Ending the licence raj in India-US relations

Hindustan Times

12-07-2025

As we approach the 20th anniversary of the US-India civilian nuclear agreement, it is worth reflecting on both the progress made and continuing challenges to India's navigation of US export controls. A major rationale for the 2005 nuclear agreement was to enable India to access strategic technologies from the US and its allies. Further reducing or harmonising export controls remains crucial both for strategic cooperation and for US and Indian businesses working in a variety of sensitive sectors — defence, aerospace, semiconductors, quantum, space, and chemical and biotechnologies — that generally require an export licence from a relevant government agency.
At face value, tremendous progress has been made in India's ability to access leading-edge technologies. Since the 1970s, India was at the receiving end of discriminatory US export controls on account of its nuclear weapon programme and close defence relationship with the Soviet Union. Despite a bilateral high technology arrangement being initiated in the 1980s, India's nuclear weapon programme and 1998 tests resulted in US sanctions. The US took various measures against India that included suspending defence sales, denying the Indian government credit and loans, and denying visas for Indian scientists. By the late 1990s, about a quarter of US exports to India by value required a licence.
Following the removal of most sanctions by 2000, when then US president Bill Clinton visited India, the George W Bush administration began a gradual process to further dilute barriers, increase strategic trade, and remove Indian entities from restrictive lists, through an initiative known as Next Steps in Strategic Partnership (NSSP). This was not altruistic on the part of the US, because it required reciprocal steps on the Indian side, integrated India into international export control regimes, and facilitated access to the Indian market. The 2005 civilian nuclear agreement turbocharged this process, resulting in 2008 in US legislation that exempted India's nuclear programme (called the Hyde Act) and a waiver for India by the Nuclear Suppliers Group (NSG), a cartel of nuclear exporting countries.
Subsequent developments built upon these efforts. In 2010, labs belonging to India's Defence Research and Development Organisation (DRDO) and Indian Space Research Organisation (Isro) were removed from US entity lists. India was granted the special legislative category of Major Defence Partner. Under the first Donald Trump administration, the Bureau of Industry and Security (BIS) at the US Department of Commerce placed India in the top category for licence exceptions called Strategic Trade Authorisation-1, enabling certain sensitive nuclear-related commerce without a license. A US-India Strategic Trade Dialogue, led in India by the foreign secretary, created working groups to manage licence exceptions, particularly for defence articles. Late in the Joe Biden administration, the US moved to remove the Bhabha Atomic Research Centre, Indira Gandhi Atomic Research Centre, and Indian Rare Earths Limited from the entity list.
Despite these major developments, India's government and businesses continue to find US export controls baffling and cumbersome. The International Traffic in Arms Regulations (ITAR) regime that governs defence-related exports is managed by the US department of State's directorate of defense trade controls (DDTC). Meanwhile, Export Administration Regulations (EAR) are managed by the BIS at the Department of Commerce. The various US export control regimes and processes remain disaggregated and tortuous.
For its part, India has updated its own export control regulations, initially shaped customs and trade laws after the 1960s. In 2005, India passed a WMD Act to better harmonise policies with global standards. After 2010, India updated end-user certification requirements on certain items under a Special Chemicals, Organisms, Materials, Equipment, and Technologies (SCOMET) category, which is regularly reassessed by the ministry of commerce and industry. India is also a member of major multilateral groups for harmonising export controls, including the Chemical and Biological Weapons Conventions, the Missile Technology Control Regime (MTCR), the Wassenaar Arrangement on conventional arms and dual-use technologies, and the Australia Group on biological and chemical items.
The good news is that there has in fact been an increase in successful Indian licensing applications from the US. But several challenges remain. For example, cooperation on space launch technologies and unmanned aerial combat systems (drones) has been delayed or frustrated. There are several reasons for this.
One, export controls are always changing, due to the rapid evolution of emerging technologies and global supply chains, and the need to constantly reevaluate what constitutes security-sensitive commerce. In attempting to update its own regulations, the US sometimes imposes unilateral changes before notifying others. This requires constant contact and negotiation.
Two, neither country has a single-window approval, licensing, and enforcement process for export controls. The US departments of commerce, State, and defence all oversee different processes, while some approvals require Congressional authorisation or notification. The National Security Council can offer a single response and has sometimes convened representatives from relevant US agencies – along with their Indian counterparts – to overcome specific obstacles and identify bottlenecks to implementation. Transferring some items from ITAR to EAR would also be welcomed by partners such as India, although radical changes would involve Congress. Despite its desire to increase arms exports, the Trump administration may not have the ability or willingness to address this issue. Meanwhile, India prefers more time-consuming individual licences in its export controls over general authorisations. This complicates supply chain integration, which often involves the import and re-export of sensitive items.
Three, although some challenges confronting the US export control regime are systemic — frustrating even close allies such as Australia, UK, Japan, and South Korea — certain elements of the US bureaucracy continue to raise specific concerns about India, including its relations with Russia and Iran and its nuclear and ballistic missile programmes. Some more outdated concerns conflict with political-level recognition by successive US administrations of India's strategic circumstances. This complicates India's attempts to get general authorisation for certain cutting-edge technologies (e.g. quantum technologies).
Four, corporate entities in both the US and India could still benefit from learning how to navigate the complicated US export control process. Industry consultations, particularly with small and medium enterprises (SMEs) in India, would enable corporate entities to take advantage of new opportunities afforded by the dilution of export-control restrictions.
Five, a longer-running issue has been end-use verification by the US, which India believes is sometimes too intrusive. Since the US retains concerns in many countries about diversion by corporate entities, even without governments' knowledge, the answer lies in better domestic enforcement. A lack of agreement over enforcement could result in extraterritorial measures by the US, to the detriment of Indian businesses. Finding mutually satisfactory mechanisms to ensure the enforcement of end-use provisions is necessary.
This year offers a few opportunities for meaningful change. India could tie export controls to trade negotiations, despite a traditional US aversion to linking trade with national security. Additionally, there are possibilities for greater civilian nuclear commerce, subject to changes to Indian legislation and policy. These present opportunities to increase civilian nuclear energy to meet India's growing demand and ensure stability in India-US strategic commercial relations. But due to the complexity of export controls, both governments would also do well to establish a regular inter-agency touch point to inform each other of new export control restrictions, ensure speedier licences, and enable better communication and enforcement.
Dhruva Jaishankar is executive director, ORF America. The views expressed are personal.