At the time India was banned from purchasing uranium on the international market because it had detonated a nuclear weapon in 1974 and refused to sign the Nuclear Non-Proliferation Treaty (NPT). There was a fear that if India had nuclear weapons, eventually so would Pakistan, a fear that turned real in 1998 when Islamabad tested its first nuclear device.
Pakistan also refused to sign the NPT.
Under the rules of the Treaty, both countries were excluded from the 45-member Nuclear Suppliers Group. While the ban was not a serious problem for Pakistan -- it has significant uranium deposits -- it was for India. With few domestic resources, India had to balance between using its uranium for weapons or to fuel nuclear power plants. Given that India is energy poor, that was a difficult choice.
When the Bush administration took over in 2001, it immediately changed the designation of China from "strategic partner" to "strategic competitor." It also resumed arms sales to New Delhi despite India's 1998 violation of the NPT with a new round of tests.
Then Washington offered a very big carrot called the 1-2-3 Agreement that allowed India to bypass the NPT and buy uranium so long as it is not used for weapons. This, however, would allow India to shift all of its domestic fuel into weapons production.
At the time, Pakistan -- which asked for the same deal and was rebuffed -- warned that the Agreement would ignite a nuclear arms race in Asia, which is precisely what has happened. India and Pakistan are busily adding to their nuclear weapons stocks, as is China and, of course, North Korea.
The 1-2-3 Agreement went into effect in 2008, although it has not been fully implemented.
Complicating this whole matter are ongoing tensions between India and Pakistan in Kashmir, over which the two have fought three wars, the last of which came close to going nuclear. Rather than trying to defuse a very dangerous conflict, however, the Bush administration ignored Kashmir. So did the Obama administration, in spite of a pre-election promise by Barack Obama to deal with the ongoing crisis.
(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).