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Weapons of Mass Destruction (WMD)

[CRS Issue Brief for Congress]

93097: India - U.S. Relations

Updated December 9, 1996

Barbara Leitch LePoer
Foreign Affairs and National Defense Division

CONTENTS

SUMMARY

MOST RECENT DEVELOPMENTS

BACKGROUND AND ANALYSIS

Context of the Relationship
U.S. and Congressional Interest
India's Post-Cold War Adjustments
Foreign Policy Reassessment
Economic Reform
Baggage from the Past
Strategic Rivalries
Regional Dissidence
Social Tensions and Problems
Political Setting
1996 Parliamentary Election
Deve Gowda-led United Front Government
India-U.S. Relations and Bilateral Issues
Security
Nuclear Weapons and Missile Proliferation
Brokering an End to the India-Pakistan Rivalry
U.S.-India Military Cooperation
Regional Dissidence and Human Rights
Punjab
Kashmir
Human Rights
India's Economic Reforms and Market Opening
Trade Issues
Market Access Barriers
Intellectual Property Rights Protection
U.S. Aid
Narcotics

FOR ADDITIONAL READING


SUMMARY

Although the end of the Cold War has freed U.S.-India relations from the constraints of a bipolar world, relations continue to be affected by the burden of history, most notably the longstanding India-Pakistan regional rivalry. The main areas of U.S. and congressional interest in India include nuclear weapons and missile proliferation, regional stability, human rights, and economic policy issues.

The major U.S. concern in South Asia is the prevention of nuclear and ballistic missile proliferation and the reduction of tensions between India and Pakistan, which center on their competing claims to the former princely state of Kashmir. India and Pakistan, both of which are believed to have nuclear weapons capability, have so far ignored U.S. and international pressure to sign the Nuclear Nonproliferation Treaty. Neither sanctions applied to India nor a cutoff of aid to Pakistan appear to have dampened the drive by both countries to acquire weapons of mass destruction and the means to deploy them. Partly through U.S. encouragement, India and Pakistan have adopted some confidence-building measures, such as periodic meetings of senior military commanders and a pledge not to attack each other's nuclear facilities. Despite these steps, IndiaPakistan relations continued to deteriorate in 1996.

Congress has been particularly concerned with human rights issues related to regional dissidence and separatist movements in Kashmir, Punjab, and India's Northeast. Strife in these areas over the past several years has resulted in the deaths of thousands of civilians, militants, and security forces. International human rights groups, as well as Congress and the U.S. State Department, have criticized India for alleged human rights abuses by its security forces, including mass arrests, indiscriminate firing on civilian crowds, rape, burning of business and residential neighborhoods, and torture and execution of prisoners in custody. In recent years, Congress has expressed its concern over human rights violations in Kashmir and Punjab in numerous resolutions, amendments, and committee reports.

The United States has been highly supportive of India's efforts to transform its formerly quasi-socialist economy through fiscal reform and market opening. After coming to power in 1991, the Narasimha Rao government, under the guidance of Finance Minister Manmohan Singh, began reducing inflation and the fiscal deficit, privatizing state-owned industries, reducing tariffs and industrial licensing controls, and instituting incentives to attract foreign trade and investment. Rapidly expanding U.S.- India economic relations were a major focus of the May 1994 visit of Rao to the United States, as well as subsequent visits to India by several U.S. cabinet-level delegations. The United Front coalition government, led by Prime Minister Deve Gowda, that came to power following Indian parliamentary elections in May-June 1996 has pledged to continue India on the path of economic reform and market opening. However, India's continuing market access barriers in some sectors, as well as its inadequate intellectual property rights protection for such items as pharmaceuticals, books, tapes, and videos, continue to be of concern.


MOST RECENT DEVELOPMENTS

On December 5, India announced that it would not produce its intermediate-range ballistic missile, Agni, unless the nation's security was threatened. Analysts viewed the decision as being motivated by a range of factors, including budget constraints, pressure from the United States and other Western nations, and improving relations with China. A visit by Chinese President Jiang Zemin to India in late November 1996 concluded with an agreement by India and China not to attack each other across their disputed border and to negotiate a partial withdrawal of troops from the border.

In November 1996, the U.S. government offered a "substantial" award, under its global rewards program established in 1984, for information on the whereabouts and welfare of Donald Hutchings, one of four Western tourists kidnaped in July 1995 in Jammu and Kashmir state by a previously unknown Kashmiri militant group, Al-Faran. A fifth hostage, Norwegian Hans Christian Ostroe, was found beheaded in August 1995. Amid concerns for the health and safety of the remaining captives, efforts by the Indian government to negotiate their release so far have been unsuccessful. Al-Faran reportedly demanded release of 15 militants held by the Indian government. The governments of India and Pakistan, as well as most Kashmiri separatist groups, have condemned the kidnapings, and the Clinton Administration long has called for the immediate release of the hostages.


BACKGROUND AND ANALYSIS

Context of the Relationship

U.S. and Congressional Interest

U.S. and congressional interest in India includes a wide spectrum of issues, ranging from nuclear and missile proliferation concerns through human rights, trade, and economic policy questions. In recent years these interests have been particularly affected by three developments: 1) the end of the Cold War and India's subsequent need to diversify its international relationships; 2) the adoption of sweeping economic policy reforms by the Narasimha Rao government beginning in 1991; and 3) deepening bitterness in ties between India and Pakistan over the Kashmir dispute and ongoing Indian preoccupation with China as a long-term source of strategic threat. Congress has been particularly focused on nuclear proliferation, human rights, and trade issues. A number of Members have backed measures that would seek cuts in U.S. aid to India as a means of expressing dissatisfaction with India's human rights policies.

India's Post-Cold War Adjustments

Foreign Policy Reassessment. Caught off guard by the precipitous end of the Cold War, India has sought over the past several years to adapt to new global realities that have antiquated many of its former policies, roles, and alliances. With the demise of the Soviet Union, India lost a reliable source of economic assistance and military equipment, a key trading partner, and the promise of political support in its adversarial relationships with neighboring China and Pakistan. Moreover, the end of a bipolar world has made India's traditional, though often symbolic, role as a leader of the nonaligned world essentially obsolete.

Both India and the United States are actively exploring the opportunity presented by the end of the Cold War for a more normal relationship between the world's two largest democracies. The withering of the formerly close U.S.-Pakistan alliance -- as a result of the Soviet departure from Afghanistan and Pakistan's nuclear weapons program -- has also been a contributing factor.

Economic Reform. New Delhi's fixation with quasi-socialist economic planning -- the results of which had, for more than a decade, compared badly with the spectacular growth of the market-oriented East Asian countries -- suffered a further blow in the rejection of that model by the former USSR and its successor states. On taking power in 1991, the Narasimha Rao government inherited a desperate financial situation. India's budget deficit exceeded 10% of its Gross Domestic Product (GDP), and inflation was running above 15%. With only a few weeks' worth of foreign exchange reserves on hand, the country was thought by some analysts to be on the brink of defaulting on its $80 billion foreign debt. All of these factors, however, were symptomatic of deeper economic problems created by decades of central planning and bureaucratic regulation that had stunted economic growth.

Rao's finance minister, Manmohan Singh, immediately embarked on a bold strategy of reforms to address India's economic problems. Since mid-1991, the government has substantially reduced inflation and the fiscal deficit, begun privatizing or cutting subsidies to inefficient state-owned industries, made the rupee convertible in international trade, and reduced tariffs and industrial licensing controls in order to attract foreign investment. The United States has been very supportive of India's economic reforms, which have been helped along by International Monetary Fund (IMF) assistance and prodding.

Baggage from the Past

Despite the lifting of Cold War constraints, in many policy spheres India remains shackled to the past. Rivalries with neighbors, separatist tendencies, and sectarian tensions continue to divert attention and resources from basic needs of economic and social development. Moreover, fallout from these unresolved problems -- particularly nuclear arms proliferation and human rights issues -- presents serious irritants in U.S.- Indian relations.

Strategic Rivalries. Three wars and a constant state of military preparedness on both sides of the border have marked the half-century of bitter rivalry between India and Pakistan. The acrimonious nature of the partition of British India in 1947 and the continuing dispute over Kashmir have been major sources of tension, leading both countries to devote comparatively large resources to building defense establishments that include a nuclear weapons capability as well as programs for developing ballistic missile delivery systems. The Kashmir problem is rooted in claims by both countries to the former princely state, divided by a military line of control, since 1948, into the Indian state of Jammu and Kashmir and Pakistan-controlled Azad (Free) Kashmir. India blames Pakistan for supporting a separatist movement raging in the Muslim-dominated Kashmir Valley since 1990. Pakistan claims only to lend moral and political support to the rebellion, while accusing India of creating dissension in Pakistan's Sindh province.

Adding to India's bitterness toward Pakistan is the latter's historically close ties with China. India and China fought a short border war in 1962, and China since then has occupied territory claimed by India. Although Sino-Indian relations have greatly improved in recent years, the two countries have yet to reach a boundary agreement. Moreover, India remains suspicious of China's nuclear weapons capability as well as its long-time support for Pakistan. During a visit by Rao to China in September 1993, however, the Indian prime minister and Chinese Premier Li Peng signed an agreement to reduce troops and maintain peace along the line of actual control (LAC) that divides their forces. Agreements on trade, environmental, and cultural cooperation were also signed. Despite expanding border trade and meetings of the India-China working group tasked with providing technical advice for the implementation of the agreement, by late 1995 little progress was apparent on troop reduction or boundary demarcation. After eight rounds of talks by the joint working group, however, both sides pulled back troops from four points along the eastern sector of the border in December 1995.

Regional Dissidence. A vastly diverse country in terms of ethnicity, language, culture, and religion, India can be a problematic country in terms of governance. Internal instability resulting from such diversity is further complicated by colonial legacies; international borders in many instances divide ethnic groups, creating flashpoints for regional dissidence and separatism. India's methods of managing such problems and crises, which do not always meet with internationally accepted human rights standards, have further alienated dissident groups.

Kashmir and Punjab are India's two major areas of separatist struggle. In the case of Punjab, Sikh separatists have sought for the past decade to establish an independent Khalistan (land of the pure community of Sikh believers). In the case of Kashmir, some militant groups, such as the Jammu and Kashmir Liberation Front (JKLF), seek an independent or autonomous Kashmir. Other groups, the largest of which is the Hizbullah Mujahadin (HM), seek union with Pakistan. There have been more than 20,000 casualties in Punjab in the past decade, including civilians, militants, and security forces. In Kashmir, a reported 25,000 civilians, militants, and security forces have been killed since 1990.

On a lesser scale, there are similar problems of incomplete national integration in other parts of India, particularly the Northeast, where a number of smaller dissident groups are fighting either for separate statehood, autonomy, or independence. The geographically remote and economically backward Northeast is populated by a mosaic of ethnic and religious groups, both tribal and non-tribal. Migration of nontribal peoples into less populated tribal areas is at the root of many problems in the region. Fighting in Manipur state between government forces and the separatist National Socialist Council for Nagaland (NSCN), which has bases in neighboring Burma, has worsened since 1993. The NSCN has sought for 40 years to establish a separate Naga nation encompassing Nagaland and parts of Manipur and Assam. More than 600 people have been killed in Manipur in recent years as a result of clashes between mainly separatists and security forces and between Christian Naga and Kuki tribespeoples in Manipur. In October 1996, following a six-day tour of the Northeast, Prime Minister Deve Gowda promised to deal with the problem of illegal migration into the region, as well as strengthen the infrastructural and agricultural sectors of the Northeast.

Social Tensions and Problems. In recent years, a rising tide of Hindu nationalism has posed a serious problem for the Indian government. Although India is more than 80% Hindu, its Westernized independence leaders, led by Jawaharlal Nehru and M.K. ("Mahatma") Gandhi, sought to establish a secular government with protection for India's many religious minorities, including the 100 million Muslims who comprise 10% of the current population.

The Hindu-led Bharatiya Janata Party (BJP), which has been both a driving force and a beneficiary of increasing Hindu militancy, claims there is broad support for establishment of a Hindu state. The well-disciplined BJP mushroomed from just two Parliamentary seats following the 1984 election to winning 119 seats in the 1991 election. In December 1992, a BJP-led march to build a temple dedicated to the Hindu god Ram on the site of the Babri mosque at Ayodhya resulted in the illegal destruction of the 400-year-old mosque. State government forces failed to control the situation and rioting ensued, leaving about 1,200 people, mostly Muslims, dead nationwide. In January 1993, some 600 more people were killed in anti-Muslim riots in Bombay. India's commercial center, Bombay previously had been relatively free of communal violence. Bombay also was the scene of ten synchronized terrorist bombings on Mar. 12, 1993 that targeted the city's stock exchange and major hotels, killing more than 300 and injuring 1,400. Although Indian government officials have accused Pakistan of complicity, the bombings have been linked, in part, to criminal elements, a growing problem throughout India. By late 1994, the country appeared to have put the episode behind it, and Bombay had returned to its role as the center of India's booming economy.

Political Setting

1996 Parliamentary Election. As a result of the voting, no single party won a majority in the 545-seat Parliament. The election was a serious defeat for former Prime Minister Narasimha Rao's Congress Party, which led the struggle for independence from the British in 1947, and had been the ruling party in India for most of the post-independence period. Factors in the decline of national support for the Congress Party included neglect of grassroots political organizations, the rise of communal politics and regional-based parties, and corruption that reportedly has undermined popular confidence in government officials and politicians of all political parties. The BJP won the most seats of any party (160), while Congress was second with 136 seats. (In terms of percentage of the vote, however, Congress won 28.1% and the BJP 23.5%). On May 15, President Shankar Dayal Sharma named BJP leader Atal Behari Vajpayee prime minister and gave the party 12 days to pass a vote of confidence in the new government. With allied parties, including the Shiv Sena Hindu nationalist party in Maharashtra State, the BJP controlled 194 seats in all. Because of its Hindu nationalist platform and perceived anti-Muslim bias, however, the BJP was unable to attract any coalition partners, and Vajpayee resigned on May 28.

Deve Gowda-led United Front Government. On June 1, Prime Minister H.D. Deve Gowda came to power at the head of a United Front coalition government comprising 13 parties representing leftists, freetraders, regional groups, lower castes, Muslims, and other minorities. The 63-year-old Deve Gowda, the former Karnataka State chief minister, is a leader of the Janata Dal party, which with 40 seats is the third largest party. Although the United Front controls only 192 seats, it easily passed a confidence motion on June 12 with the backing of Rao's Congress Party, which agreed to support the coalition without joining it.

Despite the inherent instability of such a disparate coalition, the United Front government claims that because of its diversity it is best suited to represent the pluralistic nature of Indian society. Although Indian coalition governments have had a poor record for stability -- none have lasted more than a couple years -- the current situation may bode well for the United Front. Unable to attract coalition partners because of its perceived anti-Muslim bias, the BJP is unlikely to make enough gains in the near future to push for and win a new election. For the Congress Party, which is currently in serious disarray as a result of its poor showing in the election and several unresolved political scandals, there appears, at this time, to be no advantage in withdrawing its support for the United Front government. Nonetheless, it will take a great deal of negotiating skill on the part of Prime Minister Deve Gowda to hold the coalition together, particularly on economic and social issues.

India-U.S. Relations and Bilateral Issues

Security

Nuclear Weapons and Missile Proliferation. Heading the list of U.S. objectives in South Asia is the prevention of nuclear and ballistic missile proliferation along with the reduction of regional tensions that could trigger the use of such weapons. Both India and Pakistan are believed by analysts to have crossed the nuclear weapons capability threshold, although most open source information suggests that they have not thus far deployed weapons. India conducted an underground test of a nuclear device in 1974. In October 1990, the United States cut off aid to Pakistan when President Bush was unable to certify that Pakistan did not possess a "nuclear explosive device," as required under Section 620E(e) of the Foreign Assistance Act (FAA), the so-called "Pressler amendment." A Pakistani government official acknowledged in February 1992 that the country has the capacity for making at least one nuclear weapon, and some analysts believe it has enough enriched uranium for 10- 15 weapons. Statements in August 1994 by former Prime Minister Nawaz Sharif that Pakistan has an atomic bomb were denied by Prime Minister Bhutto. India is thought to have the capability of producing 75 or more nuclear weapons. (For further information on the cutoff of aid to Pakistan, see CRS Issue Brief 90149, Pakistan Aid Cutoff: U.S. Nonproliferation and Foreign Aid Considerations, by Richard P. Cronin. To date, the cutoff of U.S. aid to Pakistan and sanctions applied to an Indian space research company for the proposed purchase of Russian booster rockets have done little to slow the pace of either country's programs to acquire weapons of mass destruction and the means to deliver them. Both India and Pakistan have combat aircraft that, with modification, would be capable of delivering nuclear weapons. Both countries are believed to be seeking to develop or acquire ballistic missiles with the capability of striking each other's major population centers. India has tested both its short-range Prithvi surface-to-surface missile and its Intermediate Range Ballistic Missile (IRBM), Agni. Pakistan also has tested both short and intermediate-range missiles, the technology for which was reportedly obtained from China.

Neither India nor Pakistan are a party to the Nuclear Nonproliferation Treaty (NPT). Attempts to pressure the two countries to sign the NPT so far have been met by India's insistence on a nondiscriminatory global nuclear nonproliferation regime, including the abandonment of nuclear arms by the Chinese, and Pakistan's safe stance that it will sign the NPT when India does.

On September 10, 1996, India was one of only three nations to vote against the adoption of the Comprehensive Test Ban Treaty (CTBT) by the United Nations General Assembly. In the 158-3 vote, Libya and Bhutan also voted no, while five other nations abstained. Prime Minister Deve Gowda said that India would not sign the treaty in its present form as it was highly discriminatory. Deve Gowda further stated, "India will neither build nuclear weapons nor conduct any further tests and its programme will only be confined to generation of power," according to Indian news reports. Pakistan, which voted for the CTBT, has stated that it will not sign the treaty unless India does.

Brokering an End to the India-Pakistan Rivalry. The United States responded to increasing friction between India and Pakistan over Kashmir, beginning in early 1990, by strongly encouraging both governments to continue to institute confidence-building measures in order to reduce tensions. Measures adopted so far include: agreement on advance notice of military movements; establishment of a military commander "hotline"; an exchange of lists of nuclear installations and facilities; agreement not to attack each other's nuclear facilities; a joint ban on use and production of chemical weapons; and measures to prevent air space violations. Although such measures have had some effect, the destruction of the Babri Mosque at Ayodhya in December 1992, and accusations by India of Pakistani links to the terrorist bombings in Bombay in March 1993, again raised tensions to high levels.

The United States and India held several rounds of talks on South Asian regional security and nonproliferation issues in 1992 and 1993. High-level talks were also held with Pakistan during the same period. U.S. State Department officials have urged India and Pakistan to adopt a number of new confidence-building measures for the near-term, including an agreement not to conduct nuclear detonations, a cutoff of fissile material production, and the placement of safeguards on nuclear facilities. Recognizing that real regional security is dependent on reduction of underlying tensions, the United States in recent discussions with India and Pakistan has made the following suggestions: the opening of an Indo-Pakistani dialogue on Kashmir, leading initially to the demilitarization of the Siachen Glacier area; a mutual reduction of conventional arms and defense expenditures; and an agreement by both countries to stop involving themselves in each other's regional unrest.

Although the Pakistan government hailed the ending of the Hazratbal mosque siege, it pressed India to reduce its troop strength in Kashmir and release political prisoners in order to create the right climate for talks between the two countries. In October, Indian Prime Minister Narasimha Rao, in a congratulatory message to newly elected Pakistan Prime Minister Benazir Bhutto, had offered talks with Islamabad on all matters of mutual concern, including Kashmir. Previous discussions between India and Pakistan at the foreign secretary level were broken off in August 1992, because of rising tensions between the two countries. On Jan. 2-3, 1994, talks were held in Islamabad between Indian Foreign Secretary J.N. Dixit and his Pakistani counterpart, Shaharyar Khan, on a range of issues, with discussions on Kashmir reportedly the major focal point. Although no agreements were reached, both sides held out the possibility of resuming the talks. Dixit stated furthermore that India was ready to make new proposals regarding the Siachen Glacier and other disputed border areas.

The Clinton Administration has maintained a policy toward South Asia that has followed the same broad guidelines as the Bush Administration: concern about nuclear and missile proliferation; support for democratization and human rights; and interest in economic reforms and trade expansion. A number of events in recent years have raised the profile of South Asia in U.S. policy: 1) The congressionally mandated creation of the new South Asia bureau, headed by Raphel, has given greater focus to U.S.-South Asia policy. 2) Heightened tensions between India and Pakistan since 1993, as well as periods of political instability in both countries, have increased U.S. concern about the danger of hostilities between the two nuclear-capable neighbors. As a result, the United States has strengthened its support for resolving the Kashmir dispute and other problems as well as increased pressure for progress on the nuclear issue. 3) Frustration with the apparent failure of the aid cutoff to force Pakistan to abandon its nuclear weapons program and a desire for a more balanced and flexible approach to the proliferation problem prompted new administration initiatives. 4) Serious human rights problems continued to be reported from many parts of the region, particularly Kashmir. 5) India's economic reforms and new openness to trade and investment increasingly attracted the attention of U.S. business interests.

U.S. Deputy Secretary of State Strobe Talbott visited New Delhi in early April 1994, with the dual mission of assuring India of U.S. intention to pursue an evenhanded policy in South Asia and presenting the latest Clinton Administration proposals for halting nuclear weapons proliferation in the region. The Administration initiatives call for a one-time waiver of the Pressler Amendment (under which arms sales to Pakistan are currently barred) in order to release 28 F-16 fighter planes already purchased by Pakistan. In return, Pakistan would agree to a verifiable cap on its production of fissile material.

The 6-day visit to the United States by Indian Prime Minister Narasimha Rao, in May 1994, marked the beginning of a significant improvement in U.S.-India relations. Rao addressed a joint session of the Congress and met with President Clinton. Although discussions were held on nuclear nonproliferation, human rights, and other issues, the main focus of the visit was rapidly expanding U.S.-India economic relations. Clinton and Rao reportedly promised to intensify their efforts to achieve a comprehensive nuclear test ban treaty and a verifiable global ban on production of weapons-grade nuclear materials. Also during the visit, the United States announced the appointment of career diplomat Frank Wisner as ambassador to India, a post that had remained vacant for more than a year. On presenting his credentials in New Delhi in August, both Wisner and President Shanker Dayal Sharma expressed their countries' interest in a comprehensive nuclear test ban treaty and a global ban on production of fissile material for weapons production. In September, the United States and India co-sponsored U.N. General Assembly resolutions in support of those two goals.

By late 1994, however, there was no apparent progress on Administration proposals for a verifiable cap on India and Pakistan's production of fissile material. Moreover, relations between India and Pakistan appeared to be in a constant state of deterioration. The Pakistan parliament in July condemned India for human rights violations in Kashmir. Indian government officials in August renewed charges of Pakistan complicity in the 1993 Bombay bombings. Both Islamabad and New Delhi frequently accused the other of harassing, intimidating, or manhandling its diplomats and expelled members of the other's diplomatic corps on charges of espionage. Foreign Secretary talks, last held in January 1994, have yet to be rescheduled.

In a move to strengthen U.S. security ties with India and Pakistan, U.S. Secretary of Defense William J. Perry visited both Pakistan and India in early January 1995, the first visit to the region by a U.S. Defense Secretary since the waning days of the Cold War. Prior to the visit, Perry stressed that, rather than contentious issues such as the F-16 sales or the NPT, talks would focus on ways to further peace and stability in the region, as well as expand areas of closer defense cooperation, including peacekeeping efforts. In Islamabad, Secretary Perry announced the reestablishment of the U.S.- Pakistani Consultative Group for discussing security measures. In New Delhi, Secretary Perry called for an end to Cold War tensions and a new era in security relations while signing a U.S.-India military accord. The pact calls for closer security ties and increased cooperation in defense production and research, joint military exercises, and military training.

Secretary Perry asserted U.S. intentions to maintain an even-handed approach in its relations with India and Pakistan. He also underscored Washington's understanding of the security concerns of both New Delhi and Islamabad. Rather than stressing the U.S. preference for a rollback of both countries' nuclear programs, Secretary Perry urged India and Pakistan not to deploy short-range missiles capable of carrying nuclear weapons. Both countries were urged to adopt a commitment to greater transparency with each other by exchanging defense budgets and planning, as a means of mutual confidence-building. Noting that a solution to the Kashmir problem is necessary before India and Pakistan can develop a normal relationship, Perry restated the U.S. offer to provide whatever help it can if requested by both parties.

By early 1996, however, the United States has become concerned over increasing tension and nuclear and missile proliferation in South Asia. In mid-December 1995, U.S. press reports, based on U.S. intelligence leaks, suggested that India may be preparing to test a nuclear weapon at Pokaran in the Rajasthan desert, where it conducted its first and only nuclear test in 1974. India promptly denied the reports. Throughout January and February, India and Pakistan traded heavy fire along the line of control (LOC) that divides their forces in the disputed area of Kashmir. Pakistan blamed India for a rocket attack that killed twenty persons on January 26 in a village on the Pakistan side of the LOC. India denied responsibility. On January 27, India tested a longer range, nuclear-capable version of its Prithvi missile. The U.S press reported in early February on leaked U.S. intelligence reports that China sold to Pakistan, in 1995, ring magnets that can be used in enriching uranium for nuclear weapons. Pakistan denied the reports. Following the election of Prime Minister Deve Gowda in 1996, both India expressed interest in resuming high-level talks between the two countries that have been broken off for two years.

U.S.-India Military Cooperation. Unlike U.S.-Pakistan military ties, which date back to the 1950s, military cooperation between the United States and India is in the early stages of development. Joint Indo-U.S. steering committees, agreed on during the visit of Secretary Perry to India in January 1995, have been established to coordinate relations between the two countries' naval and armed services. Perry and Indian Defense Secretary Achutan Nambiar met in Washington in September 1995, reportedly to lay the groundwork for future defense cooperation, including regular military-to-military visits and technical assistance on research and development projects. Army interaction has included an agreement on increased exchange visits -- to include students, U.S. medical officers studying the effects of high altitude on troops, and, possibly, small training teams attending military exercises. Naval cooperation so far has included a 20-day special operations joint exercise focused on marine counterterrorism and peacekeeping operations at Ratnagiri in September 1994. Indo-U.S. naval forces also conducted joint exercises off India's Malabar Coast in May 1995 and March 1996. An Indian naval contingent supported the U.S.-led U.N. peacekeeping mission in Somalia starting in December 1992. India's ground troops in Somalia, which numbered 5,000 in mid-1994, received high praise for their humanitarian as well as peacekeeping efforts. In October 1996, India had about 1,200 U.N. peacekeeping forces, mainly serving in Angola and Bosnia-Hercegovina.

Regional Dissidence and Human Rights

U.S. concern over dissidence and human rights problems in India results from its interest in human rights and democratization issues worldwide as well as its concern for regional stability in South Asia. Although there are generalized human rights problems throughout India, such as police abuse, child labor, and discrimination against women and minorities, some of the most serious problems occur in Kashmir and Punjab. International human rights organizations, such as Amnesty International and Asiawatch, have documented abuses by Indian security forces, including mass arrests, indiscriminate firing on civilian crowds, burning of business and residential neighborhoods, rape, and torture and execution of prisoners in custody. The Indian government denies most such accusations and points instead to terrorist acts of bombing, kidnaping, and assassination allegedly committed by militant groups. A January 1995 Amnesty International report on torture and deaths in custody in Kashmir, allegedly at the hands of Indian security forces, also expresses grave concern over numerous reports of human rights abuses by armed militant groups. A September 1994 Human Rights Watch report, on arms and abuses in Indian Punjab and Kashmir, alleges a large flow of arms left over from the Afghan conflict through Pakistan into Punjab and Kashmir. The report also alleges continuing serious human rights abuses by both militants and Indian government forces in Kashmir.

In dealing with the situation in Kashmir and Punjab, the Indian government has employed a wide range of security legislation, including laws that permit authorities to search and arrest without warrant and detain persons for a year without charge or bail. Other security laws prescribe sentences of not less than five years for disruptive speech or actions. In some cases, security forces are given permission to shoot to kill. Also under these laws, special courts have been established that meet in secret and are immune from the usual laws of evidence.

Punjab. In the past decade of separatist violence in Punjab, a reported 20,000 people -- civilians, militants, and security forces -- have been killed. Over the last few years, however, a security forces crackdown in the state has virtually halted terrorist and separatist activity. Applying a carrot-and-stick approach, the Indian government deployed some 150,000 army troops to pacify the countryside before state assembly elections were held in November 1991. Probably more effective was the beefing up -- in size and weaponry -- of the Punjabi Sikh-dominated state police under police chief K.P.S. Gill. By early 1993, Gill claimed that the separatist campaign was nearly over; some 800 militants had surrendered and most of the separatist groups were in serious disarray. Separatist-related deaths dropped from nearly 5,000 per year in 1991 and 1992 to less than 100 for 1995.

Popular disillusionment with criminal elements among the militants, and general war-weariness after a decade of violence, reportedly contributed to the turning tide in Punjab. Although voter participation in the 1991 elections was only about 20%, some 70% voted in municipal elections in September 1992; and more than 80% participated in local council elections held in January 1993. Supporters of the crackdown say that, for the first time in many years, peace and freedom of movement have returned to the state, night farming and transport have resumed, and real estate values are up. Detractors, however, call the crackdown a reign of police terror and human rights violations and say that the Indian government has yet to address Sikh economic, political, and social grievances. In August 1995, the chief minister of Punjab state, Beant Singh, along with 12 others, was killed by a suicide bomber in the state capital of Chandigarh. Babbar Khalsa, a Sikh terrorist group, claimed responsibility for the assassination. Elected in 1991, Singh was hailed by his supporters for bringing peace to Punjab, while being reviled by his detractors for reportedly ruthless methods used by the security forces in doing so.

Kashmir. The human rights situation in Kashmir worsened in 1993, despite Rao government efforts in setting up a human rights commission and addressing some specific violations. International human rights groups cited Indian security forces for escalating the level of violence in 1993, including firing on demonstrators, burning large sections of the towns of Srinagar and Sopore, and allegedly killing several prominent Kashmiri human rights activists.

In mid-October 1993, Indian army troops surrounded the Hazratbal Mosque in Srinagar, alleging that militants taking refuge inside the shrine had tampered with locks that protect a sanctum where a sacred relic, a hair said to be from the beard of the Prophet Mohammed, is housed. The 33-day siege ended peacefully on November 16 when the 65 inmates of the mosque reportedly reached an agreement with the Indian government to surrender to the Kashmir Police for screening and release. During the month-long siege, more than 50 persons were killed in other parts of the Kashmir Valley as a result of Indian security forces firing on crowds of demonstrators.

During the Hazratbal mosque siege, a new Kashmiri political group came to the fore. The Hurriyat Conference (Kul Jamaat-e-Hurriyat-e-Kashmir; All Kashmir Freedom Front), formed in early 1993, is an umbrella organization for groups opposed to Indian rule in Kashmir. The conference launched effective mass strikes and demonstrations during the mosque siege, but has spoken out against "errants" and "criminals" who have entered the militant ranks. Hurriyat membership includes about 30 groups and associations, including the JKLF, JKHM, Muslim Conference, and People's League. The Hurriyat Conference, which states it is committed to seeking dialogue with the Indian government on a broad range of issues, proposes convening a tripartite conference on Kashmir, including India, Pakistan, and representatives of the Kashmiri people. Conference leaders have also demanded Kashmiri representation at any talks between India and Pakistan on Kashmir.

In 1993, the Rao government stated that it planned to restart the political process in Kashmir, where state elections had last been held in 1987. President's rule (rule by the central government) was established in July 1990 and extended by Parliament every six months. In preparation for elections, the government began a series of initiatives in 1994, including releasing some prominent Kashmiri militants from prison. JKLF founder and leader Yasin Malik was released in May 1994. In October, the government released from detention three more militant leaders -- Abdul Ghani Lone, Syed Ali Shah Geelani, and Shabir Shah -- whose release had been championed by various human rights groups and some Members of Congress. The Rao government plan called for restoring normalcy to the state through reviving development activity, attracting industrial investment through tax incentives, rebuilding the destroyed infrastructure, and reestablishing social-economic programs in preparation for the holding of state elections. Kashmiri militant groups, however, repeatedly rejected the holding of any such poll within the framework of the Indian constitution. Although disagreeing on the various proposed options for Kashmir, there was general agreement by the Kashmiri militant groups that international oversight for any polls is necessary, and that Kashmiris must be a party to any discussions on a resolution of the issue.

In May 1995, a 535-year-old shrine and much of the surrounding town of Charar-e- Sharief in Jammu and Kashmir state were destroyed by fires during a standoff between Indian security forces and Kashmiri separatist militants staying in the town. The Indian security forces blame the militants for the explosions, while the Kashmiri townspeople blame the security forces. The 15th-century shrine marked the birthplace of the Sufi Muslim patron saint of Kashmir, who is revered by Kashmiri Muslims and Hindus alike. The destruction of the shrine and subsequent demonstrations in the Kashmir Valley prompted the Indian government to abandon its plans to hold elections in the state by July 1995. Plans to hold elections in December 1995 were also dropped when the Indian Election Commission refused permission, saying that conditions in Kashmir were "not consistent with the conduct of free and fair elections."

In May 1996, however, elections to fill the six seats for Jammu and Kashmir State were held as part of the general parliamentary elections called by the Rao government. Turnout for the elections in the state was about 40%, with some reports of voters being herded to polling stations by security forces. The elections served as a rehearsal for Jammu and Kashmir State assembly elections, which were held in September 1996, spread over four days. The National Conference (NC), the longstanding mainstream Kashmiri party led by Farooq Abdullah, along with other national and local parties took part in polls. The Hurriyat Conference, calling the polls a sham, refused to contest. The NC won 57 of 87 seats, and Farooq Abdullah became chief minister of the state in early October. The polling, according to unofficial observers, fell somewhere between the Indian government's description of "a free and fair election" and the Hurriyat characterization of "a military operation."

Human Rights. The U.S. State Department, in it annual Country Reports on Human Rights Practices, released in March 1996, stated that: "During 1995 India made significant progress in resolving human rights problems. In recent years, Indian and international human rights groups increasingly have criticized the country's human rights situation, particularly in Kashmir and Punjab. The Congress has expressed its disapproval of human rights abuses in India through various "sense of the Congress" resolutions, amendments to aid bills, and committee reports. In 1989 and 1991, bills were introduced that sought to cut off most development assistance to India unless Amnesty International was allowed to monitor the human rights situation there. In 1992, $24 million (the amount of development assistance to India) was cut from the Foreign Operations Appropriations bill by the House, but was restored in the Conference Committee. In June 1993, the House passed an amendment, 425-0, that would cut $4.1 million from the general development account of the foreign aid bill in order to censure India for alleged human rights violations. In June 1996, an amendment that would have limited development aid for India on human rights grounds, was rejected, 126-297.

There is evidence of increasing Indian government sensitivity to pressure on the issue of human rights. In July 1994, the government noted, in a reply to an Amnesty International report on human rights violations in Punjab and Kashmir since 1990, that it had taken action against 174 security forces members for human rights violations. A National Human Rights Commission, established by presidential ordinance in September 1993, was given parliamentary approval in December. The five-member panel, headed by former Supreme Court chief justice Ranganath Mishra, by mid-1994 had investigated abuses in Punjab, Kashmir, and the Northeast and begun issuing reports and recommendations. In August, the Commission urged the government to repeal the Terrorist and Disruptive Activities (Prevention) Act (TADA), under which persons may be detained for years without due process. Since 1985, an estimated 67,000 people throughout India have been detained under the TADA, often for offenses unrelated to terrorist activities. When the TADA came up for renewal in May 1995, the Rao government allowed the law to lapse, although existing statutes were expected to be amended in order to preserve some of the TADA provisions. The Supreme Court, under Chief Justice M.N. Venkatachaliah, reportedly also has become more active in combating the custodial excesses of the police. As a result of 1994 Supreme Court rulings, stringent requirements have been placed on arrest procedures, and compensation for police abuse victims is being granted.

Until recently India has denied international human rights groups official access to Kashmir, Punjab, and other sensitive areas. India announced in July 1993 that it would allow human rights organizations such as Amnesty and the International Committee of the Red Cross (ICRC) to visit the country but added that travel to insurgency-stricken regions would have to be cleared on a case-by-case basis. In March 1994, the Indian government allowed an ICRC team to visit Jammu and Kashmir and in late September gave the ICRC permission to begin its humanitarian programs, which reportedly include visiting jails and detention centers, setting up medical outposts, and providing specialized training for security forces in Kashmir. A reported 5,000 Kashmiris currently are in jail under anti-terrorist laws. In late June, the Indian government signed a memorandum of understanding with the ICRC to allow it "access to all persons arrested and detained in relation with the current situation in Jammu and Kashmir" in order "to monitor the conditions of detention and treatment of detainees." Although an Amnesty International team was allowed to visit Bombay in 1994, in order to investigate the 1993 bombings there, it has not yet been given permission to visit Kashmir or Punjab. In July-August 1996, however, an Amnesty International team reportedly made a month-long, low-key visit to India.

India's Economic Reforms and Market Opening

Under the guidance of Finance Minister Singh, the Rao government instituted economic reforms beginning mid-1991. Positive results by 1995 included: raising the GDP growth rate from 1.2% to 5.3%; reducing the fiscal deficit from 8.4% to 6% of GDP; reducing inflation from 16% to 10%; instituting trade and industrial reforms; and privatizing some state-owned industries and requiring others to seek commercial financing in lieu of government subsidies. In these efforts India has received the support and prodding of the IMF as well as various aid-donor nations. In June 1995, the India Development Fund (IDF) meeting in Paris pledged assistance of $6.5 billion for 1996. In extending the assistance, however, the IDF urged India to persevere with its reforms, with particular attention to budget deficit reduction, state government involvement in liberalization efforts, and social sector and infrastructure investment.

Observers note a number of factors that have favored the government's unusual decisiveness in the economic arena, including: pressure for reform from the International Monetary Fund (IMF), which had granted a stopgap loan to the new government; widespread respect for the capable and apolitical Singh; a reported general agreement on economic policy between Congress and the BJP; and a growing public consensus that it is in the country's best interest to participate more fully in the global economic community. In March 1995, Singh presented his fifth budget, which promised to increase government investment in the social sector, as well as continue India on the path of economic reform. Past Indian government policies severely restricted foreign trade and investment in the country. Under the Rao government, however, many market access barriers have been removed or reduced and a more favorable climate for investment established. Major changes since 1991 include: cutting tariffs on capital goods from 80% to 25% and the maximum tariff rate on most goods from 150% to 55%; cutting the minimum lending rate for banks from 19% to 14%; raising the foreign equity limit for investment projects from 40 to 51%, with 75-100% equity permitted in some high tech, export-oriented, or tourism industries; ending of most industrial licensing requirements; making the rupee convertible on the trade and current accounts, with steps toward convertibility on the capital account; and instituting fiveyear tax holidays and other incentives for certain types of investments, including power projects and investments in the free trade zones.

As a result of these policy changes, annual foreign investment approvals rose from $90 million in 1990 to $10 billion in 1995. More than one-third of these investments were by U.S. companies, including IBM, Motorola, Coca Cola, Pepsico, Morgan Stanley, Merrill Lynch, AT&T, Raytheon, Kellogg, Procter & Gamble, Ford, and Mobil. In mid-January 1995, U.S. Commerce Secretary Ronald H. Brown led the largest U.S. trade and investment mission to India to date. Agreements were initialed on more than $7 billion in power generation, transportation, petrochemicals, financial services, telecommunications, and health care projects. During a February visit by U.S. Energy Secretary Hazel O'Leary and a delegation of U.S. business leaders, energy agreements worth more than $1.4 billion were signed. The Cabinet-level visits demonstrated Clinton Administration support for the Indian economic reform process, as well as U.S. interests in broadening ties with India.

India's recent success in attracting foreign investment remains overshadowed by that of countries like China, Malaysia, and Indonesia, where terms and conditions for investment are still more favorable. Some analysts point out, however, that East and Southeast Asian countries have a decade or more head start, and India, keeping to its present reform path, will one day rival current Asian economic powerhouses. Although international investors clearly are intrigued by India, including the market potential represented by its 100 million-strong middle class, major concerns remain.

Infrastructural deficiencies are a serious problem for any prospective investor in India. India has little in the way of a modern highway system, and its railway system, although the largest in Asia, is inefficient and seriously overburdened. The telephone system and other telecommunications facilities are primitive by most standards. Most industries and many cities are plagued by frequent power interruptions and brownouts. Moreover, although the investment process has been streamlined somewhat, bureaucratic delays and the need for multiple project approvals continue to exist.

In 1995, problems of infrastructure, power, and red tape were overshadowed by investor concerns over politicization of India's economic reforms and whether reform efforts will continue apace no matter who is heading the government. Setting off investor alarms was the cancellation of the $2.8 billion Dabhol power project originally negotiated by Texas-based Enron and the Congress-led Maharashtra state government. In March 1995, state elections brought to power a Hindu nationalist coalition government that included the BJP and the Shiv Sena, an extremist Hindu party (led by Bal Thackeray) that had campaigned on the issue of overturning the Enron contract. On August 3, the new state government canceled the Enron project, ruling that it was too costly and that contract negotiations had lacked transparency. Shortly thereafter, negotiations for power projects by U.S. companies in Orissa and Karnataka were also temporarily held up. In January 1996, Enron and the Maharashtra government reached a new agreement that included $600 million in cost-cutting measures. Also in 1995, Kentucky Fried Chicken outlets in Bangalore and New Delhi were temporarily closed down on health and sanitation charges. Most observers viewed these incidents as political posturing by the BJP, and other parties, related to the April 1996 parliamentary elections. Economic nationalism is seen as an easy vote winner and effective way to attack the ruling party.

Trade Issues

Market Access Barriers. U.S. exports to India for 1995 were $3.3 billion, an increase of 43.6% over 1994. U.S. imports from India for 1995 totaled $5.7 billion in 1995, an increase of 8% over 1994. Despite significant tariff reductions and other measures taken by India to improve market access, according to the report of the United States Trade Representative (USTR) for 1995, a number of foreign trade barriers remain. U.S. exports that reportedly would benefit from lower Indian tariffs include fertilizers, wood products, medical equipment, scrap metals, and agricultural products. The import of consumer goods is restricted, and other items, such as agricultural commodities and petroleum products, may only be imported by government trading monopolies. The USTR also cited barriers that continue to exist in India's financial services sector. All insurance companies are government owned, as are most banks. Largely dominated by the state, India's banking industry has been widely criticized for its inefficiency and poor service and regarded as a stumbling block in India's efforts to open up the economy. Public sector banks, which include 90% of India's bank branches, handle 85% of the country's banking business. In a sign that India's banking industry may be opening up, approval has been given for 17 new foreign banks and bank branches to operate in India since 1993.

Intellectual Property Rights Protection. Inadequate intellectual property rights protection, by means of patents, trademarks and copyrights, has been a longstanding issue between the United States and India. Major areas of irritation have included pirating of U.S. pharmaceuticals, books, tapes, and videos. In May 1991, the USTR cited India as a "priority foreign country" under the Special 301 provision of the 1988 Trade Act for its lack of protection and enforcement of intellectual property rights. After a 9-month investigation, the USTR further determined that, although India had strengthened its trademark and copyright laws, patent protection remained weak, adversely affecting U.S. pharmaceutical companies. As a result, the Bush Administration in 1992 suspended duty-free privileges under the Generalized System of Preferences (GSP) for about $80 million in Indian exports of pharmaceutical and related products. In April 1993, the USTR again named India as a "priority foreign country" under "special 301." The Indian Parliament, in May 1994, passed amendments to the country's copyright law designed to strengthen intellectual property rights protection. The new laws are expected to benefit writers, artists, and musicians, as well as both domestic and foreign publishers and manufacturers of records, tapes, videos, and computer software. Analysts predicted that, with the reduced threat of piracy, both U.S. and Indian software producers will greatly expand their Indian markets. In view of the new copyright laws and proposed legislation on trademarks, the USTR in June 1994 moved India from the priority foreign country list to the less stringent "priority watch list," while continuing to urge India's adoption of patent protection legislation.

U.S. Aid

The relatively small U.S. aid program for India for FY1996 includes an estimated $48.7 million in development assistance, $108 million in P.L.480 funds, and $350,000 for International Military Education and Training (IMET). For FY1997, the Clinton Administration has requested $57 million for development assistance, $96 million in P.L 480 funds, and $400,000 for IMET. The U.S. Agency for International Development (AID) increasingly is focusing on sustainable development programs that support India's efforts to restructure and privatize its economy. Included are programs that promote private sector involvement in energy production and distribution; U.S.-India commercial technology joint ventures; a project to provide more urban land with water, sewer, power, and road services; and assistance to Indian enterprises seeking to restructure and become more competitive. Other programs are targeted at family planning and preventive health care, and P.L. 480 funds go to providing food assistance, largely through private voluntary agencies. The small IMET program funds technical training and professional military education for mid- and senior-level Indian officers. First Lady Hillary Clinton visited India in late March as part of a five-nation tour of South Asian projects in support of women's economic and social development. The First Lady announced that India would receive the first grant, for $500,000, of a new U.S. Agency for International Development initiative for educating girls and women. As India's largest bilateral aid donor, Japan pledged $1.2 billion official aid for 1996.

Narcotics

India is the world's largest producer of opium for pharmaceutical purposes, some of which reportedly is diverted illegally to heroin production. The country has an estimated 1.2 million heroin addicts and 4.5 million who are addicted to opium. India serves as a major transit route for drugs originating in both Pakistan and Burma, and also is a major supplier to both countries of the chemical used in manufacturing heroin. Thousands of gallons of acetic anhydride reportedly are shipped by camel through Rajasthan state to Pakistan, where some of it is passed on to drug manufacturers in Afghanistan. Smaller amounts of the chemical, which is produced in the New Delhi area, are also smuggled through India's Northeast to heroin producers in Burma.

Counternarcotics efforts in both India and Pakistan are hampered by lack of political and budgetary support, lack of infrastructure in drug-producing areas, and corruption among police, government officials, and local politicians. U.S. counternarcotics assistance to India consists mainly of funding training programs for enforcement personnel and the Indian Coast Guard. Major counternarcotics efforts by the Indian government in 1994 included improved cooperation with Pakistan on counternarcotics efforts and implementation of new policies aimed at reducing the diversion of legally produced opium to the illegal market. Although the Indian government is becoming more concerned about the drug problem, observers note there needs to be an increase in political support and resources for counternarcotics efforts. During Prime Minister Rao's U.S. visit in May 1994, India and the United States signed a memorandum of understanding on cooperative efforts to stop the illegal drug trade.


FOR ADDITIONAL READING

CRS Issue Briefs

CRS Issue Brief 94041. Pakistan-U.S. Relations, by Barbara Leitch LePoer. (Updated regularly)

CRS Reports

CRS Report 91-563. The Kashmir Dispute: Historical Background to the Current Struggle, by Richard P. Cronin and Barbara Leitch LePoer.

CRS Report 96-437. India and Pakistan Border Conflict: Background and Ongoing Problems, by Barbara Leitch LePoer.

CRS Report 96-580. India's 1996 Parliamentary Elections: Implications for U.S. Policy Interests, by Barbara Leitch LePoer.

CRS Report 96-730. The Kashmir Dispute: Recent Developments and U.S. Policy, by Barbara Leitch LePoer.






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