US President Barack Obama's upcoming visit to India is likely to be a watershed moment for the India-US relationship. It marks the first time a US president will be the chief guest at India's Republic Day celebration. It also represents an evolution in the Narendra Modi government's foreign policy orientation and reaffirms the US interest in India as a lynchpin in its Asia Pivot strategy.

The reorienting of Indian foreign policy started early under Modi. His first visit outside of the South Asia region was in August last year to Japan, a major US ally.

This was followed by a successful visit to the US, during which Modi and Obama pledged in a joint op-ed in The Washington Post that the two countries would work together to help shape "international security and peace".

Modi also made a trip last November to Australia-another major US ally and a country to which no Indian leader had paid a visit for 28 years.

Apart from the important symbolic message Obama's attendance at the Republic Day parade conveys, there will likely be substantive progress on relations, particularly in defence cooperation.

The centre piece of the visit may well be the unveiling of an updated Defence Framework Agreement. The New Framework for the US-India Defence Relationship that was signed in 2005 will expire in June this year, thus necessitating a renewal of this landmark agreement.

US-India defence trade ties have come a long way since 2005. Even though Russia still supplies around 65 per cent of India's import requirements, the US provided $2 billion worth of defence equipment to India in 2013, allowing it to surpass Russia for the first time as the largest defence exporter to India since 2011.

In August last year, the Ministry of Defence approved a $2.5 billion purchase of 22 Boeing Apache attack helicopters and 15 Chinook heavy-lift helicopters. India has also received five C-130J military transport aircraft from Lockheed Martin, with six more planes to be delivered over the next two years.

The two sides are reportedly considering announcing pilot projects for joint production of drones and special equipment for the C-130Js during Obama's visit. This has been possible following the 2012 launch of the India-US Defence Trade and Technology Initiative (DTTI), through which the US has proposed 17 co-production and co-development projects.

Ashton Carter, the nominee for the top job at Pentagon, who is scheduled for a Senate confirmation hearing in February, was the prime mover behind the DTTI in his previous position as deputy secretary of defence. He is expected to continue the momentum towards greater India-US defence cooperation in his new, more powerful role.

The nuclear dilemma

Prospects for a major breakthrough on the nuclear liability issue seem less certain. Although Secretary of State John Kerry recently highlighted nuclear issues as a major area of discussion between the two countries, the gap in their positions with regard to India's Civil Liability for Nuclear Damage Act remains wide. The 2010 law makes suppliers, rather than operators, of nuclear reactors accountable for damages in case of nuclear accidents, contrary to international norms and business practices.

American companies are thus reluctant to invest in India's nuclear industry. Westinghouse-which was granted a nuclear power plant site in Gujarat-signed an Early Works Agreement with the Nuclear Power Corporation of India in September 2013, a largely symbolic gesture aimed at maintaining good faith in ongoing negotiations.

The US and Indian officials have recently held several rounds of meetings to try to break the legal deadlock, but a workable compromise solution is so far not in sight.

The terrorism issue will certainly be an important part of discussions, but Indian leaders should not allow its tensions with Pakistan to dominate Obama's visit.

Fighting between the Indian and Pakistani armies along the Line of Control has escalated in recent months, rendering a ceasefire that had been in place since 2003 all but dead. A major terrorist attack on an Indian military facility in Kashmir during the state's elections in December and a Pakistani court's recent granting of bail to Mumbai terrorist attack leader Zaki-ur-Rehman Lakhvi has strained relations even further.

While Obama would be wise to steer free of directly referencing India-Pakistan relations, he should be clear on the US position against the Lashkar-e-Taiba (LeT) and that cases against LeT leaders in Pakistani custody will be handled expeditiously.

Some Indian commentators raised eyebrows when Obama telephoned Pakistani Prime Minister Nawaz Sharif shortly after he accepted the invitation to visit India, citing it as an example that the US still hyphenates its relations with the two countries. Yet the fact remains that Obama is visiting India for the second time in his tenure in office, while avoiding going to Pakistan altogether.

Get over the Pakistan fixation

The recent dust-up in the Indian media over inaccurate reports that the US had certified Pakistan for taking sufficient anti-terrorism steps to earn additional large sums of US aid demonstrates the current Indian sensitivity on US-Pakistan ties.

The US took pains to correct the record, indicating that no certification had been made. Instead, the US administration has invoked a national security waiver to provide Pakistan with aid in the absence of sufficient counterterrorism steps.

The US is in a bind when it comes to counter-terrorism conditions on Pakistani aid. It cannot certify Pakistan is cracking down on groups such as the LeT, specially when a Pakistani court grants bail to a known terrorist leader such as Lakhvi. But the administration also cannot continue to implement the national security waiver in perpetuity. At some point, either Pakistan will have to move against the LeT or potentially risk US congressional members pressuring the administration to cut aid, much like what happened in the 1990s with the Pressler Amendment.

President Obama's upcoming visit to India is too important to get bogged down in familiar disagreements over aid to Pakistan. The broader common security interests of India and the United States dictate that they move away from the India-Pakistan hyphenation paradigm to one in which their bilateral cooperation becomes the bedrock of security and stability throughout the region and beyond. Obama's appearance at India's Republic Day celebration will be a decisive step in this direction.

 - Lisa Curtis is senior research fellow at the Asian Studies Center of The Heritage Foundation, Washington