UPDATE 1-India-US talks to focus on Afghanistan, economic tie

* Two sides battle “sense of drift” in partnership

* Afghanistan/Pakistan policy looms over US-India meeting

* U.S. says expanding ties is big priority
(Adds comments from senior U.S. diplomat Bill Burns)

By Andrew Quinn

WASHINGTON, June 1 (BestGrowthStock) – India and the United States
open high-level talks this week, hoping to cement gains in a
partnership still bedeviled by doubts despite vows of deeper
political and economic cooperation.

Indian concerns focus on growing U.S. ties with its
arch-rival Pakistan — a key player in the U.S.-led war in
Afghanistan — while U.S. officials will likely press for more
progress in opening India’s huge market to U.S. companies in
the energy, retail and education sectors.

Secretary of State Hillary Clinton and Indian External
Affairs Minister S.M. Krishna will each lead large government
teams to the Washington meetings, which begin in earnest on
Wednesday and move into high gear on Thursday.

U.S. Undersecretary of State Bill Burns said on Tuesday
expanding U.S. political and economic ties with India was a
priority of the Obama administration, which also wanted closer
cooperation on issues from East Asia to the Middle East.

“India’s strength and progress on the world stage is deeply
in the strategic interest of the United States,” said Burns in
an address to the Council on Foreign Relations.

“Never has there been a moment when partnership between
India and America mattered more to the rest of the globe.”

U.S. officials have repeatedly sought to reassure India
that the bilateral relationship — which blossomed under former
President George W. Bush — remains on the fast track under his
successor, President Barack Obama.

Indian Prime Minister Manmohan Singh was Obama’s first
official state visitor in November, and Obama plans his own
return visit to New Delhi later this year.

Washington cites progress on climate change, Iran and
intelligence-sharing as hallmarks of the new cooperation.

STRAINS

But the partnership has come under strain in Afghanistan,
where India is jostling with Pakistan for influence ahead of
Washington’s planned troop withdrawal to start in mid-2011.
[ID:nN30218339]

The Obama administration has sent mixed signals over the
role India should play in Afghanistan, leaving diplomats to
beat back Indian fears that Pakistan’s strategic interests
could have more weight.

Burns sought to ease concerns over Afghanistan, saying
Washington valued India’s role there and saw its involvement as
a “key part of that country’s future success.”

But analysts say these persistent doubts point to a broader
uncertainty over how the two democracies will move forward.

“Be it Iran, Pakistan, terrorism or nuclear issues,
Washington had still not been able to figure out if India was
part of the problem or solution,” Uday Bhaskar of New
Delhi-based think tank National Maritime Foundation.

“There is a sense of drift on both sides.”

From the U.S. perspective, there is frustration over the
slow pace of major economic initiatives, including full
implementation of a 2008 civilian nuclear cooperation deal that
ended India’s nuclear isolation since its 1974 atomic test.

U.S. officials estimate the agreement could represent a $10
billion jackpot for U.S. reactor builders such as General
Electric Co. (GE.N: ) and Westinghouse Electric Co, a subsidiary
of Japan’s Toshiba Corp (6502.T: ).

But while Singh said in November he saw no hurdles to full
implementation of the deal, moves to set in place the legal
framework have been slow and look likely to encounter further
delay in India’s parliament.

Also moving slowly are Indian proposals to open up its $450
billion retail sector — of huge interest to companies such as
Wal-Mart Stores (WMT.N: ) — and to allow foreign universities to
set up Indian campuses, a focus for top-tier U.S. schools.

U.S. defense giants Lockheed Martin Corp (LMT.N: ) and Boeing
Co (BA.N: ) are watching hints that India may liberalize foreign
direct investment in its defense equipment market, which could
be worth $100 billion over the next 10 years.

Both companies are already bidding in India’s $11 billion
tender for 126 new fighter jets, which itself would be one of
the largest arms deals in the world.

Political analysts say the economic payoffs may come
eventually, but that the United States is learning it must be
patient as India works at its own pace.

“There is considerable frustration,” said Ashley Tellis, an
India expert at the Carnegie Endowment think-tank. “We don’t
understand the dynamics of domestic Indian politics. My sense
is that we will get what we want eventually, but it will never
be in the first iteration.”

Stock Market

(Additional reporting by Sue Pleming in Washington and
Krittivas Mukherjee in New Delhi; editing by Cynthia Osterman)

UPDATE 1-India-US talks to focus on Afghanistan, economic tie