Why the US needs India

Updated: Mar 12 2014, 09:31am hrs
In 2006, two-way trade with India was a mere $25 billion. But today, just 8 years since setting the $25 billion mark, two-way trade with India stands at $100 billion. In a word, business has been good. It is no wonder President Obama reiterated on September 27 that the partnership between the United States and India will be one of the defining partnerships of the 21st century.

Could business be better

Of course business could be better! We have both recovered from a disastrous global recession, and our approach should beand USIBC subscribes to this approachto address legitimate concerns of our industries via candid, thorough, respectful and straight-forward dialogue, and not through acrimonious filings or in the headlines of newspapers, or through punitive actions.

The US and India are friendly nations, the worlds largest free-market democracies. We share values of freedom and hope underpinned by familial ties. We have much at stake, both commercial and strategic. We must strive to keep these attributes foremost in mind. I would like to respond to the specifics which have been central to USIBCs advocacy over the past two years.

On tax:

USIBC has consistently called for more predictability on Indias tax front: Indias tax decision-making is opaque. That said, in response to investor concerns, the government of India has demonstrated a notable effort to engage more directly with industry on tax concerns. Just this past year, the finance minister travelled to the US three times to meet with business leaders at meetings convened by USIBC.

To further understand complaints from tech companies specifically, the finance minister convened a follow-up meeting in New Delhi to delve into technical tax cases relating to the IT sector, adjusting certain policies to the benefit of IT companies.

The Prime Minister invited industry to engage with him on tax and other matters at a USIBC event in New York on September 27, 2013. This unprecedented level of engagement is unusual and demonstrates a commitment to hear companies concerns and to set policies right.

In addition, the Central Board of Direct Taxes this year reconsidered a circular on R&D taxation, moving this in line with international norms. Most significantly, India created a new Tax Administration Reform Commission (TARC), led by Dr Shomea globally recognised tax expertwho has consistently shown a commitment to address business concerns shared by both domestic and foreign investors.

On intellectual property:

Technology and innovation will be key for both our future economies. To achieve greater collaboration in these important areas, it is essential to develop shared ecosystems that reward and protect IP. On issues concerning water & energy security, research & development, diabetes & other health challenges, food security, space exploration, or defence & homeland security, collaboration in technology and innovation will be crucial. Certainly, more work needs to be done strengthening the protection of IPR. That said, Americas most precious technology, its defence technology, has grown in trade with India from $250 million in 2003 to over $12 billion today. The US government is exchanging and sharing technologies with India that previously it has shared with its closest allies: Great Britain, Australia and Japan. The growing trust in sharing such technology and the IP that goes along with this demonstrates a trust and appreciation on behalf of both governments of the issues at stake concerning sensitive technology and the importance of the protection and safe-keeping of IPR.

There have been challenges faced in the pharmaceutical sector. But we cannot ignore the fact that many pharma companies are thriving in India:

Abbott, GSK, Gilead, to name a few. India is a federal republic with 31 states, comprised of a dynamic business community in both the private and public sectors: a country which is governed by an executive branch, a legislative branch, with its laws overseen by a respected judiciary. Weve heard reference in previous testimony to the Supreme Court ruling against one drug. Indias Supreme Court is autonomous from the government. We have heard in previous testimony of decisions made in quasi-judicial proceedings by quasi-judicial bodies, which enjoy autonomy from the government. We recognise that India is comprised of an active, entrepreneurial private and public sector whichas in any countrywill continue to challenge patents and patentability. But just as true is the fact there are companies in India with new molecules in the pipeline that are champions for innovation, supporting strong IPR.

Fortunately in India there is due processboth at the quasi-judicial level and in the courts to uphold Indias rule of law. These same courts have issued judgments against certain companies, true. These same courts have issued judgments in favour of companies, also. India cannot be viewed as a monolith. Companies operating thereand US companies have so far invested $50 billion in Indiaunderstand the rules and laws and have navigated these successfully and continue to invest. Just last month, Pepsi announced investment plans of more than $2 billion. Ford is nearing completion of its largest manufacturing plant ever outside the US in the Indian state of Gujarat. These are just a sampling.

Companies like Citi and GE have been in India for more than 100 yearsand are thriving. It would be wrong therefore to tar brush India. Yes, there have been some unfortunate decisions that have dampened investor enthusiasm. And USIBC continues to work on these. We do this by engaging India. India is a commercial and strategic partnerthe very country we hope to one day call our strongest ally.

At USIBC we are pleased the two-way trade is evenly balanced, poised to grow from $100 billion today to a stretch-goal of $500 billion by the end of the decade. All sides want this. India has opened nearly every sector to 100% FDI, barring a few. We would like to see insurance and defence opened further. The finance minister has publicly declared: FDI is imperative. The flip side is that Indian companies are investing tens of billions in the US. The business relationship is a genuine two-way street. Hearings such as this help remind us how far weve come in the commercial arena, while calling attention to Indias need to calibrate regulations to protect data, or inspire Indias future legislature to adjust its Patent Act to align more wholly with international norms particularly regarding incremental innovation. Certainly, there is an awareness by Indias leadership that CLs may discourage innovation. Everyone agrees that India needs to spend more on healthcare. Stakeholders in the film, music and software industry, including the government, are aware of the ravages of piracy and recognise the need to improve enforcement and to put in place measures that will stem piracy over the long-term by better educating the public.

The way forward

Indias new Ambassador to the US, Subrahmanyam Jaishankar, who arrived in Washington as recently as

December 23, has already met with industry including leaders of the pharmaceutical industry. The Ambassador has publicly expressed his willingness to address legitimate concerns of US business.

By May 31, 2014, just 10 weeks from now, India will have elected a new government. Half of the voter populationas many as 400 millionwill be under the age of 25 and voting for the very first time. They are favourably inclined toward the USa Pew Poll suggests 74% of all Indians have a favourable view of the US.

Let us be careful not to inflame the sentiments of an emotive India, which is on the move. The risk is that we force the hand of Indias next government to buy European or Japanese, instead of American.

The promise of the 21st century depends squarely on a robust US-India commercial and strategic partnership. Central to this partnership will be the co-development and sharing of our best technologies, as well as free-movement between our economies of our best minds and thinkers. Evolving ecosystems that reward and protect IP will be crucial. Indias new generation understands this. Indias new generation seeks better governance, innovation and discovery, opportunity and prosperity. Engagement and mutual respect, not acrimony, have advanced the US-India commercial and strategic partnership.

Ron Somers

(Excerpted from the USIBC testimony before the US International Trade Commission)

Ron Somers is president of the US-India Business Council (USIBC)