclear items. Taken together, the July 2005 U.S.-India Joint Statement and a
June 2005 U.S.-India Defense Framework Agreement include provisions for moving
forward in all four NSSP issue-areas.13 Many observers saw in the NSSP evidence
of a major and positive shift in the U.S. strategic orientation toward India, a shift later
illuminated more starkly with the Bush Administration’s intention to initiate full civil
nuclear cooperation with India. (See also CRS Report RL33072, U.S.-India Bilateral
Agreements and ‘Global Partnership.’)
Civil Nuclear Cooperation. India’s status as a non-signatory to the 1968
Nuclear Nonproliferation Treaty (NPT) has kept it from accessing most nuclear-
related materials and fuels on the international market for more than three decades.
New Delhi’s 1974 “peaceful nuclear explosion” spurred the U.S.-led creation of the
Nuclear Suppliers Group (NSG) — an international export control regime for
nuclear-related trade — and the U.S. government further tightened its own export
laws with the Nuclear Nonproliferation Act of 1978. New Delhi has long railed at
a “nuclear apartheid” created by apparent double standards inherent in the NPT,
which allows certain states to legitimately employ nuclear deterrents while other
states cannot.
The Bush Administration Policy Shift. Differences over nuclear policy
bedeviled U.S.-India ties for decades and — given New Delhi’s lingering
resentments — have presented a major psychological obstacle to more expansive
bilateral relations. In a major policy shift, the July 2005 U.S.-India Joint Statement
notably asserted that, “as a responsible state with advanced nuclear technology, India
should acquire the same benefits and advantages as other such states,” and President
Bush vowed to work on achieving “full civilian nuclear energy cooperation with
India.” As a reversal of three decades of U.S. nonproliferation policy, such proposed
cooperation stirred controversy and required changes in both U.S. law and in NSG
guidelines. India reciprocally agreed to take its own steps, including identifying and
separating its civilian and military nuclear facilities in a phased manner and placing
the former under international safeguards. Some in Congress express concern that
civil nuclear cooperation with India might allow that country to advance its military
nuclear projects and be harmful to broader U.S. nonproliferation efforts. While the
Bush Administration previously had insisted that such cooperation would take place
only within the limits set by multilateral nonproliferation regimes, the Administration
later actively sought adjustments to U.S. laws and policies, and has approached the
NSG in an effort to adjust that regime’s guidelines, which are set by member
consensus.
In March 2006, President Bush and Prime Minister Singh issued a Joint
Statement that included an announcement of “successful completion of India’s
13 See [http://www.whitehouse.gov/news/releases/2005/07/20050718-6.html] and
[http://www.indianembassy.org/press_release/2005/June/31.htm].

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CRS-15
[nuclear facility] separation plan.”14 After months of complex and difficult
negotiations, the Indian government had presented a plan to separate its civilian and
military nuclear facilities as per the July 2005 Joint Statement. The separation plan
would require India to move 14 of its 22 reactors into permanent international
oversight by the year 2014 and place all future civilian reactors under permanent
safeguards. Shortly thereafter, legislation to waive the application of certain
requirements under the Atomic Energy Act of 1954 with respect to India was, at the
President’s request, introduced in the U.S. Congress.
Potential Benefits and Costs. Secretary of State Rice appeared before key
Senate and House committees in April 2006 to press the Bush Administration’s case
for civil nuclear cooperation with India. The Administration offered five main
justifications for making changes in U.S. law to allow for such cooperation,
contending that doing so would
! benefit U.S. security by bringing India “into the nonproliferation
mainstream;”
! benefit U.S. consumers by reducing pressures on global energy
markets, especially carbon-based fuels;
! benefit the environment by reducing carbon emissions/greenhouse
gases;
! benefit U.S. business interests through sales to India of nuclear
reactors, fuel, and support services; and
! benefit progress of the broader U.S.-India “global partnership.”15
Many leading American experts on South Asian affairs joined the Administration in
urging Congress to support the new policy, placing particular emphasis on the
“necessary” role it would play in promoting a U.S.-India global partnership.16
Further hearings in the Senate (April 26) and House (May 11) saw a total of
fifteen independent analysts weigh in on the potential benefits and/or problems that
might accrue from such cooperation. Some experts opined that the Administration’s
optimism, perhaps especially as related to the potential effects on global energy
markets and carbon emissions, could not be supported through realistic projections.
Numerous nonproliferation experts, scientists, and former U.S. government officials
warned that the Bush Administration’s initiative was ill-considered, arguing that it
would facilitate an increase in the size of India’s nuclear arsenal, potentially leading
to a nuclear arms race in Asia, and would undermine the global nonproliferation
regime and cause significant damage to key U.S. security interests.17
14 See [http://www.whitehouse.gov/news/releases/2006/03/20060302-5.html].
15 See “U.S.-India Civil Nuclear Cooperation Initiative Fact Sheet,” U.S. Department of
State, at [http://www.state.gov/r/pa/scp/2006/62904.htm]; Condoleezza Rice, “Our
Opportunity With India,” Washington Post, Mar. 13, 2006.
16 See, for example, an open letter Congress at [http://www.indianembassy.org/newsite/
press_release/2006/Mar/30.asp].
17 See, for example, open letters to Congress at [http://fas.org/intt2006/X3e_FDC01218.pdf];
(continued...)

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CRS-16
The U.S. Chamber of Commerce, which, along with the U.S.-India Business
Council, lobbied vigorously in favor of President Bush’s initiative, speculated that
civil nuclear cooperation with India could generate contracts for American businesses
worth up to $100 billion, as well as generate up to 27,000 new American jobs each
year for a decade.18 However, foreign companies such as Russia’s Atomstroyexport
and France’s Areva may be better poised to take advantage of the Indian market.
Moreover, U.S. nuclear suppliers will likely balk at entering the Indian market in the
absence of nuclear liability protection, which New Delhi does not offer at present.
Geopolitical Motives. In the realm of geopolitics, much of the
Administration’s argument for moving forward with the U.S.-India nuclear initiative
appears rooted in an anticipation/expectation that New Delhi will in coming years
and decades make policy choices that are more congruent with U.S. regional and
global interests (a desire for such congruence is, in fact, written into P.L. 109-401).
Proponents suggest that this U.S. “gesture” will have significant and lasting
psychological and symbolic effects in addition to the strictly material ones, and that
Indian leaders require such a gesture in order to feel confident in the United States
as a reliable partner on the world stage.19 Skeptics aver that the potential strategic
benefits of the nuclear initiative are being over-sold. Indeed, centuries of Indian anti-
colonial sentiments and oftentimes prickly, independent foreign policy choices are
unlikely to be set aside in the short run, meaning that the anticipated geopolitical
benefits of civil nuclear cooperation with India remain speculative and at least
somewhat dependent upon unknowable global political developments.
Congressional Action. After months of consideration, the House
International Relations Committee and Senate Foreign Affairs Committee both took
action on relevant legislation in late June 2006, passing modified versions of the
Administration’s proposals by wide margins. The new House and Senate bills (H.R.
5682 and S. 3709) made significant procedural changes to the Administration’s
proposal, changes that sought to retain congressional oversight of the negotiation
process, in part by requiring the Administration to gain future congressional approval
of a completed peaceful nuclear cooperation agreement with India (this is often
referred to as a “123 Agreement,” as it is negotiated under the conditions set forth in
Section 123 of the Atomic Energy Act).
During the final months of its tenure, the 109th Congress demonstrated
widespread bipartisan support for the Administration’s new policy initiative by
17 (...continued)
[http://www.armscontrol.or g/ pdf /20060912_India_Ltr_Congress.pdf]; and
[http://www.armscontrol.org/pdf/20051118_India_Ltr_Congress.pdf].
18 See Sridhar Krishnaswami, “‘Indo-US N-deal a Historic Opportunity,’” Rediff India
Abroad, Mar. 22, 2006, at [http://www.rediff.com/news/2006/mar/22ndeal.htm].
19 Some believe that offering U.S. support for a permanent Indian seat on the U.N. Security
Council (UNSC) might have been a more appropriate and more readily delivered gesture.
For example, the former Chairman of the House International Relations Subcommittee on
Asia and the Pacific, Representative Jim Leach, called U.S. support for India’s permanent
seat on the UNSC a “self-apparent gesture” (House Committee on International Relations
Hearing, “The U.S. and India: An Emerging Entente?,” Sep. 8, 2005).

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CRS-17
passing enabling legislation through both chambers (in July 2006, the House passed
H.R. 5682 by a vote of 359-68; in November, the Senate passed an amended version
of the same bill by a vote of 85-12). Numerous so-called “killer amendments” were
rejected by both chambers (Indian government and Bush Administration officials had
warned that certain proposed new provisions, such as those requiring that India halt
its fissile material production or end its military relations with Iran, would trigger
New Delhi’s withdrawal from the entire negotiation).
In a December 2006 “lame duck” session, congressional conferees reconciled
the House and Senate versions of the legislation and provided a 30-page explanatory
statement (H.Rept. 109-721). On December 18, President Bush signed the Henry J.
Hyde United States-India Peaceful Atomic Energy Cooperation Act of 2006 into law
(P.L. 109-401), calling it a “historic agreement” that would help the United States
and India meet the energy and security challenges of the 21st century. The President
also issued a signing statement asserting that his approval of the Act “does not
constitute [his] adoption of the statements of policy as U.S. foreign policy” and that
he will construe such policy statements as “advisory.” Some Members of Congress
later expressed concern that President Bush would seek to disregard Congress’s
will.20
Civil nuclear cooperation with India cannot commence until Washington and
New Delhi finalize a peaceful nuclear cooperation agreement, until the NSG allows
for such cooperation, and until New Delhi concludes its own safeguards agreement
with the International Atomic Energy Agency. (See CRS Report RL33016, U.S.
Nuclear Cooperation With India.)
Indian Concerns. Almost immediately upon the release of the July 2005
Joint Statement, key Indian political figures and members of the country’s insular
nuclear scientific community issued strong criticisms of the U.S.-India civil nuclear
initiative; critics continue to be vocal to this day. Former Prime Minister Vajpayee,
along with many leading figures in his Bharatiya Janata Party (BJP), insisted that the
deal as envisioned would place unreasonable and unduly expensive demands on
India, particularly with regard to the separation of nuclear facilities. In reaction to
the U.S. Congress’s passage of enabling legislation in late 2006, the BJP listed
numerous continuing objections, and went so far as to call the deal “unacceptable”
and aimed at “capping, rolling back, and eventually eliminating India’s nuclear
weapons capability.”21 Many analysts view the BJP’s opposition as political rather
than substantive, especially in light of the fact that the 2004 NSSP initiative was
launched during the BJP’s tenure.
India’s influential communist parties, whose Left Front provides crucial support
to the Congress-led ruling coalition in New Delhi, have focused their ire on
geopolitical aspects of the civil nuclear initiative. In December 2006, the leader of
20 See [http://www.whitehouse.gov/news/releases/2006/12/20061218-1.html];
[http://www.whitehouse.gov/news/releases/2006/12/20061218-12.html]; Carol Giacomo,
“Bush India Statement Raises Congress Concerns,” Reuters, Dec. 21, 2006).
21 See “Press Statement of the BJP on the Indo-US Nuclear Deal,” Dec. 10, 2006, at
[http://www.bjp.org].

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CRS-18
India’s main communist party said the U.S.-India civil nuclear deal was “not
acceptable” as it would “seriously undermine India’s independent foreign policy.”
Previously, the Left Front had called India’s two IAEA votes on Iran a “capitulation”
to U.S. pressure. Indian leftists thus have been at the forefront of political resistance
to India’s becoming a “junior partner” of the United States.
Equally stinging and perhaps more substantive criticism has come from several
key Indian scientists, whose perspectives on the technical details of the civil nuclear
initiative are considered highly credible. India’s nuclear scientific community,
mostly barred from collaboration with international civil nuclear enterprises as well
as direct access to key technologies, has worked for decades in relative isolation,
making its members both proud of their singular accomplishments and sensitive to
any signs of foreign “interference.” Many view the enabling legislation passed by the
U.S. Congress as being more about nonproliferation and less about energy
cooperation. They consider it both intrusive on and preclusive of their activities.
The seven major criticisms of existing plans for U.S.-India civil nuclear
cooperation made by Indian commentators may be summarized as follows:
! Intra-U.S. government certification and reporting requirements are
overly rigorous;
! India’s unilateral moratorium on nuclear tests is being codified into
a bilateral obligation;
! India is being denied nuclear reprocessing technologies warranted
under “full cooperation;”
! India has not been given assurances that it will receive uninterrupted
fuel supplies in perpetuity;
! The United States is retaining the right to carry out its own
“intrusive” end-use verifications;
! India is being expected to adhere to multilateral protocols, including
the Proliferation Security Initiative, the Missile Technology Control
Regime, and the Waasenaar Arrangement, which it has declined to
accept in the past; and
! Language on securing India’s assistance with U.S. efforts to prevent
Iran from obtaining weapons of mass destruction limits New Delhi’s
foreign policy independence.22
Prime Minister Singh has stood firm against such wide-ranging and high-profile
criticisms, repeatedly assuring his Parliament that relevant negotiations with the
United States have not altered basic Indian policies or affected New Delhi’s
independence on matters of national interest. Within this context, however, Singh
has expressed serious concern about the points listed above.23 Regardless of the
22 Ibid.; M.R. Srinavasan, “India May Lose Control of Its Nuclear Future,” Frontline
(Madras), Dec. 14, 2006; “India’s Top Scientists Oppose US Deal,” Agence France Presse,”
Dec. 16, 2006; V. Sudarshan, “Not Much Frisson,” Outlook (Delhi), Dec. 25, 2006.
23 See “Excerpts from PM’s Reply to Discussion in Rajya Sabha on Civil Nuclear Energy
Cooperation with the United States,” Aug. 17, 2006, at
(continued...)

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CRS-19
legally binding or non-binding nature of certain controversial sections of the U.S.
legislation, New Delhi has found many of them to be either “prescriptive” in ways
incompatible with the provisions of the July 2005 and March 2006 Joint Statements,
or “extraneous” and inappropriate to engagements “among friends.”24
Civil Space Cooperation. India has long sought access to American space
technology; such access has since the 1980s been limited by U.S. and international
“red lines” meant to prevent assistance that could benefit India’s military missile
programs. India’s space-launch vehicle technology was obtained largely from foreign
sources, including the United States, and forms the basis of its intermediate-range
Agni ballistic missile booster, as well as its suspected Surya intercontinental ballistic
missile program. The NSSP called for enhanced U.S.-India cooperation on the
peaceful uses of space technology, and the July 2005 Joint Statement called for closer
ties in space exploration, satellite navigation and launch, and in the commercial space
arena. Conferences on India-U.S. space science and commerce were held in
Bangalore (headquarters of the Indian Space Research Organization) in 2004 and
2005. During President Bush’s March 2006 visit to India, the two countries
committed to move forward with agreements that will permit the launch of U.S.
satellites and satellites containing U.S. components by Indian space launch vehicles
and, two months later, they agreed to include two U.S. scientific instruments on
India’s Chandrayaan lunar mission planned for 2007.
High-Technology Trade. U.S. Commerce Department officials have sought
to dispel “trade-deterring myths” about limits on dual-use trade by noting that only
about 1% of total U.S. trade value with India is subject to licensing requirements and
that the great majority of dual-use licensing applications for India are approved (more
than 90% in FY2005). July 2003 saw the inaugural session of the U.S.-India High-
Technology Cooperation Group (HTCG), where officials discussed a wide range of
issues relevant to creating the conditions for more robust bilateral high technology
commerce; the fourth HTCG meeting was held in New Delhi in November 2005 (in
early 2005, the inaugural session of the U.S.-India High-Technology Defense
Working Group was held under HTCG auspices).25
Since 1998, a number of Indian entities have been subjected to case-by-case
licensing requirements and appear on the U.S. export control “Entity List” of foreign
end users involved in weapons proliferation activities. In September 2004, as part
of NSSP implementation, the United States modified some export licensing policies
and removed the Indian Space Research Organization (ISRO) headquarters from the
Entity List. Further adjustments came in August 2005 when six more subordinate
entities were removed. Indian entities remaining on the Entity List are four
subordinates of the ISRO, four subordinates of the Defense Research and
23 (...continued)
[http://www.carnegieendowment.org/static/npp/Singh_speech_Aug_2006.pdf].
24 Author interview with Indian government officials, New Delhi, Sep.13, 2006.
25 See U.S. Department of Commerce, Bureau of Industry and Security fact sheets at
[http://www.bis.doc.gov/InternationalPrograms/IndiaCooperation.htm] and
[http://www.bis.doc.gov/InternationalPrograms/IndialCoopPresentation.htm].

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CRS-20
Development Organization, one Department of Atomic Energy entity, and Bharat
Dynamics Limited, a missile production agency.26
Security Issues
U.S.-India Security Cooperation. Defense cooperation between the United
States and India is in the early stages of development (unlike U.S.-Pakistan military
ties, which date back to the 1950s). Since September 2001, and despite a concurrent
U.S. rapprochement with Pakistan, U.S.-India security cooperation has flourished.
The India-U.S. Defense Policy Group (DPG) — moribund since India’s 1998 nuclear
tests and ensuing U.S. sanctions — was revived in late 2001 and meets annually;
U.S. diplomats call military cooperation among the most important aspects of
transformed bilateral relations. In June 2005, the United States and India signed a
ten-year defense pact outlining planned collaboration in multilateral operations,
expanded two-way defense trade, increasing opportunities for technology transfers
and co-production, expanded collaboration related to missile defense, and
establishment of a bilateral Defense Procurement and Production Group. The United
States views defense cooperation with India in the context of “common principles
and shared national interests” such as defeating terrorism, preventing weapons
proliferation, and maintaining regional stability. Many analysts laud increased U.S.-
India security ties as providing an alleged “hedge” against or “counterbalance” to
growing Chinese influence in Asia.
Since early 2002, the United States and India have held a series of
unprecedented and increasingly substantive combined exercises involving all military
services. “Cope India” air exercises have provided the U.S. military with its first
look at Russian-built Su-30MKIs; in 2004, mock air combat saw Indian pilots in late-
model Russian-built fighters hold off American pilots flying older F-15Cs, and
Indian successes were repeated versus U.S. F-16s in 2005. U.S. and Indian special
forces soldiers have held joint exercises near the India-China border, and major
annual “Malabar” joint naval exercises are held off the Indian coast (the sixth and
most recent in October 2006). Despite these developments, there remain indications
that the perceptions and expectations of top U.S. and Indian military leaders are
divergent on several key issues, including India’s regional role, approaches to
countering terrorism, and U.S.-Pakistan relations.
Along with increasing military-to-military ties, the issue of U.S. arms sales to
India has taken a higher profile. In 2002, the Pentagon negotiated a sale to India of
12 counter-battery radar sets (or “Firefinder” radars) worth a total of $190 million.
India also purchased $29 million worth of counterterrorism equipment for its special
forces and has received sophisticated U.S.-made electronic ground sensors to help
stem the tide of militant infiltration in the Kashmir region. In 2004, Congress was
notified of a possible sale to India involving up to $40 million worth of aircraft self-
protection systems to be mounted on the Boeing 737s that carry the Indian head of
state. The State Department has authorized Israel to sell to India the jointly
developed U.S.-Israeli Phalcon airborne early warning system, an expensive asset
that some analysts believe may tilt the regional strategic balance even further in
26 See [http://www.bis.doc.gov/Entities].

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CRS-21
India’s favor. In August 2006, New Delhi approved a $44 million plan to purchase
the USS Trenton, a decommissioned American amphibious transport dock. The ship,
which will become the second largest in the Indian navy, is set to fly the Indian flag
in early 2007, possibly carrying six surplus Sikorsky UH-3H Sea King helicopters
India seeks to purchase for another $39 million.
The Indian government reportedly possesses an extensive list of desired U.S.-
made weapons, including PAC-3 anti-missile systems, electronic warfare systems,
and possibly even combat aircraft. The March 2005 unveiling of the Bush
Administration’s “new strategy for South Asia” included assertions that the United
States welcomed Indian requests for information on the possible purchase of F-16 or
F/A-18 multi-role fighters, and indicated that Washington is “ready to discuss the
sale of transformative systems in areas such as command and control, early warning,
and missile defense.” American defense firms eagerly pursue new and expanded
business ties with India. Still, some top Indian officials express concern that the
United States is a “fickle” partner that may not always be relied upon to provide the
reciprocity, sensitivity, and high-technology transfers sought by New Delhi.27 (In
February 2006, the Indian Navy declined an offer to lease two U.S. P-3C maritime
reconnaissance aircraft, calling the arrangements “expensive.”)
In a controversial turn, the Indian government has sought to purchase a
sophisticated anti-missile platform, the Arrow Weapon System, from Israel. Because
the United States took the lead in the system’s development, the U.S. government has
veto power over any Israeli exports of the Arrow. Although Defense Department
officials are seen to support the sale as meshing with President Bush’s policy of
cooperating with friendly countries on missile defense, State Department officials are
reported to opposed the transfer, believing that it would send the wrong signal to
other weapons-exporting states at a time when the U.S. is seeking to discourage
international weapons proliferation. Indications are that a U.S. interest in
maintaining a strategic balance on the subcontinent, along with U.S. obligations
under the Missile Technology Control Regime, may preclude any approval of the
Arrow sale.
Joint U.S.-India military exercises and arms sales negotiations can cause
disquiet in Pakistan, where there is concern that induction of advanced weapons
systems into the region could disrupt the “strategic balance” there. Islamabad worries
that its already disadvantageous conventional military status vis-à-vis New Delhi will
be further eroded by India’s acquisition of sophisticated “force multipliers.” In fact,
numerous observers identify a pro-India drift in the U.S. government’s strategic
orientation in South Asia. Yet Washington regularly lauds Islamabad’s role as a key
ally in the U.S.-led counterterrorism coalition and assures Pakistan that it will take
no actions to disrupt strategic balance on the subcontinent. (See also CRS Report
RL33072, U.S.-India Bilateral Agreements, and CRS Report RL33515, Combat
Aircraft Sales to South Asia: Potential Implications.)
Nuclear Weapons and Missile Proliferation. Some policy analysts
consider the apparent arms race between India and Pakistan as posing perhaps the
27 See, for example, “Defense Firms Seek Sales in India,” Chicago Tribune, Dec. 21, 2006.

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CRS-22
most likely prospect for the future use of nuclear weapons by states. In May 1998,
India conducted five underground nuclear tests, breaking a self-imposed, 24-year
moratorium on such testing. Despite international efforts to dissuade it, Pakistan
quickly followed. The tests created a global storm of criticism and represented a
serious setback for two decades of U.S. nuclear nonproliferation efforts in South
Asia. Following the tests, President Clinton imposed full restrictions on non-
humanitarian aid to both India and Pakistan as mandated under Section 102 of the
Arms Export Control Act. India currently is believed to have enough fissile material,
mainly plutonium, for 55-115 nuclear weapons; Pakistan, with a program focused on
enriched uranium, may be capable of building a similar number. Both countries have
aircraft capable of delivering nuclear bombs. India’s military has inducted short- and
intermediate-range ballistic missiles, while Pakistan itself possesses short- and
medium-range missiles (allegedly acquired from China and North Korea). All are
assumed to be capable of delivering nuclear warheads over significant distances.
Proliferation in South Asia is part of a chain of rivalries — India seeking to
achieve deterrence against China, and Pakistan seeking to gain an “equalizer” against
a conventionally stronger India. In 1999, a quasi-governmental Indian body released
a Draft Nuclear Doctrine for India calling for a “minimum credible deterrent” (MCD)
based upon a triad of delivery systems and pledging that India will not be the first to
use nuclear weapons in a conflict. In January 2003, New Delhi announced creation
of a Nuclear Command Authority. After the body’s first session in September 2003,
participants vowed to “consolidate India’s nuclear deterrent.” India thus appears to
be taking the next steps toward operationalizing its nuclear weapons capability. (See
also CRS Report RL32115, Missile Proliferation and the Strategic Balance in South
Asia, and CRS Report RS21237, Indian and Pakistani Nuclear Weapons.)
U.S. Nonproliferation Efforts and Congressional Action. Soon after
the May 1998 nuclear tests in South Asia, Congress acted to ease aid sanctions
through a series of legislative measures.28 In September 2001, President Bush waived
remaining sanctions on India pursuant to P.L. 106-79. During the 1990s, the U.S.
security focus in South Asia sought to minimize damage to the nonproliferation
regime, prevent escalation of an arms race, and promote Indo-Pakistani bilateral
dialogue. In light of these goals, the Clinton Administration set out “benchmarks”
for India and Pakistan based on the contents of U.N. Security Council Resolution
1172, which condemned the two countries’ nuclear tests. These included signing and
ratifying the Comprehensive Nuclear Test Ban Treaty (CTBT); halting all further
production of fissile material and participating in Fissile Material Cutoff Treaty
negotiations; limiting development and deployment of WMD delivery vehicles; and
implementing strict export controls on sensitive WMD materials and technologies.
28 The India-Pakistan Relief Act of 1998 (in P.L. 105-277) authorized a one-year sanctions
waiver exercised by President Clinton in November 1998. The Department of Defense
Appropriations Act, 2000 (P.L. 106-79) gave the President permanent authority after
October 1999 to waive nuclear-test- related sanctions applied against India and Pakistan.
On October 27, 1999, President Clinton waived economic sanctions on India (Pakistan
remained under sanctions as a result of an October 1999 military coup). (See CRS Report
RS20995, India and Pakistan: U.S. Economic Sanctions.)

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CRS-23
Progress in each of these areas has been limited, and the Bush Administration
quickly set aside the benchmark framework. Along with security concerns, the
governments of both India and Pakistan faced the prestige factor attached to their
nuclear programs and domestic resistance to relinquishing what are perceived to be
potent symbols of national power. Neither has signed the CTBT, and both appear to
be producing weapons-grade fissile materials. (India has consistently rejected the
CTBT, as well as the Nuclear Nonproliferation Treaty, as discriminatory, calling
instead for a global nuclear disarmament regime. Although both India and Pakistan
currently observe self-imposed moratoria on nuclear testing, they continue to resist
signing the CTBT — a position made more tenable by U.S. Senate’s rejection of the
treaty in 1999.) The status of weaponization and deployment is unclear, though there
are indications that this is occurring at a slow but steady pace. Section 1601 of P.L.
107-228 outlined U.S. nonproliferation objectives for South Asia. Some Members
of Congress identify “contradictions” in U.S. nonproliferation policy toward South
Asia, particularly as related to the Senate’s rejection of the CTBT and U.S. plans to
build new nuclear weapons. In May 2006, the United States presented in Geneva a
draft global treaty to ban future production of fissile material (a Fissile Material
Cutoff Treaty) that it hopes will be supported by India. Some analysts speculated that
the move was meant to bolster U.S. congressional support for proposed U.S.-India
civil nuclear cooperation.
India-Iran Relations. India’s relations with Iran traditionally have been
positive and, in 2003, the two countries launched a bilateral “strategic partnership.”29
Many in the U.S. Congress have voiced concern that New Delhi’s policies toward
Tehran’s controversial nuclear program may not be congruent with those of
Washington, although these concerns were eased when India voted with the United
States (and the majority) at the International Atomic Energy Agency sessions of
September 2005 and February 2006. In each of the past three years, the United States
has sanctioned Indian scientists and chemical companies for transferring to Iran
WMD-related equipment and/or technology (most sanctions have been chemical-
related, but one scientist was alleged to have aided Iran’s nuclear program); New
Delhi called the moves unjustified. Included in legislation to enable U.S.-India civil
nuclear cooperation (P.L. 109-141) was a non-binding assertion that U.S. policy
should “secure India’s full and active participation” in U.S. efforts to prevent Iran
from acquiring weapons of mass destruction.30 Some in Congress also have noted
with alarm reports of contacts between the Indian and Iranian militaries, although
such contacts may be insubstantial.31
29 See text of the January 2003 “New Delhi Declaration” at [http://meaindia.nic.in/
declarestatement/2003/01/25jd1.htm].
30 Although President Bush indicated he has not adopted the law’s statements of policy as
U.S. foreign policy, this provision has rankled many in New Delhi who view it as an
“extraneous” constraint on India’s foreign policy independence. In their explanatory
statement accompanying P.L. 109-401, congressional conferees repeatedly emphasized their
belief that securing India’s assistance on this matter was “critical” (H.Rept. 109-721).
31 See, for example, Vivek Raghuvanshi and Gopal Ratnam, “Indian Navy Trains Iranian
Sailors,” Defense News, Mar. 27, 2006; “India-Iran Military Ties Growing,” Strategic
Affairs, June 16, 2001; “Rice Downplays India’s Iran Links,” CNN.com, Apr. 6, 2006.

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CRS-24
There are further U.S. concerns that India will seek energy resources from Iran,
thus benefitting financially a country the United States is seeking to isolate. Indian
firms have in recent years taken long-term contracts for purchase of Iranian gas and
oil. Purchases could be worth many billions of dollars, but thus far differences over
pricing have precluded sales. Building upon growing energy ties is the proposed
construction of a pipeline to deliver Iranian natural gas to India through Pakistan.
The Bush Administration has expressed strong opposition to any gas pipeline
projects involving Iran, but top Indian officials insist the project is in India’s national
interest and they remain “fully committed” to the multi-billion-dollar venture, which
may begin construction in 2007. The Iran-Libya Sanctions Act (P.L. 107-24)
required the President to impose sanctions on foreign companies that make an
“investment” of more than $20 million in one year in Iran’s energy sector. The 109th
Congress extended this provision in the Iran Freedom Support Act (P.L. 109-293).
To date, no firms have been sanctioned under these Acts. (See also CRS Report
RS22486, India-Iran Relations and U.S. Interests, and CRS Report RS20871, The
Iran-Libya Sanctions Act.)
India’s Economy and U.S. Concerns
Overview. India is in the midst of a major and rapid economic expansion, with
an economy projected to be the world’s third largest in coming decades. Although
there is widespread and serious poverty in the country, observers believe long-term
economic potential is tremendous, and recent strides in the technology sector have
brought international attention to such high-tech centers as Bangalore and Hyderabad.
However, many analysts and business leaders, along with U.S. government officials,
point to excessive regulatory and bureaucratic structures as a hindrance to the
realization of India’s full economic potential. The high cost of capital (rooted in
large government budget deficits) and an “abysmal” infrastructure also draw negative
appraisals as obstacles to growth. Constant comparisons with the progress of the
Chinese economy show India lagging in rates of growth and foreign investment, and
in the removal of trade barriers.
India’s per capita GDP is still less than $800 ($3,510 when accounting for
purchasing power parity). The highly-touted information technology and business
processing industries only employ about one-third of one percent of India’s work
force and, while optimists vaunt an Indian “middle class” of some 300 million
people, a roughly equal number of Indians subsist on less than $1 per day.32 Yet,
even with the existence of ongoing problems, the current growth rate of India’s
increasingly service-driven economy is among the highest in the world and has
brought the benefits of development to many millions of citizens. The U.N.
Development Program ranked India 126th out of 177 countries on its 2006 human
development index, up from 127th in both 2004 and 2005.
After enjoying an average growth rate above 6% for the 1990s, India’s economy
cooled with the global economic downturn after 2000. Yet sluggish Cold War-era
“Hindu rates of growth” became a thing of the past. For the fiscal year ending March
32 A December 2006 study by the Indian Ministry of Statistics found that more than 200
million citizens in rural areas subsist on less than 12 rupees (about 27 cents) per day.

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CRS-25
2006, real change in GDP was 8.5%, the second-fastest rate of growth among the
world’s 20 largest economies. Robust growth in the services and industry sectors
continues, but is moderated by a fluctuating agricultural sector (low productivity
levels in this sector, which accounts for about one-fifth of the country’s GDP, are a
drag on overall growth). Estimated growth for the current fiscal year is about 8.7%
and short-term estimates are encouraging, predicting expansion well above 7% for
the next two years. A major upswing in services is expected to lead; this sector now
accounts for more than half of India’s GDP. Consumer price inflation has risen (a
year-on-year rate above 7% in October 2006), but is predicted to again drop to
between 5% and 6% in 2007. As of June 2006, India’s foreign exchange reserves
were at a record $163 billion. The soaring Bombay Stock Exchange tripled in value
from 2001-2006, then apparently overheated with the worst-ever daily decline of its
benchmark Sensex index on May 22, 2006, when almost 11% of its total value was
lost. The market has since stabilized and apparently recovered, reaching new highs
in the closing months of 2006.
A major U.S. concern with regard to India is the scope and pace of reforms in
what has been that country’s quasi-socialist economy. Economic reforms begun in
1991, under the Congress-led government of Prime Minister Rao and his finance
minister, current Prime Minister Manmohan Singh, boosted growth and led to major
new inbound foreign investment in the mid-1990s. Reform efforts stagnated,
however, under weak coalition governments later in the decade, and combined with
the 1997 Asian financial crisis and international sanctions on India (as a result of its
1998 nuclear tests) to further dampen the economic outlook. Following the 1999
parliamentary elections, the BJP-led government launched second-generation
economic reforms, including major deregulation, privatization, and tariff-reducing
measures.
Once seen as favoring domestic business and diffident about foreign
involvement, New Delhi appears to gradually be embracing globalization and has
sought to reassure foreign investors with promises of transparent and
nondiscriminatory policies. In February 2006, a top International Monetary Fund
official said that India’s continued rapid economic growth will be facilitated only by
enhanced Indian integration with the global economy through continued reforms and
infrastructure improvements. A November 2006 World Bank report identified the
country’s main economic challenges as
! improving the delivery of core public services such as healthcare,
education, power and water supply for all India’s citizens;
! making growth more inclusive by diminishing existing disparities,
accelerating agricultural growth, improving th job market, and
helping lagging states grow faster;
! sustaining growth by addressing its fiscal and trade deficits, and
pushing ahead with reforms that facilitate growth, and;
! addressing HIV/AIDS before the epidemic spreads to the general
public.
Trade and Investment. As India’s largest trade and investment partner, the
United States strongly supports New Delhi’s continuing economic reform policies;
a U.S.-India Trade Policy Forum was created in November 2005 to expand bilateral

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CRS-26
economic engagement and provide a venue for discussing multilateral trade issues.
India was the 22nd largest export market for U.S. goods in 2005 (up from 24th the
previous year). Levels of U.S.-India trade, while relatively low, are blossoming; the
total value of bilateral trade has doubled since 2001 and the two governments intend
to see it doubled again by 2009. U.S. exports to India in 2006 had an estimated value
of $9.9 billion (up 24% over 2005), with aircraft; business and telecommunications
equipment; pearls, gemstones, and jewelry; fertilizer; and chemicals as leading
categories. Imports from India in 2006 totaled an estimated $21.9 billion (up 17%
over 2005). Leading imports included cotton apparel; textiles; and pearls, gemstones,
and jewelry. Annual foreign direct investment to India from all countries rose from
about $100 million in 1990 to an estimated $7.4 billion for 2005 and more than $11
billion in 2006. About one-third of these investments was made by U.S. firms; in
recent months and years, the major U.S.-based companies Microsoft, Dell, Oracle,
and IBM announced plans for multi-billion-dollar investments in India. Strong
portfolio investment added another $10 billion in 2005. India has moved to raise
limits on foreign investment in several key sectors, although U.S. officials prod New
Delhi to make more rapid and more substantial changes to foreign investment
ceilings, especially in the retail, financial services, and banking sectors.
During his March 2006 visit to Delhi, President Bush noted India’s “dramatic
progress” in economic reform while insisting “there’s more work to be done,”
especially in lifting caps on foreign investment, making regulations more transparent,
and continuing to lower tariffs. That same month, the U.S.-India CEO Forum —
composed of ten chief executives from each country representing a cross-section of
key industrial sectors — issued a report identifying India’s poor infrastructure and
dense bureaucracy as key impediments to increased bilateral trade and investment
relations.33
Barriers to Trade and Investment. Despite significant tariff reductions
and other measures taken by India to improve market access, according to the 2006
report of the United States Trade Representative (USTR), a number of foreign trade
barriers remain, including high tariffs, especially in the agricultural sector. The
USTR asserts that “substantial expansion of U.S.-India trade will depend on
continued and significant additional Indian liberalization.”34 The Commerce
Department likewise encourages New Delhi to continue lowering tariffs as a means
of fostering trade and development.
India’s extensive trade and investment barriers have been criticized by U.S.
government officials and business leaders as an impediment to its own economic
development, as well as to stronger U.S.-India ties. For example, in 2004, the U.S.
Ambassador to India told a Delhi audience that “the U.S. is one of the world’s most
open economies and India is one of the most closed.” Later that year, U.S. Under
Secretary of State Alan Larson opined that “trade and investment flows between the
U.S. and India are far below where they should and can be,” adding that “the picture
33 See “U.S.-India Strategic Economic Partnership,” U.S.-India CEO Forum, Mar. 2006 at
[http://planningcommission.nic.in/reports/genrep/USIndia.pdf].
34 See [http://www.ustr.gov/Document_Library/Reports_Publications/Section_Index.html].

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CRS-27
for U.S. investment is also lackluster.” He identified the primary reason for the
suboptimal situation as “the slow pace of economic reform in India.”35
Inadequate intellectual property rights protection is another long-standing issue
between the United States and India. The USTR places India on its Special 301
Priority Watch List for “inadequate laws and ineffective enforcement” in this area.
The International Intellectual Property Alliance, a coalition of U.S. copyright-based
industries, estimated U.S. losses of $443 million due to trade piracy in India in 2005,
three-quarters of this in the categories of business and entertainment software
(estimated loss amounts for 2005 do not include motion picture piracy, which in 2004
was estimated to have cost some $80 million).36 In December 2006, Under Secretary
of Commerce and Director of the U.S. Patent and Trademark Office Jon Dudas told
a New Delhi audience that “further modifications are necessary” in India’s
intellectual property rights protection regime and that India’s copyright laws are
“insufficient in many aspects.” He also warned that “piracy and counterfeiting rates
will continue to rise without effective enforcement.”37
While the past two decades have seen a major transformation of the Indian
economy, it remains relatively closed in many aspects. The Heritage Foundation’s
2006 Index of Economic Freedom — which may overemphasize the value of absolute
growth and downplay broader quality-of-life measurements — again rated India as
being “mostly unfree,” highlighting especially restrictive trade policies, heavy
government involvement in the banking and finance sector, demanding regulatory
structures, and a high level of “black market” activity.38 The Vancouver-based Fraser
Institute provides a more positive assessment of economic freedom in India, while
also faulting excessive restrictions on capital markets and regulations on business.39
Corruption also plays a role: Berlin-based Transparency International placed India
70th out of 163 countries in its 2006 “corruption perceptions index.” The group’s
2006 “bribery index” found India to be the worst offender among the world’s top 30
exporting countries.40 (See also CRS Report RS21502, India-U.S. Economic
Relations.)
Multilateral Trade Negotiations. In July 2006, the World Trade
Organization’s “Doha Round” of multilateral trade negotiations were suspended
indefinitely due to disagreement among the WTO’s six core group members —
which include the United States and India — over methods to reduce trade-distorting
domestic subsidies, eliminate export subsidies, and increase market access for
agricultural products. The United States and other developed countries seek
substantial tariff reductions in the developing world. India, like other members of
35 See [http://www.state.gov/e/rls/rm/2004/36345.htm].
36 See [http://www.iipa.com/rbc/2006/2006SPEC301INDIA.pdf].
37 See [http://newdelhi.usembassy.gov/pr120706.html]. Bush Administration policy is at
[http://mumbai.usconsulate.gov/chris_israel.html].
38 See [http://www.heritage.org/research/features/index/country.cfm?id=India].
39 See [http://www.fraserinstitute.ca/admin/books/chapterfiles/3aEFW2006ch3A-K.pdf#].
40 See [http://www.transparency.org].

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the “G-20” group of developing states, has sought more market access for its goods
and services in the developed countries, while claiming that developing countries
should be given additional time to liberalize their own markets. In particular, India
is resistant to opening its markets to subsidized agricultural products from developed
countries, claiming this would result in further depopulation of the countryside.
India’s Commerce Minister, Kamal Nath, blamed U.S. intransigence for the Doha
Round’s collapse. In November 2006, during a visit to New Delhi to discuss trade
issues with top Indian leaders, U.S. Agriculture Secretary Mike Johanns urged India
to match “ambitious” U.S. offers and “lead the way toward unlocking the Doha
negotiations by offering real market access.”41 (See also CRS Report RL32060,
World Trade Organization Negotiations: The Doha Development Agenda, and CRS
Report RL33144, WTO Doha Round: The Agricultural Negotiations.)
The Energy Sector. India’s continued economic growth and security are
intimately linked to the supply of energy resources. Indeed, Indian leaders insist that
energy security is an essential component of the country’s development agenda,
calling for an integrated national energy policy, diversification of energy supplies,
greater energy efficiency, and rationalization of pricing mechanisms. The country’s
relatively poor natural energy resource endowment and poorly functioning energy
market are widely viewed as major constraints on the country’s continued rapid
economic growth. Estimates indicate that maintaining recent rates of growth will
require that India increase its commercial energy supplies by 4%-6% annually in
coming years.42 The U.S. government has committed to assist India in promoting the
development of stable and efficient energy markets there; a U.S.-India Energy
Dialogue was launched in July 2005 to provide a forum for bolstering bilateral energy
cooperation.43
India is the world’s fifth largest energy consumer and may become third by the
middle of this century. Overall power generation in the country more than doubled
from 1991 to 2005.44 Coal is the country’s leading commercial energy source,
accounting for more than half of national demand. India is the world’s third most
productive coal producer, and domestic supplies satisfy most demand (however, most
of India’s coal is a low-grade, high-ash variety of low efficiency). Oil consumption
accounts for some one-third of India’s total energy consumption; about 70% of this
oil is imported (at a rate of 1.7 million barrels per day in 2005), mostly from the West
Asia/Middle East region. India’s domestic natural gas supply is not likely to keep
pace with demand, and the country will have to import much of its natural gas, either
via pipeline or as liquefied natural gas. Hydropower, especially abundant in the
41 “India Blames U.S. for Failure of WTO Talks,” Hindu (Madras), July 26, 2006; Secretary
Johanns at [http://newdelhi.usembassy.gov/pr112106b.html].
42 See Vibhuti Hate, “India’s Energy Dilemma,” Center for Strategic and International
Studies, Sep. 7, 2006, at [http://www.csis.org/media/csis/pubs/sam98.pdf].
43 See U.S. Department of State fact sheet at [http://www.state.gov/p/sca/rls/fs/2005/
49724.htm]. In May 2006, the Senate Foreign Relations Committee passed S. 1950, to
promote global energy security through increased cooperation between the United States and
India on non-nuclear energy-related issues, but the full Senate took no action on the bill.
44 See [http://powermin.nic.in/reports/pdf/ar05_06.pdf].

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CRS-29
country’s northeast and near the border with Nepal, supplies about 5% of energy
needs. Nuclear power, which Indian government officials and some experts say is
a sector in dire need of expansion, currently accounts for only 1% of the country’s
energy supplies and less than 3% of total electricity generation.45 Even optimistic
projections suggest that nuclear power will provide less than 10% of India’s
generation capacity in 25 years.46 One-fifth of the country’s power is consumed by
farmers’ irrigation systems, making the farm lobby a powerful obstacle to curtailing
subsidies provided by State Electricity Boards, which collectively lose $4.5 billion
annually. Moreover, as much as 42% of India’s electricity is said to disappear though
“transmission losses,” i.e., theft.47
Regional Dissidence and Human Rights
The United States maintains an ongoing interest in India’s domestic stability and
the respect for internationally recognized human rights there. The U.S. Congress has
held hearings in which such issues are discussed. As a vast mosaic of ethnicities,
languages, cultures, and religions, India can be difficult to govern. Internal instability
resulting from diversity is further complicated by colonial legacies such as
international borders that separate members of the same ethnic groups, creating
flashpoints for regional dissidence and separatism. Beyond the Kashmir problem,
separatist insurgents in remote and underdeveloped northeast regions confound New
Delhi and create international tensions by operating out of neighboring Bangladesh,
Burma, Bhutan, and Nepal. Maoist rebels continue to operate in numerous states.
India also has suffered outbreaks of serious communal violence between Hindus and
Muslims, especially in the western Gujarat state. (See also CRS Report RL32259,
Terrorism in South Asia.)
India’s domestic security is a serious issue beyond the Jammu and Kashmir
state: in April 2006, Prime Minister Singh identified a worsening Maoist insurgency
as “the single biggest internal security challenge” ever faced by India. Lethal attacks
by these “Naxalites” continue and have included June and December landmine
explosions that left a total of 26 policemen dead in the eastern Jharkhand state.
Three days of communal rioting followed the demolition of a Muslim shrine in the
Gujarat state in May and left six people dead and dozens more injured. More than
1,000 Indian army troops were deployed to quell the violence. Later communal
clashes between Hindus and Muslims in the Uttar Pradesh state left two children
dead and more than 100 homes destroyed by fire. As for militant separatism in the
northeast, serious violence has flared anew in the Assam state following the collapse
of negotiations with the United Liberation Front of Assam, which is designated as a
“group of concern” by the U.S. State Department.
45 Data from U.S. Department of Energy, Energy Information Administration, Dec. 2005 at
[http://www.eia.doe.gov/emeu/cabs/india.html]; Tanvi Madan, “India,” Brookings
Institution Energy Security Series Report, Nov. 2006 at
[http://www.brookings.edu/fp/research/energy/2006india.pdf].
46 John Stephenson and Peter Tynan, “Will the U.S.-India Civil Nuclear Cooperation
Initiative Light India?,” Nov. 13, 2006, at [http://www.dalberg.com/npec.pdf].
47 Mark Gregory, “India Struggles With Power Theft,” BBC News, Mar. 15, 2006.

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CRS-30
The Kashmir Issue. Although India suffers from several militant regional
separatist movements, the Kashmir issue has proven the most lethal and intractable.
Conflict over Kashmiri sovereignty also has brought global attention to a potential
“flashpoint” for interstate war between nuclear-armed powers. The problem is rooted
in competing claims to the former princely state, divided since 1948 by a military
Line of Control (LOC) separating India’s Jammu and Kashmir and Pakistan-
controlled Azad [Free] Kashmir. India and Pakistan fought full-scale wars over
Kashmir in 1947-48 and 1965. Some Kashmiris seek independence from both
countries. Spurred by a perception of rigged state elections in 1989, an ongoing
separatist war between Islamic militants and their supporters and Indian security
forces in Indian-held Kashmir has claimed perhaps 66,000 lives.
Some separatist groups, such as the Jammu and Kashmir Liberation Front
(JKLF), continue to seek an independent or autonomous Kashmir. Others, including
the militant Hizbul Mujahideen (HuM), seek union with Pakistan. In 1993, the All
Parties Hurriyat [Freedom] Conference was formed as an umbrella organization for
groups opposed to Indian rule in Kashmir. The Hurriyat membership of more than
20 political and religious groups has included the JKLF (now a political group) and
Jamaat-e-Islami (the political wing of the HuM). The Hurriyat Conference, which
states that it is committed to seeking dialogue with the Indian government on a broad
range of issues, calls for a tripartite conference on Kashmir, including Pakistan, India,
and representatives of the Kashmiri people. Hurriyat leaders demand Kashmiri
representation at any talks between India and Pakistan on Kashmir. The Hurriyat
formally split in 2003 after a dispute between hardliners allied with Islamabad and
those favoring negotiation with New Delhi. Subsequent efforts to reunify the group
failed. In September 2005, the Congress-led government renewed high-level contact
with moderate Hurriyat leaders begun by the previous BJP-led coalition. New Delhi
vowed to pull troops out of Kashmir if militant infiltrations and violence there cease,
but to date only nominal troop withdrawals have come in response to a somewhat
improved security situation in the region.
India blames Pakistan for supporting “cross-border terrorism” and for fueling
a separatist rebellion in the Muslim-majority Kashmir Valley with arms, training, and
militants. Islamabad, for its part, claims to provide only diplomatic and moral
support to what it calls “freedom fighters” who resist Indian rule and suffer alleged
human rights abuses in the region. New Delhi insists that the dispute should not be
“internationalized” through involvement by third-party mediators and India is widely
believed to be satisfied with the territorial status quo. In 1999, a bloody, six-week-
long battle near the LOC at Kargil cost more than one thousand lives and included
Pakistani army troops crossing into Indian-controlled territory. Islamabad has sought
to bring external major power persuasion to bear on India, especially from the United
States. The longstanding U.S. position on Kashmir is that the issue must be resolved
through negotiations between India and Pakistan while taking into account the wishes
of the Kashmiri people.
The Northeast. Since the time of India’s foundation, numerous militant
groups have fought for greater ethnic autonomy, tribal rights, or independence in the
country’s northeast region. Some of the tribal struggles in the small states known as
the Seven Sisters are centuries old. It is estimated that more than 50,000 people have
been killed in such fighting since 1948, including some 10,000 deaths in 15 years of

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CRS-31
fighting in the Assam state. The United Liberation Front of Assam (ULFA), the
National Liberation Front of Tripura, the National Democratic Front of Bodoland
(NDFB), and the United National Liberation Front (seeking an independent Manipur)
are among the groups at war with the central government. In April 2005, the U.S.
State Department’s Counterterrorism Office named ULFA in its list of “other groups
of concern,” the first time an Indian separatist group outside Kashmir was so
named.48 A series of bombings left at least 15 people dead and dozens more injured
in Assam in November 2006; police blamed ULFA rebels for the attacks.
New Delhi has at times blamed Bangladesh, Burma, Nepal, and Bhutan for
“sheltering” one or more of these groups beyond the reach of Indian security forces,
and New Delhi has launched joint counter-insurgency operations with some of its
neighbors. India also has accused Pakistan’s intelligence agency of training and
equipping militants. Bhutan launched major military operations against suspected
rebel camps on Bhutanese territory in 2003 and appeared to have routed the ULFA
and NDFB. In 2004, five leading separatist groups from the region rejected New
Delhi’s offer of unconditional talks, saying talks can only take place under U.N.
mediation and if the sovereignty issue was on the table. Later, in what seemed a
blow to the new Congress-led government’s domestic security policies, a spate of
lethal violence in Assam and Nagaland was blamed on ULFA and NDFB militants
who had re-established their bases in Bhutan. Major Indian army operations in late
2004 may have overrun Manipur separatist bases near the Burmese border. New
Delhi’s hesitant year-long efforts at negotiation with ULFA rebels and a six-week-old
cease-fire in Assam collapsed in October 2006, leading to a spike of lethal violence
that included multiple bombings the final months of 2006.
Maoist Insurgency. Also operating in India are “Naxalites” — Maoist
insurgents ostensibly engaged in violent struggle on behalf of landless laborers and
tribals. These groups, most active in inland areas of east-central India, claim to be
battling oppression and exploitation in order to create a classless society. Their
opponents call them terrorists and extortionists. The groups get their name from
Naxalbari, a West Bengal village and site of a militant peasant uprising in 1967. In
April 2006, Prime Minister Singh identified a worsening Maoist insurgency as “the
single biggest internal security challenge” ever faced by India, saying it threatened
India’s democracy and “way of life.” The U.S. State Department’s Country Reports
on Terrorism 2005 warned that attacks by Maoist terrorists in India are “growing in
sophistication and lethality and may pose a long-term threat.”49 Naxalites now
operate in half of India’s 28 states and related violence caused nearly 1,000 deaths
in 2005.
The most notable of these outfits are the People’s War Group (PWG), mainly
active in the southern Andhra Pradesh state, and the Maoist Communist Center of
West Bengal and Bihar. In 2004, the two groups merged to form the Communist
Party of India (Maoist). Both appear on the U.S. State Department’s list of “groups
of concern” and both are designated as terrorist groups by New Delhi, which claims
there are nearly 10,000 Maoist militants active in the country. PWG fighters were
48 See [http://www.state.gov/s/ct/rls/crt/2005/65275.htm].
49 See [http://www.state.gov/s/ct/rls/crt/2005/64345.htm].

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CRS-32
behind a 2003 landmine attack that nearly killed the chief minster of Andhra Pradesh.
In 2004, that state’s government lifted an 11-year-old ban on the PWG, but the
Maoists soon withdrew from ensuing peace talks, accusing the state government of
breaking a cease-fire agreement. Violent attacks on government forces then escalated
in 2005 and continued with even greater frequency in 2006.
The Indian government has since May 2005 sponsored a grassroots anti-Maoist
effort. This “Salwa Jundum” (“Campaign for Peace” or, literally, “purification
hunt”) militia, especially active in the Chhattisgarh state, is viewed by some as an
effective countervailing people’s movement, but others label it a vigilante group that
has engaged in its own coercive and violent tactics against innocent tribals. New
Delhi has also expressed concern that indigenous Maoists are increasing their links
with Nepali communists that recently ended their war with the Kathmandu
government. Many analysts see abundant evidence that Naxalite activity is spreading
and becoming more audacious in the face of incoherent and insufficient Indian
government policies to halt it.
Hindu-Muslim Tensions. Some elements of India’s Hindu majority have at
times engaged in violent conflict with the country’s Muslim minority. In late 1992,
a huge mob of Hindu activists in the western city of Ayodhya demolished a 16th
century mosque said to have been built at the birth site of the Hindu god Rama.
Ensuing communal riots in cities across India left many hundreds dead. Bombay was
especially hard hit and was the site of coordinated 1993 terrorist bombings believed
to have been a retaliatory strike by Muslims. In early 2002, another group of Hindu
activists returning by train to the western state of Gujarat after a visit to the site of the
now razed Babri Mosque (and a proposed Hindu temple) were attacked by a Muslim
mob in the town of Godhra; 58 were killed. Up to 2,000 people died in the fearsome
communal rioting that followed, most of them Muslims. The BJP-led state and
national governments came under fire for inaction; some observers saw evidence of
state government complicity in anti-Muslim attacks.
The U.S. State Department and human rights groups have been critical of New
Delhi’s largely ineffectual efforts to bring those responsible to justice; some of these
criticisms were echoed by the Indian Supreme Court in 2003. In March 2005, the
State Department made a controversial decision to deny a U.S. visa to Gujarat Chief
Minster Narendra Modi under a U.S. law barring entry for foreign government
officials found to be complicit in severe violations of religious freedom. The
decision was strongly criticized in India. Sporadic incidents of communal violence
continued to destroy both lives and property in 2006.
Human Rights. According to the U.S. State Department’s India: Country
Report on Human Rights Practices, 2005, the Indian government “generally
respected the human rights of its citizens; however, numerous serious problems
remained.” These included extensive societal violence against women; extrajudicial
killings, including faked encounter killings; excessive use of force by security forces,
arbitrary arrests, and incommunicado detentions in Kashmir and several northeastern
states; torture and rape by agents of the government; poor prison conditions and
lengthy pretrial detentions without charge; forced prostitution; child prostitution and
female infanticide; human trafficking; and caste-based discrimination and violence,
among others. Terrorist attacks and kidnapings also remained grievous problems,

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CRS-33
especially in Kashmir and the northeastern states.50 New York-based Human Rights
Watch’s latest annual report noted “important positive steps” by the Indian
government in 2005 with respect to human rights, but also reviewed the persistence
of problems such as abuses by security forces and a failure to contain violent
religious extremism.51
The State Department’s Bureau of Democracy, Human Rights, and Labor has
claimed that India’s human right abuses “are generated by a traditionally hierarchical
social structure, deeply rooted tensions among the country’s many ethnic and
religious communities, violent secessionist movements and the authorities’ attempts
to repress them, and deficient police methods and training.”52 India’s 1958 Armed
Forces Special Powers Act, which gives security forces wide leeway to act with
impunity in conflict zones, has been called a facilitator of “grave human rights
abuses” in several Indian states. India generally denies international human rights
groups official access to Kashmir and other sensitive areas. State’s 2005-2006 report
on Supporting Human Rights and Democracy calls India “a vibrant democracy with
strong constitutional human rights protections,” but also asserts that “poor
enforcement of laws, widespread corruption, a lack of accountability, and the
severely overburdened court system weakened the delivery of justice.”53
Human Trafficking. The State Department’s June 2006 report on trafficking
in persons said that New Delhi “does not fully comply with the minimum standards
for the elimination of trafficking; however, it is making significant efforts to do so”
and it placed India on the “Tier 2 Watch List” for the third consecutive year “due to
its failure to show evidence of increasing efforts to address trafficking in persons.”
New Delhi later downplayed the claims and said the report was “not helpful.” The
trafficking of women and children is identified as a serious problem in India.54
Religious Freedom. An officially secular nation, India has a long tradition
of religious tolerance (with occasional lapses), which is protected under its
constitution. The population includes a Hindu majority of 82% as well as a large
Muslim minority of some 150 million (14%). Christians, Sikhs, Buddhists, Jains,
and others total less than 4%. Although freedom of religion is protected by the
Indian government, human rights groups have noted that India’s religious tolerance
is susceptible to attack by religious extremists.
In its annual report on international religious freedom released in November
2005, the State Department found that the status of religious freedom in India had
“improved in a number of ways ... yet serious problems remained.” It lauded the
New Delhi government for demonstrating a commitment to policies of religious
inclusion, while claiming that “the government sometimes in the recent past did not
50 See [http://www.state.gov/g/drl/rls/hrrpt/2005/61707.htm].
51 See [http://hrw.org/wr2k6/wr2006.pdf].
52 Supporting Human Rights and Democracy: The U.S. Record 2002 -2003,” U.S.
Department of State, at [http://www.state.gov/g/drl/rls/shrd/2002/21760.htm].
53 See [http://www.state.gov/g/drl/rls/shrd/2005/63948.htm].
54 See [http://www.state.gov/g/tip/rls/tiprpt/2006/65989.htm].

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CRS-34
act swiftly enough to counter societal attacks against religious minorities and
attempts by some leaders of state and local governments to limit religious freedom.”55
A May 2006 report of the U.S. Commission on International Religious Freedom
lauds continued improvements since the May 2004 election of the Congress-led
coalition, but warns that concerns about religious freedom in India remain. These
include ongoing attacks against religious minorities, perpetrated mainly by Hindu
activists and most often in states with BJP-led governments. The Commission also
continues to criticize allegedly insufficient state efforts to pursue justice in cases
related to 2002 communal rioting in Gujarat.56
HIV/AIDS
The United Nations estimates that 5.7 million Indians are infected with
HIV/AIDS, giving India the largest such population worldwide (India overtook South
Africa in this category in 2006). Due to the country’s large population, prevalence
rates among adults remain below 1%. India’s AIDS epidemic has become
generalized in four states in the country’s south (Andhra Pradesh, Tamil Nadu,
Karnataka, and Maharashtra) and two in the northeast (Manipur and Nagaland).
According to USAID, these six states account for 80% of the country’s reported
AIDS cases.57 India first launched its AIDS control program in 1992; New Delhi
boosted related funding to about $120 million in the most recent fiscal year. As part
of its foreign assistance program in India, the U.S. government supports integrated
HIV/AIDS prevention, treatment, and support services in high prevalence states.
Stigma, gender inequalities, and discrimination present major obstacles to controlling
India’s HIV/AIDS epidemic. In the country’s traditional society, open discussion of
sexuality and risk of infection is rare, making education and awareness difficult.
Analysts have said substantially greater resources are needed to address HIV/AIDS
in India than are currently available.58 (See also CRS Report RL33771, Trends in
U.S. Global AIDS Spending: FY2000-FY2007.)
U.S. Assistance
Economic. According to the U.S. Agency for International Development
(USAID), India has more people living in abject poverty (some 385 million) than do
Latin America and Africa combined. From 1947 through 2005, the United States
provided nearly $15 billion in economic loans and grants to India. USAID programs
in India, budgeted at about $68 million in FY2006, concentrate on five areas: (1)
economic growth (increased transparency and efficiency in the mobilization and
allocation of resources); (2) health (improved overall health with a greater integration
of food assistance, reproductive services, and the prevention of HIV/AIDS and other
55 See [http://www.state.gov/g/drl/rls/irf/2006/71440.htm].
56 See [http://www.uscirf.gov/countries/publications/currentreport/index.html].
57 See “Health Profile: India,” U.S. Agency for International Development, at
[http://www.usaid.gov/our_work/global_health/aids/Countries/ane/india_05.pdf].
58 See, for example, Pramit Mitra and Teresita Schaffer, “Public Health and International
Security: The Case of India,” July 2006 at
[http://www.csis.org/media/csis/pubs/060731_aids_india.pdf].

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CRS-35
infectious diseases); (3) disaster management; (4) energy and environment
(improved access to clean energy and water; the reduction of public subsidies through
improved cost recovery); and (5) opportunity and equity (improved access to
elementary education, and justice and other social and economic services for
vulnerable groups, especially women and children).59
Security. The United States has provided about $161 million in military
assistance to India since 1947, more than 90% of it distributed from 1962-1966. In
recent years, modest security-related assistance has emphasized export control
enhancements and military training. Earlier Bush Administration requests for
Foreign Military Financing were later withdrawn, with the two countries agreeing to
pursue commercial sales programs. The Pentagon reports military sales agreements
with India worth $288 million in FY2002-FY2005.
Table 1. U.S. Assistance to India, FY2001-FY2007
(in millions of dollars)
Program
FY2001
FY2002
FY2003
FY2004
FY2005
FY2006
FY2007
or
Actual
Actual
Actual
Actual
Actual
Est.
Request
Account
CSH
24.6
41.7
47.4
47.8
53.2
47.7
48.4
DA
28.8
29.2
34.5
22.5
24.9
10.9
10.0
ESF
5.0
7.0
10.5
14.9
14.9
5.0
6.5
IMET
0.5
1.0
1.0
1.4
1.5
1.2
1.5
NADR
0.9
0.9
1.0
0.7
4.2
2.4
1.5
Subtotal
$59.8
$79.8
$94.4
$106.2
$98.7
$67.2
$67.9
Food Aid*
78.3
105.7
44.8
30.8
26.1
43.0
—
Total
$138.1
$185.5
$139.2
$137.0
$124.8
$110.2
$67.9
Sources: U.S. Departments of State and Agriculture; U.S. Agency for International Development.
Abbreviations:
CSH:
Child Survival and Health
DA:
Development Assistance
ESF:
Economic Support Fund
IMET:
International Military Education and Training
NADR:
Nonproliferation, Anti-Terrorism, Demining, and Related (mainly export control
assistance, but includes anti-terrorism assistance for FY2007)
* P.L.480 Title II (grants) and Section 416(b) of the Agricultural Act of 1949, as amended (surplus
donations). Food aid totals do not include freight costs.
59 See USAID India at [http://www.usaid.gov/in].

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CRS-36
Figure 1. Map of India
Indian
Claim
Imphal
Kolkata
(Calcutta)
Mumbai
(Bombay)
I n d i a n
Marmagao
O c e a n
0
500 Miles
0
500 KM
Parallel scale at 25ûS 0ûE
Source: Map Resources. Adapted by CRS. (K.Yancey 7/6/06)

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