Ahead of Prime Minister Narendra Modi’s first meeting with U.S. President Donald Trump, the US India Business Council president Mukesh Aghi spoke to The Hindu about U.S. investors’ concerns about India’s business environment such as the recently introduced price controls on Stents. Mr. Aghi backed the anti-profiteering provisions in GST as long as they are transparently laid down. Edited Excerpts:
U.S. businesses were enthused by Prime Minister Narendra Modi’s first official visit in 2014. What’s the mood now, half-way through his administration’s tenure?
There is a growing sense of optimism for investors about India from where it was three years, for multiple reasons. This government has taken up strong structural reforms such as the bankruptcy code, the Goods and Services Tax (GST) and opening up of foreign direct investment (FDI). So U.S. companies plan to invest more in India as the market is opening up and its growth story of 7% will remain the fastest growing in the world. U.S. companies won’t want to miss out on that.
How has that changed given the Trump administration’s emphasis on domestic investments?
Yeah, it’s always challenging but U.S. companies have $2.5 trillion outside the U.S. that they are not bringing back because of high taxes.
So they are willing to take that money and invest in countries like India to get better returns.
The majority of the money coming in (as FDI) is into the services and technology side, rather than pure manufacturing. At the end of the day, U.S. companies realise that 90% of the market is outside the U.S. and they have to go after that market share.
Has the local discourse focusing on cows and restrictions on eating beef impacted investors’ view of India?
I don’t think so. U.S. companies see it as a more of a local social issue. (If) they want to go have a steak, they can get it at a five star hotel without any issue. I haven’t heard from any single member that they are going to slow down investments because of these social issues.
What would businesses look out for from the two leaders’ first meeting?
I am rather optimistic about the meeting’s outcomes because the interests of both nations are aligned geopolitically, commercially and culturally. The momentum is there, optimism is there about India and I think people are seeing this Prime Minister would get re-elected in 2019, so investors are now thinking long-term in their India plans. We see rising interest from pension funds that prefer infrastructure assets that are long-term. All the stars are aligned.
We have 1.6 lakh Indian students here contributing about $9 billion in tuition fees. With our open media and education systems, the two nations are quite aligned socially and culturally with similar value systems. Yes, we may have issues on beef. But those are normal things — overall, the two countries are aligned in the thought process. Geopolitically, U.S. needs India more whether it is (for) Afghanistan or the South China Sea. Last year, U.S. had more joint exercises with India than any other country in the world. India is one of the largest buyers of defence equipment from the U.S. now and we will see more technology transfer taking place. Commercially, we are seeing more FDI from the U.S. and Indian companies investing and hiring in the U.S. The U.S. expects India’s growth staying healthy for 20-plus years and wants a bigger share of that.
How critical is the bilateral investment treaty for U.S. businesses?
It is important to have one, but it is not a show-stopper. U.S. and China don’t have one and investment continues.
U.S. companies remain worried about intellectual property rights (IPR) in India and now, there are the price controls on stents and other medical devices…
On IPR, three High Court judgements went against the government, but they didn’t appeal… which is a positive sign. On the issue of price control on medical devices, especially stents, we have told the Indian government that the stent is not a stent by itself. There are multiple layers and qualities of strength. But there are some stents that are very advanced, for which you must have a layered-pricing. Otherwise, we will miss the high-end stents coming to India. We have made some suggestions.
With the GST regime finally on the anvil, are investors worried about the stiff anti-profiteering clauses?
I think it (the anti-profiteering clause) is good. At the end of the day, two things need to happen — tax collections need to go up and consumer needs to benefit from the replacement of multiple taxes.
