With Prime Minister Narendra Modi making it clear that US investment in India is uppermost in the engagement between the two countries and key to India’s plans for development, the question is, how do US businesses feel about India? Diane Farrell, President, US Indian Business Council tells The Hindu’s Diplomatic Editor , that sentiment is high, but based on hope of more reforms.
The White house made a statement the India represents the future of US engagement, making a special mention of economic ties. Do you think economics will be the driver during President Obama’s visit.
Diane Farell: The US-India relationship is very mature and very deep, so of course there will be national security issues that PM Modi and President Obama will discuss, but there’s no question as Secretary of State Kerry said that there is a big focus on economic issues, and opportunities most importantly. The President is bringing his Commerce Secretary , his NSC director for economics Caroline Atkinson, that there is an absolute clear focus on economic issues on this visit.
Specifically what do you expect. Even Ambassador Verma has said, this relationship has not live up to its hype…do you see an announcement coming in terms of the Bilateral Investment treaty, or the Bilateral Totalisation Agreement?
Certainly, the BIT is something we are hearing more about, as India is developing its model BIT. What we at USIBC would like to see is an announcement by the leaders that negotiations on BIT will start with a schedule, and will set an ambitious target for its completion date.
Still many sore points between India and the US: IPR, Pharma, visas, etc. Do you think President Obama and PM Modi will be able to discuss thorny issues, not just the areas they agree on?
Certainly, as an example, after Mr. Modi's visit at the end of September, saw the resumption of the trade policy forum that had been on hiatus for close to three years. And it is there that the challenging issues like IPR came up and they have agreed to establish a separate forum to work through the challenging issues like IPR in the Pharma industries. No one is expecting a quick resolution, but if we can atleast talk to each other instead of past each other then that will lead to the ultimate momentum we want.
So what you’re saying is that the fact that they’re breaking down some of these issues is positive…When it comes to India’s Make in India policy, we know this came up at the Vibrant Gujarat meeting, is the US concerns on that. Is the perception that India is being protectionist?
I think for Make in India to work, India will have to adopt policies that are going to comply with the global supply chain. In terms of the groundwork, infrastructure like roads, to rail to ports to power will have to be literally laid down. Make in India is a fantastic campaign for the PM and government, but for it to be successful its going to need transparency, predictability, consistency, a level playing field. And the key to a better investment climate is going to be the ease of doing business. If done properly, given most industries work through the global supply chain, both countries can benefit, jobs can be created in both places.
What is the investor’s mood at present? We heard Mastercard CEO Ajay Banga say at Vibrant Gujarat that investors will remain nervous until the reforms pushed through ordinances will pass legislatively. Are investors then still waiting and watching?
The fact that the government chose to pursue the ordinance route, especially with the insurance FDI, it definitely sends the signal to investors that there is a commitment from the government to see it through. However, as Mr. Banga pointed out, the ordinance route is only a temporary measure, so it is a signal but not the solution. So we hope the government is successful in convincing the upper house of parliament to pass it in this next session as well as the Lower House. Most investors, who are hoping to place their bets on India, will see it as a glass half full, understanding that more has to happen until the ultimate assurance is given, and that is parliamentary action.
How much has the US investor’s mood changed then, since September last year, when the PM visited. Are they more likely to invest?
The PM’s visit was considered a great success. His commentary that “more red carpet and less red tape”, and acknowledging that investors will only go where profits are possible, saw a very positive response from US businesses. But Since then, a number of companies have announced their intention to invest, and that’s a positive trend. But there’s always a watchful attitude towards India, so having an economist like Paul Krugman, who was in Delhi last weekend, give a sense of confidence in the Indian economy, that plays very well in C-suites (CEO offices) around the world.
The USIBC and the Commerce Ministry will host President Obama and Prime Minister Modi who will speak at a India-US CEO Conclave on the 26th of January in New Delhi.
