A Packed Menu for the Obama-Singh Summit

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Those tariffs on agriculture could prove to be a major obstacle. India's farmers, loosely organized, are still a formidable vote bank, and the Doha round of World Trade Organization talks on free trade fell apart last year as India refused to give up minimum support prices for its cotton farmers, something that the U.S. had insisted upon. Just before he left for Washington, Singh got a reminder of how powerful those farmers can be: Some 40,000 of them took over Delhi's streets and monuments on Nov. 19-20 to demand the government raise its support price for sugarcane. "We put him in that chair," says Ummesh Shankar, a 42-year-old farmer who said he would lose his farms if forced to sell at the state-issued price of $2.70 for every 100 kilos. "If he doesn't agree to twice as much, we can take the chair away from him."

India's business community could also get in the way. The U.S. is a key market for its fastest-growing exports, textiles and IT. But alarmed by the 33% drop in its exports in 2008, mostly due to the recession in U.S. and European economies, Indian companies are expanding in emerging markets in Africa and Latin America. A free-trade agreement with Argentina, Brazil, Paraguay, and Chile came into effect this June, and Tata Consultancy Services, India's largest IT company, now has 7,500 employees in Latin America. The company wants to add more. "From a long-term point of view, we have to remember that the U.S. is not the only market in the world," says TCS CEO Natarajan Chandrasekaran.

That's not exactly what Washington needs to hear. With an ever-deepening trade deficit with China, India is a critical market where U.S. companies can sell to both the government and to the consumer middle-class. Indeed, when Assistant Secretary of South Asian Affairs Robert Blake prepped media for the trip on Nov. 18, he pointed out at least $18 billion in proposed sales to India—including to the Indian military. "There are significant new sales on the horizon," said Blake. To help complete those sales, the U.S. wants the Indian government to lift the cap on foreign equity in Indian defense firms from 26% to 49%.

One risk for the U.S. is that India might decide it has a very different set of priorities. Take, for instance, global trade. While New Delhi and Beijing were instrumental in throwing a wrench into the Doha talks, India has rushed forward to sign similar agreements with some of its biggest trade partners. On Nov. 6, for instance, South Korea's Parliament approved a free trade agreement with India. Bilateral trade has grown to $15.6 billion in 2008, from $2.6 billion in 2002, mostly from Korean companies like Hyundai and Samsung using India as a cheap manufacturing base for exports.

Over the past few months, India, Asia's fourth-largest economy, has been steadily inking similar deals. It has signed a free-trade agreement with the 10-member Association of Southeast Asian Nations (ASEAN) and aims to sign similar deals with the European Union and Japan, making it far less urgent that it reach an agreement with the WTO.

Srivastava reports for BusinessWeek from New Delhi.

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