U.S. ENVOY RESIGNS, BUT GRIEVANCES LINGER IN NEW DELHI

[Indian officials are refusing to renew teacher visas until the case is resolved, leading nearly 20 teachers to leave in recent weeks. Without a quick resolution, nearly a quarter of the school’s teaching staff could be forced to leave before classes end in June. If the controversy remains unsettled into the fall, the school — widely considered one of the best international schools in the world and a key recruiting tool here — could close.]

By Gardiner Harris

Tsering Topgyal/Associated Press

Nancy J. Powell, U.S. Ambassador to India, speaking at an event in New Delhi 

on July 10, 2012.

NEW DELHI — The resignation of the United States ambassador, Nancy J. Powell, was greeted by many in New Delhi’s diplomatic community Tuesday with a sense of hope that some of the grinding disputes between the United States and India might soon be settled.

In the wake of December’s arrest and strip-search in New York of Devyani Khobragade, an Indian consular official, Indian diplomats have begun a series of investigations into the American Embassy School, the United States duty-free commissary and the American Community Support Association, a recreational club for expatriates on the United States Embassy compound.

The more the Indians looked, the more outraged they became. School administrators have quietly admitted that for years the school undertook a variety of tax-avoidance schemes, including one in which they instructed some female teachers whose husbands also worked at the school to list their occupations on visa applications as “housewife.”

Indian officials are refusing to renew teacher visas until the case is resolved, leading nearly 20 teachers to leave in recent weeks. Without a quick resolution, nearly a quarter of the school’s teaching staff could be forced to leave before classes end in June. If the controversy remains unsettled into the fall, the school — widely considered one of the best international schools in the world and a key recruiting tool here — could close.

School officials proposed raising fees for the next school year by a third to become tax compliant, and they have proposed charging an additional $5,000 for students needing remedial help in English instruction.

Only a third of the students at the school are American, so the teacher departures and fee increases have shocked many of New Delhi’s expatriates. The South Korean community, whose students make up 20 percent of the student body, has been particularly incensed by new fees for remedial English.

Investigations of the United States commissary and club have also been controversial. About 50 nations, including Chile, Peru, Sweden and Belgium, got duty-free goods at a diplomats-only store at the United States Embassy until the Indian government sent letters to these countries ending this privilege.

The nearby Canadian Embassy has since expanded its duty-free shop to accommodate some stranded nations, but transferring privileges from one embassy store to another takes time. Some ambassadors have quietly grumbled that they have scrambled in recent months to buy wine, whiskey and other goods needed for social functions, with some threatening to end privileges to Indian diplomats in their home countries — potentially setting off a global cascade of diplomatic tiffs.

Just as worrisome to executives are Indian threats to close the American club, known as ACSA, which has a swimming pool, bowling alley, baseball diamond, restaurant and hair salon. To the Indians, the club is an insulting colonial holdover because it accepts Americans and those sponsored by diplomats, which means Indians are largely excluded.

“ACSA cannot continue in its current form,” said a senior Indian diplomat, who asked for anonymity because of the sensitivity of the matter. “It will have to change in a manner that makes it compliant with rules and laws.”

But to foreign diplomats and corporate executives here, the club offers a valuable place to cool off in a chaotic and polluted city that has few recreational options and where daytime high temperatures will soon exceed 100 degrees Fahrenheit (38 Celsius).

Similar facilities at other embassies are not threatened. To mollify the Indians, the club, financed by fees from expatriates, is now closed on Mondays.

Some executives of large multinational corporations say the tiff has added to a growing sense of gloom about India’s economic prospects, which have slid substantially. In the next 10 years, India must create 120 million new jobs to accommodate a massive population bulge, an effort that is likely to be successful only if global corporations increase investments here. But instead of wooing such executives, India is threatening the school and club where their children learn and play, they complain privately.

Indian diplomats dismiss any suggestion that the American school, commissary and club are beneficial to India.

A recent poll by the Pew Research Group found that 56 percent of Indians had a favorable view of the United States, a higher share than found in Germany. Among Indians with some college education, the share is 73 percent. But despite sharing a love of democracy and the English language, the two countries have profound differences that can sometimes lead to sharp disagreements.

@ The New York Times