Monthly Updates on U.S.-India Bilateral Ties from Mukesh Aghi, President, U.S.-India Business Council
October 2016

The Final U.S.-India Trade Policy Forum of the Obama Administration

The tenth U.S.-India Trade Policy Forum (TPF) concluded this month, providing the Obama Administration a final opportunity to discuss trade issues impeding further growth in two-way trade. Over the past several years, TPF has been a productive dialogue to discuss issues related to agriculture, services and goods, intellectual property, and manufacturing. More specifically, this year, the agriculture track received special attention from the two governments. USIBC welcomed the announcement under the joint statement that demonstrated progress on agricultural products such as cherries, hay, mangos and pomegranates. USIBC looks forward to further engagement with both governments to ensure fair market access for poultry, almonds, basmati rice, and other significant agricultural goods. The Council is also particularly optimistic on the recent announcements on FDI in the market place model of e-commerce and the Model Guidelines on Direct Selling. USIBC looks forward to further engaging with both Governments to address investor concerns on India’s tariffs of IT equipment, the pricing of medical devices and pharmaceuticals and on the issue of totalization and access to high-skilled workers. Alongside the TPF, USIBC co-hosted a workshop on Trade Facilitation. We applaud the level of commitment of both sides to further streamline processes and procedures of imports in India and the Unites States.

While significant breakthroughs are traditionally unusual in Indo-U.S. dialogues such as the TPF, these are indicators of how far we have come in the relationship. Today, the United States is the foremost destination for India’s exports, purchasing more than 15 percent of all Indian goods and services, and India has a $30 billion trade surplus with the United States, the largest surplus it has with any other country. These numbers are an indication that there is potential to reach greater heights. 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. The U.S.-India partnership is deeper and broader than ever before and given the growing importance of India as the world’s fastest growing economy, it is critical that the next administration continue the work on the following areas:

(1) Finding solutions to the impasse on the Bilateral Investment Treaty (BIT);
(2) Ensuring the free movement of professionals, including H1-B workers in the United States and professionals in the legal, insurance, and accounting sectors in India; and
(3) Executing a totalization agreement that would allow Indian workers on temporary work visas to receive old-age insurance benefits for the contributions they have made to the U.S. social security system.

In regards to reforms on the domestic front in India, the World Bank released the Doing Business Report 2017. India now ranks 130 out of 189 countries. According to the report, India improved its position on three parameters—access to electricity (two years ago, the process took an average Delhi company more than four months to obtain electricity, but it now takes an average of 45 days), resolution of commercial disputes, and an electronic system for companies to pay employee insurance contributions. However, India’s performance slipped with regard to accessing credit, ease of starting business and dealing with construction permits. It should be noted that some of India’s major reforms such as the passage of Goods and Services Tax (GST), and the implementation of the bankruptcy and insolvency codes were not included in this year’s ranking and will be reflected in the report only next year.

The Department of Industrial Policy and Promotion (DIPP) and the Ministry of Commerce and Industry, in partnership with the World Bank Group conducted an Assessment of State Implementation of Business Reforms 2015-16. The assessment studies the extent to which states have implemented DIPP’s 340-point Business Reform Action Plan (BRAP) for States/Union Territories 2015-16, covering the period July 1, 2015 to June 30, 2016. Andhra Pradesh, Telangana and Gujarat top the list— reflecting a commitment on the part of these states to improve the ease of doing business.

As India moves towards a unified tax regime with the implementation of GST, USIBC will engage with a variety of stakeholders to keep members abreast of the various developments that will be required to develop an appropriate compliance program. For instance, last month the Council held a successful discussion on India’s transition to the Goods and Service Tax (GST) with Dr. Amit Mitra, Finance Minister of West Bengal and Chairman of the GST Empowered Committee of State Finance Ministers and Mr. Derek O’Brien, Member of Parliament. Led by Ajay Banga, President and CEO of Mastercard and USIBC’s Immediate Past Chairman, the business community engaged with Dr. Mitra and Mr. O’Brien on their insights of how the implementation of GST will impact the ease of doing business in India and yield new investment opportunities. Dr. Mitra and Mr. O’Brien updated USIBC that there will be four crucial meetings of the GST Council of Ministers to determine the rate of interest before the Winter session of Parliament convenes on November 16th.. This session of Parliament will conclude on December 16th and the Government of India remains hopeful that the GST will be implemented by April 1, 2017.

 

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Mukesh Aghi, President, U.S.-India Business Council