Obama and Modi: Key areas likely to be discussed

NEW DELHI (REUTERS) - US President Barack Obama arrives in India on Sunday for the second time, to build on what he calls one of the defining relationships of the 21st Century.

Following are some key areas likely to be discussed during his visit:

STRATEGIC IMPORTANCE

India's size, location, fast-growing economy and potential as a democratic counterbalance to China makes the South Asian nation an increasingly important element of US military and commercial strategy.

Prime Minister Narendra Modi's assertiveness in the region has already aligned India more with Washington, but they do not see eye-to-eye on Pakistan, and India is worried about the exit of US troops from Afghanistan. India wants greater cooperation on terrorism and access to high-technology goods for civilian and military use.

DEFENCE

The United States overtook Russia as the biggest weapons supplier to India, the Indian government said in August.

India is the world's biggest weapons importer.

US officials confidently predict deals will be unveiled on the trip, including possibly joint production of Raven drones and systems for Lockheed's C-130 transport planes.

Standing in the way of closer ties are Indian curbs on foreign companies owning majority stakes in defence companies and US curbs on exporting certain technologies.

CIVIL NUCLEAR

US and Indian officials are trying to unblock billions of dollars of potential trade in nuclear energy, but it's not clear if an agreement can be reached in time for Obama's visit.

The two sides signed a landmark civilian nuclear deal in 2008.

Holding up the trade is India's reluctance to pass legislation shielding suppliers from liability in the event of a nuclear accident, a deviation from international norms.

CLIMATE CHANGE

The United States and India are expected to announce efforts to work together to combat climate change ahead of key global talks in Paris later this year.

India, the world's third largest carbon emitter, is reluctant to follow the United States and China in committing to a peak year for emissions on the grounds it needs economic growth to alleviate poverty.

Instead, India is likely to trumpet its plans for a rapid expansion of renewable energy, for which it needs US investment and technology, and improving energy efficiency.

RENEWABLE ENERGY

India wants US companies to help lead investments of US$100 billion (S$134 billion) in renewable energy.

Modi promised to help renewable energy companies overcome entry to the Indian market during his trip to Washington last year.

A barrier to investment is a requirement that foreign companies make much of the equipment within India, which business leaders say will push up costs.

ECONOMIC TIES

Modi and Obama last year targeted a five-fold increase in annual trade to US$500 billion.

But US business leaders have been frustrated by limits on their access to the Indian market, and battles over intellectual property protection.

India and the United States have also filed several cases against each other at the World Trade Organisation over protection of their domestic steel, poultry and solar industries.

India is trying to shed an image of arbitrary taxation on foreign companies and may be close to a bilateral tax deal with Washington.