India, U.S. stress strategic ties but tensions remain

NEW DELHI (Reuters) - The United States and India stressed their desire to boost business and defence ties on Thursday, but trade and spying rows were a reminder of the obstacles to President Barack Obama's vision of a "defining"partnership.

After a day of meetings in New Delhi seen as a preparation for a September visit to Washington by new Indian Prime Minister Narendra Modi, U.S. Secretary of State John Kerry said the Indian leader's election had created a "singular opportunity."

"The moment has never been more ripe to deliver on the incredible possibilities in the relationship between our two nations," he told a news conference after the annual Strategic Dialogue meeting between the two countries.

"The United States and India can and should be indispensable partners in the 21st century," he said.

His Indian counterpart, Ms Sushma Swaraj, said the two countries were at "an important turning point" and said they shared "converging long-term strategic interests." She told the news conference that India was keen to see greater U.S. business participation in its economy and expanded defence cooperation.

Mr Kerry said delivering on the potential was key and much needed to be done to deliver concrete progress by Mr Modi's visit. He stressed the need to break down barriers to trade, subsidies and protectionism, which U.S. firms have long cited as obstacles in India.

He hailed Mr Modi's commitment to economic reform, but added: "We are waiting to see - the proof is always in the pudding."

The comments show lingering frustrations in a relationship that, while it has come a long way since the suspicions of the Cold War, has yet to live up to Obama's 2010 rhetorical billing as "one of the defining partnerships of the 21st century."

The talks in Delhi were overshadowed by a dispute over India's opposition to a world trade pact and a new expression of Indian irritation over U.S. surveillance activity. Mr Kerry urged India to reconsider its threat to veto the landmark pact agreed last year in Bali, which aims to speed trade by standardising customs rules and slashing red tape.

New Delhi has insisted it must see more progress on a parallel pact giving it more freedom to subsidise and stockpile food grains than is allowed by World Trade Organisation rules.

For its part, India, on Thursday, raised the issue of U.S. surveillance activities, with Ms Sushma saying such acts were "unacceptable" and had caused resentment in her country.

According to a document leaked by former U.S. security contractor Edward Snowden and published by the Washington Post earlier this year, Mr Modi's Bharatiya Janata Party was among a handful of political organisations a U.S. court allowed the U.S. National Security Agency to spy on.

Mr Kerry said it was not U.S. practice to comment on intelligence matters but added: "We fully respect and understand the feelings expressed by the minister."

The Obama administration sees India as a key strategic counter-balance in Asia to an increasingly assertive China and has been seeking to revive ties since Modi's election in May.

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 in New Delhi.

Mr Modi himself was banned from visiting the United States after Hindu mobs killed more than 1,000 people, most of them Muslims, in 2002 while he was chief minister of his home state of Gujarat.

Mr Kerry said the visa ban was from another time. "It wasn't me," he said in an interview with India's NDTV network. "Different government, this is a different government."

Mr Kerry said Mr Modi would be welcomed in Washington "no questions whatsoever."

"We want a new relationship. We want to see things move in a very positive way," he said.