U.S.-India summit comes as relations between the two languish

NEW DELHI — Although economics, trade, security and nuclear energy will figure prominently when President Obama meets with Indian Prime Minister Manmohan Singh in Washington on Friday, the elephant in the room will be a growing disenchantment with a relationship once thought to have near-unlimited potential.

After a hard-fought battle in both countries to finalize the 2008 U.S.-Indian civil nuclear agreement — essentially allowing India to regain full international standing after it was sanctioned for testing nuclear devices in 1974 and 1998 — many on both sides of the Pacific expected ties to strengthen.

But instead frustration has mounted since then. The U.S. has bridled at India’s perceived unwillingness to open markets, provide adequate support on international crises or cut through red tape and settle tax and protectionist issues.

India, meanwhile, is bothered by what it sees as a sense of entitlement among U.S. companies to the lion’s share of nuclear and defense contracts because of closer political ties. New Delhi, which is seeking a seat on the U.N. Security Council, also feels it’s being unfairly viewed as a regional counterweight to China when it’s focused on more pressing domestic issues.

“I feel there is a kind of slackening of tempo in India-U.S. relations,” said Salman Haider, a New Delhi-based analyst and a former Indian foreign secretary. “A top-level reaffirmation is desirable.”

Few deals are expected to result from Friday’s summit, the third between the U.S. and Indian leaders in four years, especially at a time when concessions are difficult because of India’s upcoming general election. Singh turned 81 on Thursday, and this is likely to be his last official meeting with Obama, said Vinod Kumar, an analyst with New Delhi’s Institute for Defense Studies and Analyses.

That said, the two sides appear keen to show at least modest progress, with an agreement expected between Nuclear Power Corp. of India and Westinghouse Electric Corp. to build reactors in India’s northwestern Gujarat state.

The U.S. will be looking for reassurance that India is tackling its economic woes. In recent months, India’s currency has depreciated, and the country has seen worsening fiscal and current account deficits, volatile markets, more capital controls and greater protectionism.

Though many developing countries have faced problems as international capital has gravitated toward the relatively robust U.S. market, India’s problems are made worse by political infighting, policy drift and massive corruption scandals, all of which have helped undermine consumer and investor confidence.

U.S. companies in particular are unhappy with requirements that a significant portion of their exports to India include content made by local companies. Also bothersome, they say, are uncertainty over taxation and restrictions on foreign companies investing in the Indian pension and insurance sectors.

“There is very little the prime minister can do personally to change any of this,” said Milan Vaishnav, an analyst with Washington’s Carnegie Endowment for International Peace. “But they at least want some reassurance that the government hears their concerns and is willing to take some remedial steps to address them.”

India, meanwhile, will probably be looking for assurance that it remains a central part of the U.S. strategic pivot toward the Asia-Pacific region. It will also look for better terms under America’s H-1B visa program for foreign high-tech workers coming to or already in the United States. And, as the world’s largest weapons importer, India seeks more joint design, development and production in defense projects.

Some in Washington wonder whether New Delhi actually wants significantly closer ties with the U.S. right now, even as India’s allure as a rising power diminishes.

“All of this, combined with general elections around the corner, mean that American expectations are low,” said Dhruva Jaishankar, a fellow with the German Marshall Fund of the United States in Washington. “The perception of economic turnaround would, however, change a lot.”

Both sides are also likely to discuss India’s neighbor Afghanistan, where U.S.-led NATO combat troops are preparing to withdraw by the end of 2014 amid concern that a resurgent Taliban could further destabilize the region.

Obama and Singh are also expected to discuss a proposed bilateral investment treaty. U.S. companies welcomed a recent Indian concession allowing commercial disputes to be settled by international arbitration rather than through India’s often creaky courts, but they still view economic reforms as too slow. India counters that it’s moving at its own pace, and cites recently eased restrictions on foreign retailers.

Liability issues remain a major sticking point with the cornerstone civil nuclear deal, which allowed India to acquire nuclear fuel for civilian use from suppliers around the globe. Under a 2010 Indian law, foreign suppliers assume nearly unlimited liability for accidents.

Fresh in Indians’ minds is the 1984 Bhopal gas tragedy, which killed from 2,200 to more than 8,000 people, and the perception that U.S.-based chemical firm Union Carbide shirked its responsibilities. U.S. companies counter that open-ended liability is unworkable and out of step with international norms.

mark.magnier@latimes.com

Special correspondent Sharma reported from New Delhi and Times staff writer Magnier from Islamabad, Pakistan.