Hitting the Apex in U.S.-India Ties
The Journey Towards $500 billion in Bilateral Trade
The U.S.-India economic relationship has strengthened considerably over the last 15 years. India is currently the United States’ ninth largest trading partner, and over the past decade, two-way merchandise trade has grown from $44 billion to $74 billion. There is obviously potential to reach greater heights and aspire towards $500 billion in two-way trade given the size of the U.S. and Indian economies and the depth of our bilateral ties.
USIBC believes that the momentum in our ties can be advanced further by prioritizing policies that ensure greater ease of doing business and promote a transparent policy environment. In the absence of an overarching trade agreement, there’s an opportunity to recalibrate the U.S.-India engagement on commercial and policy issues as the environments in both countries evolve.
Energizing sentiments, easing restrictions, and encouraging investments in India
India’s focus on increasing investments through ease of doing business has renewed investor confidence. However, some of the recent developments on regulations have had the unintended effect of disrupting business, especially in industries such as medical devices, information technology, and automotive. The industry sentiment can be strengthened further if the Government of India provides a standard notice and comment period (such as 30 days) for administrative decisions with a significant commercial impact. Further, the Government of India should also look into tax uncertainty as it is critical that new legislations should not be implemented with retrospective effect.
The rise of the e-commerce sector and financial payments system have been key to fueling India’s potential to become the fastest growing internet economy. Easing restrictions on FDI in the sector to allow an inventory model will spur growth, generate employment, and help develop India’s manufacturing and logistics sector to support this potential.
In addition, high-tech medical devices such as those provided by U.S. companies can improve healthcare services in India. Medical tourism in India is growing strongly and will benefit from such products. The Government should therefore reconsider its approach on price controls. Increased controls could lead to the withdrawal of advanced products from the market, impeding the growth of the sector.
Protecting the interests and the free movement of Indian professionals in the U.S.
Since the inception of H-1B visa program in 1990, the Indian IT industry has been one of the biggest users of the program. They have helped American firms deal with labor shortages that demanded specialized skills -such as research, engineering and computer programming. Around 70% of total H-1B visas granted in 2017 were issued to Indians. This also marked a 6% year-over-year increase in both the H-1B visas and L1 visas (work permits) category. While reviews of the H1-B program are needed, the impact of these should not restrict talent flow. The Government should also eliminate the imposition of an outdated and unfair tax on Indian workers and settle for a “totalization” agreement with India. This would protect the benefits of rights of workers and short-term IT and other service providers who divide their working career between two or more countries.
Strengthening India’s IPR policy framework
India is among 11 countries that have been placed on the Priority Watch List in the 2017 Special 301 Report. While important developments related to India’s Intellectual Property policy (such as the National IPR policy) signal an improvement in the IP environment, they need to be implemented in a time-bound manner to help unlock India’s innovation potential. An exclusive support cell should also be established under the Department of Industrial Policy and Promotion (DIPP), to work with businesses and regulators to establish sound policy.
Resolving tax disputes
Finally, the governments of both countries – the U.S. and India – should improve on tax dispute resolutions and aim to simplify cross-border investments by eliminating the barrier of double taxation. For this, both governments should revise the U.S.-India Bilateral Tax Treaty.