By Sanjeev Miglani
NEW DELHI, Jan 26 (Reuters) - U.S. President Barack Obama watched a dazzling parade of India's military might and cultural diversity on Monday, the second day of a visit trumpeted as a chance to establish a robust strategic partnership between the world's two largest democracies.
It rained on the parade through the heart of New Delhi, but excitement nevertheless ran high over Obama's landmark visit, which began on Sunday with a clutch of deals and 'bromance' bonding with Prime Minister Narendra Modi.
The two leaders announced plans to unlock billions of dollars in nuclear trade and to deepen defence ties.
Most significant was an agreement on two issues that, despite a groundbreaking 2006 pact, had stopped U.S. companies from setting up nuclear reactors in India and had become one of the major irritants in bilateral relations.
"Mobama breaks N-deadlock," the Mail Today newspaper said on its front page, which carried a photograph of Modi and Obama hugging each other warmly.
The bonhomie was a remarkable spectacle, given that a year ago Modi was persona non grata in Washington and was banned from visiting the United States for nearly a decade after deadly Hindu-Muslim riots in a state he governed.
Obama is the first U.S. president to attend India's Republic Day parade, an annual show of military prowess that was long associated with the anti-Americanism of the Cold War.
A cheer went up as he and the first lady, Michelle Obama, stepped out of their car and walked up to the viewing dais.
Obama then sat behind a rain-spotted screen with Modi as the parade unfolded along Rajpath, an elegant lawn-bordered boulevard dating from the British colonial era that connects the presidential palace to India Gate. Helicopters showered petals on the crowds, and then tanks, missiles, stiffly saluting soldiers, brass bands and dancers filed past the guests.
Security was tight at the parade and across the city, where tens of thousands of police and paramilitary personnel were deployed on street corners and rooftops.
Obama's presence at the parade - at Modi's personal invitation - marks the latest upturn in a roller-coaster bilateral relationship that just a year ago was in tatters.
Bickering over protectionism culminated in a fiery diplomatic spat in 2013 and the abrupt departure of the U.S. ambassador from New Delhi, who has only just been replaced.
COUNTERWEIGHT TO CHINA
The United States views India as a vast market and potential counterweight in Asia to a more assertive China, but has frequently been frustrated with the slow pace of New Delhi's economic reforms and unwillingness to side with Washington in international affairs.
Elected last May, Modi has injected a new vitality into the economy and foreign relations and, to Washington's delight, has begun pushing back against China across Asia.
"The larger goal that the United States should be pursuing here is to convince India to join a coalition of democracies to balance China's rise," former U.S. ambassador to Beijing Jon Huntsman and the South Asia Center's acting director, Bharath Gopalaswamy, wrote in a joint opinion piece for Reuters.
"Although it won't be publicised, this topic will likely be ever-present in their private conversations."
The two leaders emerged from their talks on Sunday with a 10-year framework for defence ties and deals on cooperation that included the joint production of drone aircraft and equipment for Lockheed Martin Corp's C-130 military transport plane.
Other deals ranged from an Obama-Modi hotline - India's first at a leadership level - to financing initiatives aimed at helping India use renewable energy to lower carbon intensity.
Obama also enjoyed a close friendship with Modi's predecessor Manmohan Singh, who staked his premiership on the controversial nuclear deal that made India the sixth "legitimate" atomic power and marked a high point in Indo-U.S. relations.
The deal failed to deliver on a promise of business for U.S. companies because of India's reluctance to shield suppliers from liability, a deviation from international norms that reflects the memory of the Bhopal industrial disaster.
Sounding a sour note amid the celebrations, President Pranab Mukherjee gave a stern assessment of India 65 years after it declared itself a republic, criticising parliamentary dysfunction and the overuse of decrees.
In a Republic Day address on Sunday, India's largely ceremonial president was also scathing about rampant violence against women in the world's second most populous nation.
Mukherjee said the opposition should debate laws responsibly rather than disrupting the houses of parliament, and warned Modi's government against governing by decree.
He was referring to 10 "ordinances" issued by Modi, including ones to raise the foreign investment limit in insurance, auction coal mines and ease land acquisitions.
Modi issued the decrees after opposition parties prevented parliament from functioning in protest at comments against religious minorities made by members of his Hindu nationalist party.
(Writing by John Chalmers; Editing by Raju Gopalakrishnan)
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