In many ways, 2016 marks a seminal moment in the history of U.S.-India bilateral ties and the Council. In June, the Council had the honor of hosting for the third time Prime Narendra Modi for its 41st Annual Leadership Summit in Washington, D.C. The summit took place on the eve of Prime Minister Modi’s address to a joint meeting of the United States Congress. This was also the first joint meeting by an Indian leader in a decade—a clarion call that relations between the world’s oldest democracy and the world’s largest democracy are stronger, more significant, and critical for the global economy than ever before.
During the Prime Minister’s visit, President Obama also reinforced his strong support for India’s role in global institutions, like having a seat on a reformed UN security council; welcoming India’s interest in APEC; and support for India’s accession into the multi-lateral export control regimes. Even as a transition occurs in the U.S. Government, USIBC will continue to advocate for meaningful and consistent dialogues at the highest levels between the two sides. To support this idea, the Council wrote a letter to President Trump in the week following his electoral win.
On the domestic front, USIBC is delighted to see the fastened pace of India’s recent domestic reforms, which have been hailed a major success by the investor community. The passage of key reforms such as the Goods and Services Tax (GST), establishment of ebiz portals, bankruptcy code and the liberalization of Foreign Direct Investments (FDIs) in several sectors of the economy such as civil aviation and pharmaceuticals send a message that India is open for business. GST is also likely to make goods cheaper for consumers, increase competitiveness of Indian exports in international markets and boost India’s GDP growth by 2 percent.
The passage of the Bankruptcy Bill establishes an entrepreneur-friendly legal bankruptcy framework for speedy, efficient and consistent resolution of insolvencies for companies and individuals. Industry has been hopeful for the GST for almost a decade and we commend India’s political leaders in their commitment towards growing the economy and ensuring predictability and tax certainty for the global investment community. GST is also likely to make goods cheaper for consumers, increase competitiveness of Indian exports in international markets and boost India’s GDP growth by 2 percent. The passage of the Bankruptcy Bill will establish an entrepreneur-friendly legal bankruptcy framework for speedy, efficient and consistent resolution of insolvencies for companies and individuals.
This year, the United States and India also concluded the tenth Trade Policy Forum (TPF) and the second Strategic and Commercial Dialogue. Over the past several years, the TPF has been a productive dialogue to discuss issues related to agriculture, services and goods, intellectual property, and manufacturing. The Strategic and Commercial Dialogue has also given us a deep set of parameters to work with and advanced bilateral cooperation in by: (1) increasing focus on state-level engagement, (2) using the best minds in medical care to fight infectious diseases, (3) and combating terrorism among others.
On Defense cooperation, both governments took actions that demonstrate a serious commitment to defense cooperation. For the Government of India, this action was finalization of the Logistics Exchange Memorandum of Agreement (LEMOA). This agreement has been sought for over a decade and by finalizing the text, the Modi government demonstrated that it is willing to risk short term domestic political pressure (by those who misconstrue the agreement as a concession that weakens Indian sovereignty) in order to reap the longer term benefits of defense cooperation with the United States. For its part, the U.S. government recognized India as "Major Defense Partner" and committed "to work towards facilitating technology sharing with India to a level commensurate with that of its closest allies and partners." This will bring our militaries, industries, and defense ministries even closer in the years ahead and comes on top of the 10 year defense framework already agreed to last year. While the above mentioned highlights are important, each of USIBC’s Executive Committees have made great progress toward their policy goals and reforms in 2016. Outlined below are notable accomplishments for each Committee as well as peak ahead as to where the committees are headed in 2017:
Aerospace and Defense
The U.S.-India Business Council was successful on the legislative front having drafted key components of Section 1292 of the 2016 National Defense; Authorization Act, “Enhancing Defense and Security Cooperation with India” and drafting key components of “U.S. – India Defense Technology and Partnership Act.” These legislative victories helped lead to 82 FR 6218-6221, an amendment to U.S. Export Control law that facilities defense trade with India. We also completed a robust series of engagements. In 2016, we organized private roundtable discussions with thought leaders from the Indian and U.S. governments and the think tank community including exclusive USIBC events with the Indian Minister of Defence, the Indian Political Minister to the U.S., all three Indian military attaches to the United States, the U.S. Ambassador to India, the Undersecretary of Defense for Acquisition, Technology and Logistics, the White House’s National Security Council Director for India, the Director of the Pentagon’s India Rapid Reaction Cell, the Department of State’s Director for India, the Deputy Assistant Secretary of Defense for South and Southeast Asia, the Director for India at the Defense Security Cooperation Agency, the Director for India at the Department of State’s office of Political Military Affairs, the U.S. Defense Attaché to India, the Director of the Office of Defense Cooperation (Delhi) and others.
Our advocacy work was featured in two op-eds in India’s most prominent newspaper, The Hindu, where we highlighted some of the challenges our companies are facing with the United States Government (USG) as well as the Government of India (GOI). The Committee convinced USG and GOI to conduct the first U.S.-India ICT Dialogue since January 2015. In addition, we served as the lead U.S. interlocutor for the Dialogue’s industry interaction with policymakers from both governments. The Committee was also pleased that the Government of India continued to delay the implementation of in-country security testing requirements—one of our longstanding requests. In 2017, the Committee will advocate for additional economic reforms, including but not limited to, cloud computing, preferential market access for government procurement, in-country safety and security testing requirements, tariff increases on ICT products, encryption limits, price controls for aggregator platforms, tax increases for online advertising revenue, the FDI ban on B2C e-commerce, and M2M Service Provider Guidelines.. In addition, in order to better engage and provide on-the-ground support to our members, USIBC Delhi has launched the “India Committee” that meets on a monthly basis in Delhi and provides recommendations to the Committee.
Energy, Infrastructure and Environment
Through numerous meetings and roundtables with the Minister of Petroleum and Natural Gas and other Ministry officials, the USIBC Energy Committee successfully advocated for oil and gas policy reforms that were included in the government of India’ Hydrocarbon Exploration Licensing Policy (HELP). The pro-business facets of this policy included uniform license for exploration and production of all forms of hydrocarbon, an open acreage leasing policy, and marketing and pricing freedom for crude oil and natural gas. As oil prices recover, these timely policy changes will make India a relatively more attractive investment option for international oil and gas companies. The committee has also successfully resolved numerous issues for our solar sector members that were hindering the development of projects in India. In 2016, the Infrastructure Committee lead a successful cleantech and smart cities mission to India with the U.S. Department of State to promote U.S. technology and services. The committee has also partnered with the U.S. Trade and Development Agency and the Ministry of Urban Development to host numerous smart city workshops and roundtables to ensure U.S. industry participation in the government of India’s Smart City Initiative. In follow up to a successful infrastructure financing conclave held by USIBC and the World Economic Forum (WEF), the Committee is also developing an infrastructure finance task force with WEF in 2017. The Environment Committee has been very active in the clean air, water and renewable fuels space. The committee has held numerous meetings and roundtables to showcase members technologies and services with key state and central government officials who have oversight over the government’s Clean India and Clean Ganga initiatives. The committee also played an integral part in organizing the U.S. – India Ethanol Working group to advocate for the use of U.S. renewable fuels and technology. In 2017, USIBC plans to highlight opportunities to export world-class American technologies, services, fuel, and expertise to help India meet its growing energy and Infrastructure demand in an environmentally sustainable manner and promote joint collaboration and technical exchanges between both countries. USIBC’s priorities include maximizing U.S. participation in India’s conventional and unconventional gas and electricity sectors, implementing the U.S.-India Civil Nuclear Agreement, and developing projects under the National Solar Mission and various state renewable energy programs. USIBC also plans to leverage key platforms like the U.S.-India Strategic and Energy Dialogues to advocate for important policy and regulatory reforms and build on the Government of India’s concerted efforts to implement high-level recommendations, particularly in the infrastructure, environment and energy sectors.
Foreign-owned Asset Management Companies (AMCs) were subject to discriminatory capital requirements under the FDI policy that were as high as 6 times as those for domestic AMCs. These requirements were considerably higher than those required by SEBI for foreign-owned AMCs. FDI policy required this capital to be invested in highly liquid, low-yield investments. As a result, USIBC members operating as AMCs in India considered exiting the economy given the high cost involved. USIBC successfully raised the issue of discriminatory capital requirements for foreign-owned Asset Management Companies (AMCs), which were subject to higher requirements than their domestic counterparts. The Committees Members were pleased when the Ministry of Finance announced that the capital requirements would be adjusted to the SEBI standards. USIBC was also pleased to learn that the Government of India has reconsidered its proposal to require mandatory listing for insurance companies operating in India. USIBC submitted comments outlining member concerns on the IRDAI proposal requiring that all insurance companies operating in India for more than 8 years publicly list on an Indian exchange and comply with public disclosure requirements. On October 17, the Government of India advised industry that the mandatory requirement would be reconsidered and likely be made optional.
Food and Agriculture
USIBC's Food & Agriculture Committee had a productive year working on a number of issues affecting the sector with an aim of (1) enhancing productivity (2) improving supply chain efficiency and (3) leveraging global markets, products, and expertise to increase the flow of investment in agriculture. USIBC held several high level events which included hosting the Food Safety and Standards Authority of India (FSSAI) CEO, Mr. Pawan Aggarwal in Washington D.C. and hosting aagriculture modernization mission to India focused on initiating a dialogue to promote modernization of Indian agriculture through mechanization, adoption of agricultural technology, education on best practices and a strong supply chain. The USIBC food and agriculture committee looks forward to 2017 with a commitment to creating a platform to work closely with both the governments to resolve investment impediments in the sector. With the new U.S. administration taking charge, one of the key policy advocacy areas will be to revive the U.S. - India Agriculture Cooperation Dialogue. The upcoming visit of the Food Processing Minister Smt. Harsimrat Kaur Badal to U.S. in April 2017, provides tremendous opportunity for our members to showcase their state of the art technology and engage with her team to identify opportunities for bringing these technologies to India.
The Manufacturing Committee was established in early 2016. Over the course of this year, the Committee has expanded its reach to incorporate the views of member companies across sectors within the USIBC membership. The Committee has developed a comprehensive set of policy recommendations for India that, if implemented, will lead to further investment in India's manufacturing sector. These recommendations include improving ease of doing business, further incorporating India into global value chains through deeper more collaborative participation in multilateral trade forums, and further harmonizing state and central laws, particularly in labor and taxation. In October 2016, the Committee held its inaugural Executive Mission to India. The mission worked with the Government of India to explore areas for private sector collaboration on the Prime Minister's Make in India initiative, to advocate for specific policy reforms that will enable further investment in the Indian manufacturing sector and alleviate uncertainty and obstacles for current investors, and to introduce the USIBC Manufacturing Committee to key constituencies within the Indian manufacturing sector and broader government affairs community as a key partner and enabler of the Government of India’s national policy. 2017 Priorities In 2017 the Committee will continue to focus on ease of doing business and international trade. We will also deepen our advocacy efforts at the state level by developing and executing advocacy in two key manufacturing hubs. USIBC will also begin contributing to the Ministry of Labor’s effort to simplify national labor laws. Additionally, the committee will focus on specific issues such as urban pollution and factory waste.
Media and Entertainment
In 2016, the Committee’s continued advocacy towards removing anomalies that discouraged FDI were successfully overcome when the Government of India announced it was creating a Copyright Board, a long-standing ask by the Committee. The creation of this board will go a long way in facilitating access and commercialization of content protected under copyright on fair terms. In 2017, the Committee will continue its advocacy on promoting solutions to concerns in the Media & Entertainment sector. These include; the removal of a cap on vertical integration, removing the FDI cap of 49% in the TV news sector, increasing screen density, and pushing for avenues to increase “ease of doing business” in the broadcasting sector.
Real Estate and Hospitality
In 2016, the Council’s Real Estate Executive Committee focused on three main aspects: Real Estate Regulatory Act; REITs; and Affordable Housing. In July, the Council sent in written recommendations on the draft rules for UTs under the Real Estate Regulatory Act and followed up with a meeting with the Joint Secretary (Housing) to put forward industry views. The Committee has also been active to promote policy discussions that would enable the launch of the first REIT as well as initiate a dialogue on policies conducive to reviving the country’s affordable housing project. In 2017, the Committee looks forward to deepening engagements with the Government of India on these three fronts, as well as work actively with the Council’s design and architecture firms to partake in the affordable housing segment and the Smart Cities Initiative. In addition, the Committee will continue to work to address regulatory bottlenecks on the Real Estate Act and REITs. The Council’s Hospitality Committee also looks forward to playing a role in the U.S.-India 2017 Travel and Tourism Partnership and focusing on the rise of the sharing economy industry in India.
Transportation & Logistics
As USIBC’s brand new vertical, the Transportation & Logistics Committee has seen some important strides. The Committee focused on three key issues this year: A GST that aids logistics; customs reform to expedite cross-border goods; and bottlenecks to infrastructure financing. As an important first step, the Council led the first Logistics focused industry mission to Delhi and participated in the U.S.-India Trade Facilitation Workshop to discuss ways to update customs rules and expedite the movement of goods at borders. In 2017, this Committee will work with the Indian and U.S. Governments to follow up on the Trade Facilitation discussions to reduce paperwork and automate clearances. The Committee also looks forward to initiating further discussions on better coordination between customs and tax authorities to make GST a success, as well as improving infrastructure on the backend to help the logistics industry to perform their functions smoothly in terms of meeting the impending ecommerce boom in India.
The Committee had an active 2016 hosting a number of events that promoted the rule of law, furthered the understanding of cross-border legal issues, and furthered the business development of member law firms. Notably the Committee hosted the substantive legal conference on the margins of the ABA international law section conference, hosted the law secretary in New York in July, and hosted over 15 webinars including on topics related to arbitration, FCPA and corruption, bankruptcy reform, and other legal issues. The Committee also was active on the topic of legal services liberalization, which saw some progress in the middle of the year when the Bar Council of India drafted a proposal for a liberalization, but then was set back after the BCI then retracted the proposal. The Committee looks forward to 2017 by building on its work to further promote the understanding of legal issues both in the U.S. and India through educational platforms such as webinars conferences and events. The committee also hopes to make further progress on the topic of legal services liberalization by supporting the proposals tabled by various Indian bar associations and garnering the support of the government of India.
In 2016, USIBC led advocacy efforts on behalf of its medical device companies to limit price controls in India. The committee has also been advocating for a new Drugs & Cosmetics Act to be introduced in Parliament. The Act would address numerous concerns in the life sciences sector, such as clinical trials, serialization of products, and the creation of a separate regulatory system for medical devices. After numerous efforts from the committee, ranging from face to face meetings, letters, and policy advocacy, the Indian Government has indicated that a new bill will in fact be introduced in the upcoming winter session of parliament. On behalf of our Innovative Life Sciences companies, all agree that progress has been made on the important issue of innovation and intellectual property (IP). Today, more than ever, pharmaceutical companies are reassured by India’s stance on IP, which has successfully shifted the narrative the pharmaceutical industry has had in India. In 2017, the committee will continue to pursue its priorities by advocating for the passage of a new Drugs & Cosmetics bill once it’s introduced in Parliament and also work on a strategy with our committee members to counter the government’s efforts to implement price controls on medical devices as well as continue to encourage pro-innovation policies.