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

Focusing on Trade

In September, the U.S.-Indo relationship is especially focused on international trade. The IMF rang alarm bells over the slowdown of global trade— an occurrence that has been exacerbated by little to no substantive developments in trade liberalization, either at the WTO or regionally. The monetary body predicts that in the long-run, the lack of global trade reforms will hurt economic development and prolong slowdown. Donald Trump and Hillary Clinton squared off in the first Presidential debate last month. . As expected, the future of trade pacts such as NAFTA and TPP were the hot-button issues—with both sides offering vastly different views of the economy, ways to increase jobs for Americans, and trade protectionism.

Against this backdrop, legislation impacting U.S.-India trade ties will be important to keep a close eye on. USIBC has met with members and others to discuss a strategy to counter H.R. 5801, “The Protect and Grow American Jobs Act,” which amends the Immigration and Nationality Act and was recently introduced by Congressmen Darrell Issa (R-CA) and Scott Peters (D-CA). The bill would raise the threshold wage from $60,000 to $100,000 per year for H-1B, i.e., if an H-1B worker made more than that amount then her employer would not have to take costly measures to prove that she was not displacing a native U.S. worker. At the recent ICT Dialogue in Delhi, USIBC presented on the need to promote the free flow of labor by loosening H-1B restrictions and avoiding minimum wage requirements envisioned in the Issa bill.

On the domestic front, while Prime Minister Modi’s government has always been judged on the pace of market liberalizing reforms and issues related to ease of doing business, an unequivocal path to implementing these reforms and greater clarity of regulations is increasingly becoming an important indicator of success. At the moment, a few factors can favor India’s further rise as an economic power in the region: First, the Prime Minister’s and the BJP’s approval ratings are at an all-time high— and a global attitudes survey from the Pew Research Institute finds that about two-thirds of the Indian public is satisfied with the direction of the country and eight-in-ten think the economy is doing well. Two out of three Indians also feel that India plays a far more important role in the world today than it did 10 years ago.

Second, India’s ranking in the World Economic Forum Competitiveness Index has improved by leaps and bounds— India was the most improved country in the 2016 ranking, moving up 16 places to 39th place. The World Economic Forum said that India has made progress across the board, especially in market efficiency, business sophistication, and innovation. It has also made significant gains in human welfare. Thanks to strong domestic consumption coupled with a narrow trade deficit, low inflation, and a relatively stable dollar, the Indian markets are poised to fare better than other emerging economies. Lastly, the global community also cheered India’s decision to ratify the COP21 Paris agreement on climate change, which binds each country to reduce carbon emissions.

The U.S.-India Trade Policy Forum is slated to take place in New Delhi in October and will serve as a much-needed platform to resolve some of the bottle necks in trade issues impacting businesses. The Trade Policy Forum has 4 working Groups: Agriculture, Services & Goods, Manufacturing, and Intellectual Property. Some of the key issues likely to be raised during the U.S. Administration’s last commercial dialogue with the Government of India before the elections include: Increasing private sector engagement in India’s food safety priorities; multi-brand retail, single brand retail, and e-commerce; financial services (insurance), professional services (including liberalizing legal services); medical devices, procedural roadblocks in the manufacturing sector, IPR policy, biotech licensing, and trade secrets.

The Trade Policy Forum will convene on October 20th with Ambassador Froman and Minister Sitharaman and will be preceded by two workshops leading up to the Trade Policy Forum— on trade facilitation and trade secrets as well as meetings with other senior U.S. Government officials on October 19th.

On the U.S. side, the Council, as an official partner of the Vibrant Gujarat Summit, concluded a multi-city roadshow in the United States. Led by Mr. Bharat Lal, resident Commissioner of Gujarat, the delegation also included representatives from Invest India, FICCI, ONGC and KPMG. This is the fifth year of partnership between Vibrant Gujarat and the Council. Vibrant Gujarat Summit is one of the most notable efforts in India’s attempts to place itself as the topmost investment destination. The Council organized industry receptions and roundtables in Houston, Chicago, Washington, D.C., and Menlo Park, providing an opportunity for the delegation to meet over 100 top U.S. companies across industries, including healthcare, food and agriculture, defense, logistics and infrastructure. The summit is also timely as it will be held during a critical phase of the GST roll-out. Led by Chairman John Chambers, USIBC plans to lead a delegation to the summit in January 2017.

The litmus test to fulfilling the potential of India’s trade and commercial potential will be the stability and security of the region. We live in an increasingly complex world – the expansion of the U.S.-India defense partnership, the formulation of the Defense Trade and Technology Initiative (DTTI) and the announcement of India as a major defense partner comes at a time when the freedom of democratic societies is at stake. In particular, it was heartening to see an expression of support from Senator Mark Warner (D-VA) and Senator John Cornyn (R- TX), co- chairs of Senate India Caucus to Prime Minister Modi that the U.S. stands a valuable partner in fighting terrorism and India’s national security interest.

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