Senators ask Obama to discuss India FDI laws

January 23, 2015 10:57 pm | Updated November 16, 2021 05:20 pm IST - Washington

A worker places an American flag on a flag pole in New Delhi on Friday. Prime Minister Narendra Modi has invited U.S. President Barack Obama to be the first American president to attend Republic Day celebrations on January 26. The Indian flag is seen on right.

While U.S. President Barack Obama, who is travelling to India this weekend, has been relatively soft in his exhortations to New Delhi to further open up its economy to Foreign Direct Investment, members of Congress decided to follow a plain speaking approach this week.

On Friday Senator John Cornyn, Republican of Texas and Senator Mark Warner, Democrat of Virginia, wrote a letter to the President urging him to “actively encourage” Prime Minister Narendra Modi and his administration to liberalise FDI restrictions in the e-commerce sector in particular.

“Currently, India prohibits foreign businesses from selling items directly to Indian consumers over the Internet, which means that U.S. businesses cannot sell products online directly to Indian consumers without involving a middle man,” they argued.

They added that liberalisation of FDI restrictions also would help to “further your goal of doubling U.S. exports, [leading to] more competitive prices, U.S. exporters will also benefit from access to new markets.”

The Senators, who are co-Chairs of the congressional India Caucus, said that if the prohibition were lifted, many U.S. businesses would have greater access to India’s $4.9 trillion economy and a growing middle class.

They also focused on the job-creation potential of such liberalisation, they said, noting, “It also has the potential to increase competition in India by providing less expensive goods and creating 250,000 jobs directly, with the potential for more than 1 million jobs in customer service, IT, logistics, transportation, and administration by 2021.”

The Indian e-commerce market currently stands at nearly $3.5 billion and is expected to increase to $6 billion in 2016, significantly due to the growing penetration of low-cost smart phones and mobile broadband in rural and semi-rural areas, where consumers could access goods and services through retailers without brick-and-mortar locations.

“Specifically, we ask that you request Indian Prime Minister Narendra Modi to liberalise current FDI restrictions in the business-to-consumer e-commerce sector,” the Senators said to Mr. Obama.

While economic ties are the cornerstone of the U.S.-India relationship under the leadership of Mr. Obama and Mr. Modi, the American side has consistently focused upon a list of issues requiring the attention of the Indian government, including the need for liberalisation in specific sectors, the reform of the intellectual property regime in the country and the need to press forward with negotiations for a Bilateral Investment Treaty.

New Delhi has however pushed back with its own list of concerns in the economic sphere, including demands that Washington loosen restrictions and reduce costs faced by skilled Indian personnel seeking the H-1B visa, resolve the long-standing totalisation conundrum, and avoid protectionist barriers impeding the free flow of investment funds to Indian shores.