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Cablegate: Scenesetter for Codel Gregg

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UNCLAS SECTION 01 OF 07 NEW DELHI 002529

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PREL PTER OVIP AF PK IN
SUBJECT: SCENESETTER FOR CODEL GREGG

1. (SBU) Senator Gregg and Delegation:

Mission India warmly welcomes you. Following soon after
Prime Minister Singh's historic official state visit to
Washington, your visit coincides with a rapid expansion in
the U.S.-India partnership, encompassing everything from
agriculture to defense cooperation, and reflecting widespread
support in both countries for broadening existing ties and
building new ones. India and the United States have begun
working more closely than ever, exemplified by our parallel
efforts to assist in Afghan reconstruction and unprecedented
cooperation on counterterrorism following the "26/11"
terrorist attacks in Mumbai just over a year ago. This
cooperation is made possible in part by the goodwill
generated by the Civil Nuclear Cooperation Agreement. During
your meetings, we hope you can help focus the Indian
government on the several key priorities that emerged from
the PM's visit, including cooperation on counterterrorism,
clean energy development, and global and bilateral economic
policies. India's position at the Copenhagen climate change
negotiations has remained relatively inflexible, although it
is seeking to avoid playing a spoiler role. You can expect
to hear justifications for India's rejection of binding
emissions targets and of international monitoring, as well as
questions about U.S. funding to help less developed countries
mitigate and adapt.

Strategic Dialogue: Broader and Deeper Than Ever Before
- - -

2. (SBU) Secretary Clinton launched the current phase of
rapid expansion in the U.S.-India relationship during her
visit in July when she and Minister of External Affairs S.M.
Krishna announced a new Strategic Dialogue structured around
five pillars and 18 sub-dialogues. During Prime Minister
Manmohan Singh's historic first official state visit of the
Obama Administration in November, our governments announced
major outcomes representing each of the five pillars of the
Dialogue. Highlights include a Counterterrorism Cooperation
Initiative; a Green Partnership including MOUs on Energy
Security, Energy Efficiency, Clean Energy, Wind and Solar
Power, and Climate Change; an MOI on Agricultural Cooperation
and Food Security; the Obama-Singh 21st Century Knowledge
Initiative; a meeting of the CEO Forum; and an MOU for the
establishment of a Global Disease Detection (GDD) Center. We
look forward to building on these solid foundations leading
toward a visit by President Obama at some point in 2010.

Internal Politics: A Raucous Democracy
- - -

3. (SBU) We have a true partner in the current Indian
government led by Prime Minister Singh, but its capabilities
are not without limits. The strong performance by the
Congress Party and its United Progressive Alliance (UPA)
allies in India's national elections gave Prime Minister
Singh's UPA coalition government a mandate to govern and --
freed from dependence on half-hearted allies on the Left --
to promote a closer relationship with the United States. The
fallout over a joint statement from Singh's July 16 Sharm
el-Sheikh meeting with Pakistani Prime Minister Gilani cut
short the honeymoon period, providing an opportunity for
Singh's otherwise fractured political opponents and
dissidents within his own ruling coalition. This move won
temporary political points for the opposition Bharatiya
Janata Party (BJP), but that party's steady summer implosion
facilitated the UPA government's rebound, resulting in the
Congress Party's victory in the October 13 Haryana and
Maharashtra state elections. The Sharm debacle reminded the
Prime Minister of his political constraints despite his clear
mandate. The tentativeness of the government has been on

NEW DELHI 00002529 002 OF 007


display again during the November-December session of
Parliament that adjourned December 18, during which the
fractious opposition managed to unite over populist causes
such as food price increases and a handful of narrow domestic
political issues to put the government on the defensive.

External Relations: Afghanistan and Pakistan
- - -

4. (SBU) Under Prime Minister Singh's leadership, India is
emerging as a leader in the region and in Asia at large.
India encourages democracy in the region, but is concerned
about continuing political instability in both Nepal and
Bangladesh and the humanitarian situation in Sri Lanka. We
have followed closely as India and China have sought warmer
relations through periodic dialogue and increased trade, but
Indo-China ties are strained by contentious border issues and
a sense of mutual suspicion. However, India's greatest
external challenges remain with its neighbors to the West.

5. (SBU) India is proud of its ongoing "development
partnership" with post-Taliban Afghanistan. The GOI claims
to have given USD 1.3 billion to Afghanistan since 2001.
Projects have included road construction, food aid to
children, power transmission, and telecommunications
assistance. India has also expressed interest in increasing
military training and assistance, and in providing training
for Afghan police. While expressing appreciation for India's
efforts in Afghanistan, you could also advocate increased
coordination of Indian aid with the USG and other
international partners in order to maximize impact as we
pursue a common goal of increased Afghan capacity. Indian
reaction to the President's December 1 speech on the way
forward in Afghanistan was that the U.S. is headed for the
exit sooner rather than later, and that this had significant
consequences for India's own security.

6. (SBU) The Indians understand our message about the
importance of resuming a robust dialogue with Pakistan and
the necessity of increased GOI communication to reassure
Pakistani officials about India's good intentions in
Afghanistan. The response we have consistently received is
that the GOI will not re-engage in meaningful dialogue until
Pakistan demonstrates tangible results in acting against
terror directed at India. The prevailing Indian media
assumption is that a Pakistani hand is behind much of the
plotting against India, including the October 8 bombing of
the Indian Embassy in Kabul, and this perception will likely
make the GOI even less eager to rush into resuming the sort
of forward-leaning communications that took place several
years ago with the Musharraf government. Indian reluctance
to re-engage may be further compounded by the case of alleged
Lashkar-e-Tayyiba operative David Coleman Headley arrested by
the FBI in Chicago, which fuels speculation of an official
Pakistani connection to 2008 Mumbai attacks. The Headley
case continues to dominate media coverage in India, with ever
wilder conspiracy theories getting play, including most
recently speculation that Headley was a CIA double agent.

7. (SBU) Viewed from Delhi, Pakistan's post-Mumbai law
enforcement actions against Pakistani nationals suspected of
involvement in attacks against India has thus far been
ineffectual and appears focused more on show than substance.
Pakistan's arrest of seven Mumbai suspects was clearly a step
in the right direction, but the in camera trial has been
delayed multiple times over the course of many months and is
now on its third judge. The August 3 Pakistani court decision
to adjourn indefinitely on a legal technicality a criminal
case against LeT/JuD leader Hafiz Saeed -- a man perceived by
Indians in much the same way as Osama bin Laden is perceived
by Americans -- the alleged Mumbai attack mastermind, was

NEW DELHI 00002529 003 OF 007


clearly a step backward. We also continue to hear a drumbeat
of reports that future spectacular Mumbai-style attacks
against India may be in the offing. The GOI must also factor
lingering public anger over Mumbai into its calculus in
re-engaging with Pakistan. However much PM Singh would like
to resume the dialogue, he must be wary of getting too far
out in front of public and political-class opinion, as
occurred following the Sharm joint statement. The July 23
Sharm agreement was met with media outrage and significant
dissent from some within the ruling coalition and Singh's own
Congress party who felt the agreement was precipitous and a
sign of Indian weakness. The fall-out might have toppled a
weaker and more fragmented government. PM Singh will need
political cover to resume the dialogue.

Civil Nuclear Cooperation
- - -

8. (SBU) India viewed the signing of the U.S.-India Civil
Nuclear Cooperation Agreement as an historic event and an
essential part of transforming our relationship. India has
since followed through on its nonproliferation commitments by
signing its IAEA Safeguards Agreement and concluding an
Additional Protocol with the IAEA. We are working with the
government to implement commercial cooperation, providing
U.S. firms access to an estimated USD 150 billion market and
leading to the creation of thousands of high-skilled jobs, as
well as providing India's growing economy with access to
clean energy. The Agreement no longer dominates the
headlines, but the goodwill it generated has contributed to
our improved relationship across the board and to India's
gradual movement toward the nonproliferation mainstream.

9. (SBU) The Indian government made substantial progress on
implementing commercial cooperation ahead of PM Singh's visit
to Washington, though some important hurdles remain. In
recent months, India announced two favorable reactor park
sites for U.S. firms in the states of Gujarat and Andhra
Pradesh, and submitted its declaration of safeguarded
facilities to the IAEA. We have held five rounds of
reprocessing consultations pursuant to the 123 Agreement, and
hope to conclude negotiations soon. The government responded
to our request for Part 810 license assurances on the eve of
Singh's visit, a top priority of U.S. industry, and we await
clarification on two issues. The cabinet approved draft
liability legislation, a top priority for U.S. firms, but
Parliament was not able to pass the legislation in the
just-concluded session.

The Defense Relationship
- - -

10. (SBU) The U.S.-India defense relationship has progressed
rapidly since sanctions were removed in 2000 following
India's 1998 nuclear test. Today's relationship is focused
on bilateral exercises, Subject Matter Expert Exchanges
(SMEEs), and personal exchanges at schools, conferences and
seminars. Billion-dollar defense sales are a growing
component and a superb opportunity to expand the
relationship. Exercises are the most visible of the
activities between our two militaries. In October, the Army
completed its most ambitious exercise with the deployment of
17 Strykers to India for a two week exercise which included
live firing of a combined mechanized task force for the first
time. Simultaneously, the Air Force had five transport
aircraft participating in exercise COPE INDIA held in Agra
that included a Special Forces component. The Navy conducts
an annual exercise, Malabar, that has been conducted both
bilaterally and multilaterally. The Marines hold an annual
exercise with the Indian Army, Shatrujeet, which focuses on
amphibious operations. The Indians have been cooperating

NEW DELHI 00002529 004 OF 007


with the Joint POW/MIA Accountability Command for recovery of
remains from downed Second World War planes in the
politically sensitive state of Arunachel Pradesh. To date,
we are still working on obtaining permission to repatriate
all of the remains so as to properly identify and recover
lost Airmen.

11. (SBU) Defense sales are growing quickly from roughly one
billion USD in 2008, to over two billion so far this year.
There is good potential for over four billion in sales next
year, especially with the recent Ministry of Defense approval
to pursue the C-17. For the first time, India can afford
(politically and financially) to purchase front line U.S.
equipment. They recognize the quality of U.S. systems and
have been astounded by the mission capable rates quoted for
U.S. aircraft compared to their older Russian inventory.
They are becoming increasingly sophisticated in their
analysis of costs and now use life-cycle cost instead of cost
on delivery for some purchases, giving U.S. products an
opportunity to beat cheaply made competitors. Most important,
the July 2009 agreement on End Use Monitoring (EUM) has
opened the door for FMS sales at a time when there is growing
frustration with Russia - previously India's supplier of
choice. The near doubling in cost and extensive delays in
delivery of the ex-Russian aircraft carrier GORSHKOV, issues
with transfer of technology on the T-90 tank, and universal
problems with spare parts have convinced the GOI that new
sources of supply are needed to balance Russia. Given an
opportunity, we ask that you endorse Indian purchases of U.S.
equipment as an important part of our defense relationship
and support our ongoing sales efforts.

Economic Ties
- - -

12. (SBU) The U.S.-India economic relationship, for decades
practically nonexistent, has grown rapidly and has
significant potential to expand further. At the same time,
India is an increasingly important player at the table in
multilateral economic fora, from the WTO Doha Round
negotiations and the G-20, World Bank and IMF to the UNFCCC
negotiations in Copenhagen. While India was seen in the
United States as a spoiler when the World Trade Organization
Doha Development Agenda talks broke down in July 2008,
India's new Commerce Minister showed leadership and
significantly improved the tone of discussions when he hosted
a Doha "Mini-ministerial" meeting in September, attended by
U.S. Trade Representative Kirk.

13. (U) The United States is India's largest trading partner
in goods and services and one of its largest foreign
investors. Investment has surged between our countries in
recent years, prompting agreement to launch negotiations on a
bilateral investment treaty. U.S. exports to India has
increased five-fold from USD 3.6 billion in 2000 to USD 17.7
billion last year. Two-way merchandise trade grew to a
record USD 44.4 billion in 2008, a 76-percent increase from
2005. Reflecting the global economic downturn, exports to
India fell 9.7 percent in January-September 2009 (to USD 8
billion), but Indian exports to the United States fell more
sharply. Thus, the U.S. trade deficit with India fell 43.8
percent to just USD 3.2 billion in January-September 2009.
Despite the size of its economy, India was only the United
States' 18th largest trading partner in 2008. One of the
major goals of the U.S.-India Trade Policy Forum is to
resolve barriers to trade and investment to improve this
ranking.

14. (U) India was somewhat shielded from the global economic
downturn due to its conservative central bank and
SEC-equivalent restricting many of the derivative innovations

NEW DELHI 00002529 005 OF 007


linked to the global financial crisis, and its relatively low
reliance on exports. However, although India's "Wall Street"
was less affected, its "Main Street" bore the brunt of the
downturn, with slower growth, tighter access to credit,
declining exports, higher unemployment, and less investment.
In response, India's central bank and SEC-equivalent relaxed
many of its restrictions on foreign capital inflows and
investment procedures and the GOI enacted several fiscal
stimulus programs, both pre- and post-election, to boost
economic growth.

15. (SBU) The Indian economy continues to be one of fastest
growing economies in the world, even as the global slowdown
and financial crunch moderated GDP growth from nine percent
in fiscal year (FY) 2007-08 to 6.7 percent in FY 2008-09,
which ended March 31. Growth in the second quarter was 7.9
percent and growth in fiscal year 2009-10 is now expected to
be in the seven percent range. The Commerce Ministry
announced December 15 that it expects to see a return to
positive export growth soon. With the expected return of
higher growth rates, rising inflation, and the highest fiscal
deficit (approximately 11 percent of GDP) in 20 years, the
GOI has begun to reverse some the measures it enacted during
the financial crisis and has announced plans to decrease
subsidies and increase disinvestment. Lagging agricultural
productivity and poor -- but improving -- infrastructure
continue to constrain growth. Accordingly, the top Indian
economic priorities remain physical and human infrastructure
development and spreading economic benefits into rural India.

16. (U) The United States continues to have concerns about
agricultural trade with India. The recently released Senate
Finance Committee Report on Indian agricultural trade
barriers -- a U.S. ITC investigation -- highlighted the
essentially defensive agricultural trade policy long promoted
by the Indian government. The United States is particularly
interested in gaining marketing access for U.S. dairy
products which are blocked due to a series of non-scientific
GOI rules. Discussions are ongoing, but the effort to
resolve long-standing agricultural trade issues is a Mission
priority.

U.S. Assistance: Health, Education, Energy, Water and
Sanitation, Agriculture, Law and Human Rights
- - -

17. (U) Although India's economy has been growing 7-9 percent
annually since 2004, this significant and impressive growth
is only part of the story. India has an estimated 456
million people, or 42 percent of its population, living below
the official poverty line of USD 1.25 per day, and a
staggering 828 million people, or 75.6 percent of the
population, living on less than USD 2.00 per day. This puts
India's poverty levels above those of sub-Saharan Africa
where 74 percent of the population lives on less than USD
2.00 per day. The rural and urban poor in India do not have
the education, work force skills, social capital or access to
primary health care and basic infrastructure, including
water, sanitation and electricity, to participate fully in
and benefit from India's economic growth. They are generally
not the focus of private investment. Deep rooted gender
inequities further undermine India's potential to convert its
economic growth into human development. According to the
World Economic Forum's Gender Index, India ranks 113 out of
130 countries and is in the bottom five countries for
economic participation and opportunity, and health and
survival. The GOI and the private sector are eager for
international best practices that U.S. foreign assistance
offers to address this glaring economic disparity. The U.S.
assistance program builds the capacity of local partners
including government institutions, private sector, and civil

NEW DELHI 00002529 006 OF 007


society/non-governmental organizations by promoting
replicable models and engaging in policy dialogue that leads
to higher development impact and improved resource
allocations. U.S. foreign assistance, coupled with
Government of India and private sector resources, improves
India's ability to achieve sustainable growth and reduce
poverty.

18. (U) Health: India's growing population of more than one
billion strains resources and complicates disease prevention.
More than two million Indian children under age 5 die every
year, most from preventable causes, while avoidable
complications during childbirth kill approximately 78,000
Indian women every year. Family planning choices are
limited, with more than two thirds of women opting for
sterilization as their method for family planning. The
health of the urban poor is considerably worse than the urban
middle and high income groups and is as bad as that of the
rural population. 2.47 million people in India are estimated
to be HIV positive. Although eradication efforts are
promising, India remains one of four countries where polio
continues. One fourth of the world's TB cases are in India,
which is now the number one high-burden country for Multi
Drug Resistant (MDR) TB. The U.S. assistance program,
through USAID and the Department of Health and Human
Services, works in close collaboration with the Government of
India and state governments in many health activities
designed to increase access to family health care, nourish
needy mothers and children, fight infectious diseases, and
prevent HIV/AIDS.

19. (U) Education: India has achieved significant progress
in increasing access to basic education. However, improving
the quality and relevance of education remains a major
challenge for the public education system. Despite massive
government investment in the sector, student learning levels
continue to be alarmingly low across most schools in the
country, leading to large numbers of children dropping out of
school. Approximately 50.8 percent of children in India drop
out at the elementary level, while at the secondary level, as
many as 62 percent drop out. Enrollment in higher and
technical education is only about 11 percent. High drop out
rates at all levels negatively impacts long term employment
opportunities. U.S. assistance to India, through USAID,
provides quality education to marginalized children,
including Muslim minorities, promote the use of technology to
improve the teaching and learning, and support interventions
that link education to employment. In the area of higher
education, India continues to lead the world as a source of
foreign students studying in the U.S. Our governments are
working to support the rapid expansion of formal linkages
between American and Indian institutions of higher education,
as well as focusing on expanding the role of community
colleges and other programs linking education to employment
opportunities throughout India, particularly in traditionally
under-served communities.

20. (U) Energy and Climate Change: India is a major producer
of Green House Gas (GHG) emissions, with the power sector the
largest single contributor. Even as it takes domestic steps
to reduce emissions, India's focus on development and poverty
reduction leads it to resist in international climate
negotiations any CO2 emissions targets that could retard its
economic growth. Indian power stations, characterized by old
equipment, inefficient technologies, poor maintenance
practices, and low quality coal, are some of the highest GHG
emitters in the world. The key challenge therefore is to
move India towards a low carbon development path with an
emphasis on renewable energy and the latest technologies for
cleaner coal. Nearly 20 percent of villages and 32 percent
of households do not have access to electricity. Development

NEW DELHI 00002529 007 OF 007


of an efficient and modern energy system is also necessary to
sustain India's economic growth and social development. U.S.
assistance is designed to significantly advance India's quest
for better infrastructure by reducing electricity
distribution losses, improving end-use efficiency, and
advancing market-based solutions for the co-management of
energy and water.

21. (U) Water and Sanitation: For many Indian cities and
towns facing the challenges of growing populations and urban
expansion, providing direct access to clean, affordable, and
reliable drinking water is a significant challenge.
Currently, only a fraction of the urban population has direct
access to clean piped water, often because of inadequate and
inefficient supply systems. The delivery of water and
sanitation services in cities is particularly important
because of their direct impact on human health and
productivity. To help address the urgent need for investment
in water and sanitation infrastructure across the country,
USAID is testing two sustainable models for providing
affordable and equitable access to safe drinking water and
sanitation.

22. (U) Agriculture: Addressing the challenges of food
security requires a renewed effort on developing agriculture
in India. The country is one of the largest producers of
food grains in the world, but agriculture's share of Gross
Domestic Product is only 17 percent and falling.
Inefficiencies in the agriculture sector include lack of
scientific information and adoption of new technologies and
poor linkages between farmers and markets. Indian farmers
are pre-occupied by falling water tables and the need to
irrigate over 40 percent of arable land. These problems
disproportionately impact farmers and rural laborers, which
have particularly high rates of malnutrition and poverty.
Improving agricultural productivity in India helps raise the
incomes of poor rural farmers and helps mitigate global food
shortages and volatile pricing. Of particular concern at the
moment, is food price inflation caused by a delayed 2009
monsoon and a series of clumsy GOI policy steps that have led
to reduced food supplies on the open market. The
just-concluded Parliament session was disrupted by sugar
farmers' protests and opposition accusations that the
government was not doing enough to "control" 19 percent food
price inflation. The USG is in discussions with the GOI on
an Agricultural Dialogue which would focus on some of the
longer-term issues surrounding agricultural productivity and
marketing bottlenecks, as well as nutrition.

23. (U) Law and Human Rights: Deep-rooted gender
inequalities continue to undermine India's potential to
translate its economic growth into inclusive development.
Despite progressive laws and policies, much more remains to
be done. One in three Indian women faces some sort of
domestic violence, the sex ratio of female to male children
is one of the lowest in the world, and almost 50 percent of
girls marry before the legal age of 18. There are an
estimated three million commercial sex workers, of which,
approximately 40-45 percent are children, largely girls.
India is ranked 113 out of 130 countries by the World
Economic Forum's (WEF) 2008 Gender Gap Index, and is among
the ten worst gender biased economies in the world. USAID's
access to justice program works with Indian NGOs to advocate
for legal and institutional reforms; shift popular attitudes
on issues like dowry and sex selective abortion; and increase
access to legal rights information and redressal services.


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