$500 BN US-INDIA TRADE ACHIEVABLE WITH PROPER REFORMS
The US India business relations have been on upswing over last couple of years and 2015 saw highest bilateral trade between the two countries. There is an increasing willingness among American businesses to do business with India as Indian economy picks up growth and the Indian government promotes business with supportive policies. The US-India Business Council, established in 1975 at the request of both the US and Indian governments, is a business advocacy organization dedicated to strengthening the economic and commercial relationship between the US and India. It acts as the direct link between business and government leaders, and plays a proactive role by being the voice of industry on both sides, thus enabling growth in business relations between India and the United States. To know more about the work of USIBC and how it perceives emerging bilateral business relations, Rajesh Mehta, Consulting Editor, Governance Today, spoke to Dr. Mukesh Aghi, the President of the Council. Dr. Aghi has over two and a half decades of corporate experience, leading global organizations in various capacities, such as CEO of L&T Infotech, CEO, Asia-Pacific of Steria, Inc, President of IBM India etc. to name a few.
According to Ambassador Richard Verma, 2015 saw the highest two-way India-US Trade. How optimistic are you for next few years.
The reforms undertaken by India in the last two years under Prime Minister Modi’s leadership are resonating very well with the US companies.
In a recent USIBC survey, about 20 per cent of our member companies confirmed that have already invested over $15 billion in India ever since Prime Minister Modi assumed office. Within this and the next year, we expect more than $27 billion to be invested additionally by at least 52 US companies in India.
So yes, we are optimistic, but a lot more needs to be done for India to remain on its path of domestic reforms, transparency and clarity.
There is a $500 bn goal for US India bilateral trade. What will it take to achieve this huge goal? What role can USIBC play in achieving this goal?
This is obviously an aspirational goal, but that can be achieved if proper reforms are enacted in a steadfast manner. We have had some hurdles in achieving greater trade targets which can be attributed to global and domestic factors such as the US recession in 2008-2009 and the economic slowdown in India in 2012-13.
In order to assertively move towards the $500 billion target, we must continue to support PM Modi’s Make in India Initiative. As more goods are made in India, consumers in the US will be ready to purchase them. Secondly, the dialogue on the US-India agriculture front needs to be consistent. If US investors are able to access the Indian markets in agriculture, this will promote two-way trade in a big way.
Liberalizing trade is good for both countries, which is why USIBC encourages India’s steps towards trade liberalization including supporting its interest in APEC, and having meaningful conversations on India’s interest in TPP, the multilateral trading system, and resuming negotiations on a US-India Bilateral Investment Treaty.
There has been a lot of heartburn in India on the issues of visa fee hike and return of Indian students. Do you think these can impact economic relations? What is USIBC doing on this?
Skilled labor and the knowledge economy fuels any business- much more in the 21st century than before, where the business operations cut across borders. Immigration reform has been a difficult issue politically. The problem for Indian IT firms is that the issue of H-1B visas gets conflated with the larger immigration issue that involves the estimated 11 million undocumented foreigners who live and work in the United States.
There has been a mutually beneficial partnership in place between the US and India over the last several decades, involving a combination of American and Indian high-skilled personnel, resulting in tremendous innovation, and in turn creating American jobs and fueling US industry’s global competitiveness. We would want that to remain for years ahead.
What reforms would be most sought by American investors so that investments could rise fast?
The focus should be on ease of doing business. If a company wants to build a hotel in India, it takes almost 153 permits. Investors look for expedite approvals and set up single window clearances. Whether land acquisition or environmental clearances, companies report delays of up to several years as compared to similar projects in other countries. Members of USIBC have reported that 20 different government organizations were involved with plant permitting approvals, requiring multiple visits due to lack of clarity regarding documentation.
This is an important area where proactive reforms are needed and much is being done. Then, we need more predictability on the policy side. Boardrooms prefer a consistent set of patterns. So, that is important. Third, India should focus on bringing down the cost of capital in manufacturing.
India released its model bilateral investment treaty (BIT) last December. What is your opinion about the same?
USIBC recognizes the Government’s efforts in finalizing its model BIT. A bilateral investment agreement would be beneficial to both the US and India as it would signal protections and a fair process of arbitration should disputes occur. A successful US–India BIT will signal compliance with global dispute-resolution practices that will reassure investors and more readily attract investment to India. Companies look for predictability, transparency, and clarity and BIT frameworks provide these basic levels of assurances, which help in making investment decisions.
However, in its current form, India’s Model BIT still contains gaps which would prevent it from finalizing an agreement with the United States. USIBC recommends that the Government of India revisit not only some of the substantive protections and procedural mechanisms included in the Model, but also do so from the perspective of projecting a willingness to open trade and to provide a stable investment environment in India.
How can American firms take advantage of “Digital India” & “Make in India” program of the government of India?
In the last 20 months, Prime Minister Modi’s government has made steady progress to deliver on its promise of economic reforms. Efforts such as lifting FDI caps in several sectors, reducing red tape, implementing a transparent tax environment and improving the country’s intellectual property regime have sent a crystal clear message to the global investment community that India is ready and open for business. The results of these efforts are also visible in India’s rise in the World Bank’s Ease of Doing Business Index.
American enterprise has displayed its commitment to the Make in India program in a number of areas such as defense, health, power generation, media and entertainment, and technology and has the potential to do much more. Long-term investment in manufacturing will increase by continued clarity in regulations, reforms in land and labor laws, and enabling citizens with the appropriate skills to take on the challenges of an ever-changing economy.
How do you see the success of Indian Diaspora in the US?
The Council has many Indian American CEOs of global MNCs on its board and these are all global business leaders who have high hopes from India. Indra Nooyi, Shantanu Narayen, Ajay Banga, Francisco D’Souza are all glittering examples of the India-US partnership of progress. But this relationship goes beyond the Council. Rich Verma becoming the first US ambassador of Indian-origin speaks volumes of the increasing recognition of the contributions of Indian diaspora in fortifying our relations. The 3 million strong Indian diaspora and the 100,000 Indian students in the US have been a significant contributor to the US economy as well as the US-India bilateral relations. USIBC supports events that promote Indian arts and music. Indians today constitute the largest immigrant entrepreneur community in the Silicon Valley. The Council is excited in the manner in which the strong bilateral ties between the two countries are further strengthening each day.