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Kerry to woo Modi's India, but quick progress unlikely

By David Brunnstrom

WASHINGTON (Reuters) - U.S. Secretary of State John Kerry travels to India this week as Washington tries to revitalize ties it sees as a counterbalance to China's rising power, but rapid progress is unlikely, despite the reformist reputation of India's new leader.

The visit by Kerry and a trip by Defense Secretary Chuck Hagel next month follow the resounding election win of Prime Minister Narendra Modi in May and are meant to create a good climate for Modi's planned visit to Washington in September.

Analysts said it would only be once Modi meets President Barack Obama that the United States may have a more realistic hope for progress on big defense projects, on removing obstacles to U.S. firms' participation in India's nuclear power industry, and for firmer statements of shared interests in Asia.

In a speech in Washington on Monday, Kerry said it was "a potentially transformative moment" for the U.S.-India partnership, which had "not yet always fully blossomed."

He reiterated Obama's support for India's bid for a permanent seat on the United Nations Security Council and added: "This is the moment to transform our strategic partnership into an historical partnership that honors our places as great powers and great democracies."

Four years ago, Obama declared the U.S.-India relationship would be "one of the defining partnerships of the 21st century" and last week the State Department called it one of "enormous strategic importance."

    But while the two countries are in many ways natural allies, as big democracies with shared concerns about Islamist militancy and the rise of China, the relationship falls far short of Obama's rhetorical billing.

Disputes over protectionism and intellectual property rights have soured the business climate and India has remained cautious about committing to U.S. strategic designs, given concerns that U.S. power, eroded by domestic budget battles, may be waning.

    The relationship took a dive last year after an Indian diplomat was arrested in New York on charges of mistreating her domestic help, an episode that provoked outrage and resentment in New Delhi.

Modi, whose Hindu nationalist Bharatiya Janata Party swept to an overwhelming victory after years of shaky Indian coalitions, has yet to make clear how closely he plans to work with Washington.

The potential for tension was always high. He was banned from visiting the United States after Hindu mobs killed more than 1,000 people, most of the Muslims, in 2002 while he was chief minister of his home state of Gujarat.

The Obama administration sought to turn a new page by quickly inviting Modi to Washington after his election, and was pleased by his prompt positive response.

Kerry will be heading the U.S. team at the annual Strategic Dialogue with India on Thursday, and will be accompanied by U.S. Commerce Secretary Penny Pritzker.

MODI MYSTERY

The BJP has a strong streak opposed to Western dominance of world affairs and this meshes with the rise of the BRICS block of five powerful emerging nations, which includes China, that see themselves as a counterbalance to U.S. hegemony.

    One of Modi's first moves on the world stage since taking office was to sign up to a BRICS development bank intended to wrest control over global financial institutions away from the United States and Europe.

On Friday, India threatened to block a worldwide reform of customs rules agreed last December, prompting a U.S. warning that its demands on food stockpiling could kill global trade reform.

The deadline for agreeing the trade facilitation deal falls during Kerry's time in New Delhi and a failure to overcome India's objections could overshadow his visit.

The Indian stance has fueled doubts about the extent of Modi's commitment to pushing through economic reforms seen as necessary to spur growth and attract investment.

U.S. officials say Modi's first budget contained some positive signs. But ownership limits in the defense sector were not relaxed enough to allow U.S. companies the controlling stakes they seek in joint ventures, which will make them reluctant to share technology India craves.

Nisha Biswal, U.S. assistant secretary of state for South Asia, spoke this month of the U.S. desire for Indian growth and its greater involvement in Southeast and East Asia, where China's territorial claims have caused increasing alarm.

India, which for decades had close military links with the Soviet Union while leading the world non-aligned movement, is cautious about being too closely associated with U.S. strategic policy, not least because of its economic links with China.

(Reporting by David Brunnstrom in Washington and Frank Jack Daniel and Sanjeev Miglani in New Delhi; Editing by David Storey, Clarence Fernandez and Mohammad Zargham)

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