25/01/2015 6:54 PM IST | Updated 15/07/2016 8:24 AM IST

Obama Says Breakthrough Made In Nuclear Deal

SAUL LOEB via Getty Images
Indian Prime Minister Narendra Modi (R) and US President Barack Obama talk during a meeting at Hyderabad House in New Delhi on January 25, 2015. US President Barack Obama held talks January 25 with Prime Minister Narendra Modi at the start of a three-day India visit aimed at consolidating increasingly close ties between the world's two largest democracies. The two leaders sat down for a working lunch in central Delhi after sharing a bear hug at the airport where Modi, dressed in a bright saffron shawl, broke with protocol to greet the first couple on the tarmac. AFP PHOTO / SAUL LOEB (Photo credit should read SAUL LOEB/AFP/Getty Images)

President Barack Obama today said that a breakthrough has been made on two contentious issues in the civil nuclear deal that was signed with India in 2008, but has been lying in cold storage mainly because of a liability clause.

"We reached a breakthrough understanding on two issues that were holding up progress on the civil nuclear deal," Obama said at a joint press conference after meeting Indian Prime Minister Narendra Modi for bilateral talks in New Delhi. Obama did not specify what the issues were.

The two leaders met amidst expectations of progress in deals in climate change, civilian nuclear cooperation, and defence among other areas. Modi said that discussions were held over last four months to move towards commercial co-operation in civilian nuclear technology consistent with local and international laws, and that there has been forward movement on the deal.

The deal had allowed India to become the sixth "legitimate" atomic power apart from the P-5 club in 2008, and marked a high point in Indo-U.S. relations. But the deal has been stuck since then because India has been reluctant to pass legislation that shields companies and suppliers from liability. That has held up billions of dollars that were expected to flow, and India has not been able to grow power generation as planned. TV networks speculated that the U.S. has also dropped its demand to be able to track location of material supplied to the country for nuclear power.

"In a major step forward, our partnership will allow us to develop new defence technologies," Obama said. Modi said that India and the U.S. will pursue co-development and production of specific advanced defence projects. That is the first time such a partnership has been announced between the two countries. The other similar project India had entered is for the Brahmos missile system with Russia. A hotline has been established between national security advisors of both countries.

And Obama also supported a longstanding demand from India for a greater role in the United Nations. "We support a reformed UN Security Council that has India has a permanent member," Obama said, as Modi looked on.

Earlier, the two leaders met over a working lunch that included kebabs, figs and spices. After that they talked while taking a stroll in the gardens of Hyderabad House. Their teams negotiated on a range of topics such as clean energy, climate change, defence partnership and taxation issues. "It is a great honor," Obama said after reviewing an Indian honor guard formation at Rashtrapati Bhavan. "We are so grateful for the extraordinary hospitality."

In the morning Modi broke with protocol to receive Obama himself at the airport, a gesture that had been earlier seen when former prime minister Manmohan Singh had received former president George Bush in 2008, when the landmark nuclear deal was signed.

"Deepening ties with India is a top priority for my administration," said Obama, then ended his speech with "Chalein saath saath" in Hindi, meaning "we walk together."