Can Clinton’s India Visit Help Pave the Way for More Foreign Investment?

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Saul Loeb / AFP / Getty Images

US Secretary of State Hillary Clinton greets traditional Indian dancers after watching a dance performance at the Kalakshetra Foundation in Chennai, India on July 20, 2011.

When U.S. Secretary of State Hillary Clinton decided to make Kolkata her first port of call on her visit to India this week, it took more than few people by surprise. Even in India, it wasn’t the most obvious choice for the in-demand diplomat to spend a day of her tight schedule in country’s eastern metropolis. But in recent months, Kolkata, the capital of the state of West Bengal, led by its mercurial chief minister, has become a key battlefield on which the fight over foreign investment in India is playing out, and a high-profile visit may go a long way in advancing the U.S. position.

While in Kolkata, Clinton is scheduled to meet with Mamata Banerjee, the head of the state who has become a difficult ally of late for the government in Delhi. Banerjee, who came to power last year after successfully dislodging West Bengal’s three-decades-long communist rule, has been a staunch opponent to some key reforms the coalition has been trying to push, most notably making the nation more friendly to the kind of large-scale foreign direct investment that U.S. retailers are keen to make in India. Banerjee opposed New Delhi’s plan to allow 51% FDI in multi-brand retail on the grounds that it was against her party’s manifesto. And her opposition matters: With 19 MPs in parliament, her party’s support is crucial to the Congress-led coalition. “Hillary Clinton has her task cut out,” Dipanjan Roy Chaudhury wrote last week in the Daily Mail.  “The U.S. Secretary of State aims to succeed where Prime Minister Manmohan Singh and Congress president Sonia Gandhi have failed.”

(MORE: See Clinton and Banerjee as featured in this year’s TIME 100.)

If she succeeds, American giants like WalMart and other global retailers like Tesco and Carrefour may finally be able to tap the lucrative Indian market directly by opening up their own stores in India. “There is a lot of potential for American investment in eastern and northeastern India, and Kolkata — once the heart of British empire in Asia — could be the gateway,” says Sabyasachi Basu Ray Chaudhury, a Kolkata-based political analyst and professor of political science at the Rabindra Bharati University.

Clinton evidently has been aware of that potential for some time. Last July, when West Bengal had just made the historic transition from a communist-ruled state to a non-communist one, Clinton happened to be in India to take part in the second annual Indo-US strategic dialog. According to Indian media reports, Clinton considered visiting Kolkata then, but was dissuaded by New Delhi who felt it could be construed by critics as meddling in India’s internal affairs.

A year later, much of the shine has worn off the euphoric win of Banerjee’s Trinamool Congress. Banerjee has not been able to deliver on her promises of more democratic governance and has been panned nationally for mismanagement of the state. Her at-times erratic behavior and increasing inflexibility, embodied by recent moves like banning English-language newspapers in state-run libraries and arresting a professor for circulating a political cartoon of herself, have also been damaging to the populist image she pushed during her election.

Clinton’s visit to the abode of such a divisive figure is, of course, not without domestic implications. Many analysts have observed that by choosing Kolkata her first stop, Clinton is making a gesture of support forBanerjee’s embattled administration. In the daily Calcutta Telegraph, veteran journalist K.P. Nayar called the stop “an unexpected vote of confidence amid a growing perception of disenchantment with her style and substance of governance.” If the visit reinstates confidence in Banerjee’s government, it could dissuade the Leftist parties nipping at her heels to attempt to regain power at the next state elections.

For their part, Kolkata’s political and business circles welcome the visit, saying some attention from the U.S. is long overdue considering its interests in the region. “Bengal has been ignored for a long time by the U.S. and internationally,” says Heena Gorsia, east India’s president of the Indo-American Chamber of Commerce. “You cannot have business without good political relationships and other relations can’t develop unless you have over all strong relations.”

Following her stop in Kolkata, Clinton is scheduled to meet with Indian government officials in New Delhi in preparation for the U.S.-India Strategic Dialogue to be held in Washington on June 13, co-chaired by Clinton and India’s Foreign Minister S. M. Krishna, the State Department said in a statement. She is also expected to discuss various bilateral issues, including Afghanistan, with her Indian counterparts.

Back in Kolkata, a team of 12 FBI agents has been overseeing arrangements with the local police, putting in place unprecedented security measures amidst a Muslim cleric’s threats to protest the Secretary of State’s visit. Nancy Powell, the new U.S. ambassador to India, has said this will be an opportunity for Clinton to “see firsthand how much this city and eastern India have transformed and what a bright future lies ahead.” Banerjee, meanwhile, has remained uncharacteristically silent, only saying that “she [Clinton] is most welcome in our state.”

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