The ‘Make in India' tableau on January 26 showcased a mechanical lion charged with rotating cogs and wheels moving to metallic, trance-like beats as part of the Republic Day parade, inviting investors to participate in the Indian growth story. A pointed message to US President Barack Obama and foreign investors of Prime Minister Narendra Modi's intention of revving up the country's economy.
Obama has promised USD 4 billion in loans and investments to unlock the “huge untapped potential” of a business and strategic partnership between India and US, just one-ninth of the USD 35 billion pledged by Japanese Prime Minister Shinzo Abe. What was mostly a ceremonial, even symbolic, visit could however, bring in greater investments in the coming months.
“The PMO's decision to have an investment body to monitor US investments like for Japan, and the US sending two trade missions to India this year can pave the way for enhanced investments,” said Rajesh Menon, deputy director general, Confederation of Indian Industry (CII).
During the India-US CEO Forum, sources say that Modi assured US Inc. that the PMO would personally monitor big projects and states would be brought onto the same page as the Centre thereby resolving smaller conflicts and problems faced by US companies.
Obama hailed the Indian Prime Minister for bringing “new energy and vigour” improving investor sentiment. “He (President Obama) also said that there was great interest from US companies to find consistency and clarity in regulatory and tax environment which would lead to more business in India,” said an Indian businessman who attended the forum.
At the closed-door meeting, Aditya Birla Group chairman Kumar Mangalam Birla stood up and praised the ease of doing business in the US and the proactive assistance that he received from American government officials. A visibly pleased US president acknowledged Birla's kind words in his address to industry captains and assured to take it to greater heights of cooperation.
“The level of cooperation in mutual trade will be stepped up. But there needs to be a follow up. A general atmosphere of mutual trust has been created which will lead to benefits for both economies,” said Adi Godrej, chairman, Godrej Group.
The US EXIM Bank will offer USD 1 billion in loans to boost US exports to India. Overseas Private Investment Corporation (OPIC) will extend USD 1 billion to small and medium-sized US businesses seeking to function in rural India. The US Trade Development Authority will lend USD 2 billion for investment in renewable energy.
“The economies of our two countries are interlinked, (and) the real need of the hour is to diversify the bilateral trade basket. The top 20 items in our bilateral merchandise trade basket currently accounts for close to 90 per cent of the total.
Some of the measures announced by President Obama would all go to reverse this trend,” said Ajay Shriram, chairman and senior managing director, DCM Shriram Ltd and president, CII. Bilateral trade between both countries stands at USD 100 billion and a trade target of USD 500 billion has been set.
Modi's US trip last year set the ball rolling and in the last three months, India and US held consultations of the India-US High Technology Cooperation Group, a trade policy forum meeting, discussions on cooperation in defence and nuclear technology and set up a working group on IPR issues.
Ahead of Obama's visit, there were doubts over the possible decisions that a lame duck president could initiate to take India-US trade forward. The big bang announcements would be carried forward by Obama's successor though it was a pity that his delegation had no Republican representation.
An important consequence of the Obama-Modi bromance is the renewal the defence framework agreement for the next ten years as well as operationalisation of the Defence Technology and Trade Initiative (DTTI) with focus on co-production and development in four pilot projects. Even though these are low-technology products, Indian legions hope that it would eventually lead to the co-development high-technology products as well. There has also been greater focus on climate change and clean energy.
NUCLEAR DEAL
The India-US nuclear deal has been the biggest milestone of Obama's visit. “India and US have broken the impasse over the civil nuclear deal. Understanding developed between the two sides will lead to operationalisation of the civil nuclear cooperation agreement. This is a huge positive,” said Jyotsna Suri, chairperson, Bharat Hotels Ltd and FICCI President.
The deal may have been ratified but its fine print is more blurred than Modi's pinstriped suit. “There has been no official communication on the nuclear deal. The joint statement merely states that they have come to an understanding,” said an Indian business executive who attended the India-US business meet. But in the absence of clarity, US companies have been non-committal.
“GE Hitachi Nuclear Energy (GEH) applauds both the US and Indian governments in their efforts to resolve concerns with India's existing domestic nuclear liability law related to its compatibility with international standards. We look forward to reviewing the governmental agreement in due course,” said a GE statement. “As GE has maintained from the outset, we believe a sustainable solution is one that brings India into compliance with the International Convention on Supplementary Compensation.”
For the Indian contingent, the pacts signed to develop smart cities in Ajmer, Allahabad and Vishakhapatnam, was a positive step. It's still wait and watch to see what shape it takes. Even though three task forces have been set up to chart the blueprint, the full picture is yet to emerge. For instance, US companies will collaborate with India on technology and on the basis of a financial instrument like insurable bonds, something that India has never tried before.
Obama also assured of talks on an India-US Totalisation Agreement, in the absence of which India Inc. is compelled to dish out almost USD 2 billion every year to the US government and also look into the nagging H1-B visa issue which has been problematic for the IT sector.
Resuming discussions on a high-standard bilateral investment treaty would increase bilateral trade, though it is a long-term plan. US, like India, will improve ease of doing business and the former will partner to develop infrastructure through roads, railways and broadband.
President Obama announced a new public private partnership to enable Indian Americans to directly invest in India. Indian American Congressman Ami Bera and former Speaker of the US House of Representatives and Congressman Nancy Pelosi told business representatives at an interaction that the Indian diaspora in the US was eager to pump in capital.
Exclusive interactions were also held between top government officials of the Obama delegation and India Inc. In one such meeting on January 27, US Deputy National Security Advisor for International Economics Caroline Atkinson called for greater push to bilateral ties between both nations.
US Commerce Secretary Penny Pritzker invited top Indian honchos to participate in the Select USA Investment Summit in March and said that Indian investments in the US would be expedited. Later in the day, junior finance minister, Jayant Sinha, accompanied Pritzker, an architecture aficionado, on a tour of Humayun's Tomb, an ideal opportunity for the duo to cram in further discussions on bilateral trade.
INTELLECTUAL PROPERTY RIGHTS
In his statement, Obama also mentioned the contentious issue of Intellectual Property Rights (IPR) that has caused heartburn particularly to American pharmaceutical companies. “The Obama visit has reaffirmed the importance of transparent and predictable policy environments in fostering innovation.
The visit also marked the commitment of both nations to strengthening collaboration, dialogue, and cooperation between the regulatory authorities of the two countries to ensure the safety, efficacy, and quality of pharmaceuticals, including generic medicines,” said Ranjana Smetacek, director general, Organisation of Pharmaceutical Producers of India (OPPI).
But the issue of IPR is unlikely to have a simplistic resolution. A draft National Intellectual Property Rights has been put on the public domain inviting comments from the general public. Compared to the US and EU, India has a strict policy on patents which prevents a drug manufacturer from acquiring a new patent for making minor variations to drug composition. A new patent would mean that no other pharma company would be able to produce the drug for the next 20 years.
India's low-cost generic drugs forms the backbone of its public healthcare as well as that of other poor nations. Cowering to US demands would mean a death knell to the needs of lakhs of people who won't have access to cheap drugs.
Significantly, Modi has his government would accept the recommendations of Indo-US joint working group on IPR. “We have serious concern on PM's statement that he will accept all recommendations of IPR committee. The meeting happened in November but nobody knows what these suggestions were,” said D.G. Shah, secretary general, Indian Pharmaceutical Alliance.
