And somewhere in between, there are the issues of greater cooperation in the energy sector, more access for US universities and financial institutions such as insurance firms to Indian markets, and signing a Bilateral Investment Treaty which will protect US investments from appropriation as well as a more agreeable tax protocolwhile Indo-US tax ties had plunged to an all-time low last year, there are more meetings today, but there hasnt been much movement on the tax issues US firms face in India.
Whatever the particular order in which Modi and Obama choose to take up issuesthey could, for instance, leave the sticky issues to their colleagues and just highlight the positivesa useful principle to keep in mind is that while it is important for India to get the US to see things its way on issues like IPR and the immigration law, many of the so-called concessions to the US actually benefit India as well. While the two countries already have a trade of nearly $100 billion if you include servicesIndia has a surplus of $25 billionUS FDI is very small, well under $30 billion cumulatively. The important thing for Modi to keep in mind is that, as talks on the ambitious US-led Trans-Pacific Partnership (TPP) progressTPP is a trade agreement being negotiated by the US with 11 countries including Australia, Japan, Malaysia and MexicoIndia stands increasingly isolated in terms of global trade, more so if the WTO process India is railing against gets derailed.
Civil Liability for Nuclear Damage Act, 2010: Given the Bhopal shadow, it is understandable that India should want to have an Act that puts punitive sanctions on firms responsible for industrial disasters, but the unlimited suppliers liability in the Indian law will prevent India from developing a meaningful nuclear power capability. Firms, neither Indian nor global, can possibly buy insurance for such unlimited liability provisionsin which case, India will have to give specific exemptions as it gave for some Russian plants if it wants them to come up. The Times of India has recently reported L&T writing to the Nuclear Power Corporation of India Ltd (NPCIL) that it cannot bid for the new 2,800 MWe nuclear plant in Haryana till the law is in placeNPCIL, for the record, plans to build 16 new power plants in the current Plan period. And how can equipment suppliers be held responsible beyond the basic warranty if the plant is to be operated by the public sector NPCILunder the supervision of the atomic energy regulator
Defence cooperation: Though the government has given into the defence lobbies by hiking FDI levels to just 49% instead of 51%, this is something it may want to reconsider if its current strategy of clearing more make-in-India defence deals does not result in enough world-class players coming in. The US defence industry will certainly welcome it, but so should India given what it could potentially mean as the $16 billion annual defence procurement is slated to rise to $80 billion annually by 2025, according to a BCG studybased on this, CII-BCG believe this could be the next big thing for Indian industry and could lead to the creation of 1 million jobs over the next five years.
Intellectual Property Rights/WTO: This has to be the most delicious irony in recent times. After the relentless US pressure on Indias IPR laws, India has said its laws are WTO-compliant and, should the US like, it is free to take India to WTOs dispute settlement board! Coming as it does, just before India derailed the WTO process on the issue of its subsidies for the poorwhich the governments submission to the WTO puts in the non-actionable category!it does sound hypocritical, but the fact is that India does have a good case here since Section 3(d) of the Indian Patents Act (which US firms object to) is fully compliant with the WTOs requirements. The problem, however, is twofold. For one, India has not pointed out its record in granting new patents has been good1,500 patents have been granted to the top 9 global pharma firms since 2005. And the US India Business Councils (http://goo.gl/UJ6rGa) defence of Indias patent laws needs to be re-cited.
But, given their non-epidemic nature, it does appear the government was too hasty in its compulsory licence (CL) action on Bayers liver and kidney cancer drug Nexavar. The good news here, of course, is that when, some months ago, the health ministry was pushing for a similar CL for Bristol-Myers Squibbs anti-cancer drug Dasatinib, the industry ministry was against the idea. Insisting, as India does on many occasions, that working the patent involve local manufacturing, is a needless irritant, and can easily be done away with. Hiring more patent examiners, a US grouse, is easily dealt with and it is not clear why a CL clause was put in the National Manufacturing Policy for clean energy innovations.
Immigration and problem STEMs: India and the US have traditionally sparred over the quota of H-1B visas for Indian IT firms, and the Senates Immigration Bill was tilted against Indian IT firms like Infosys while benefiting US firms like Accenture that were doing the same kind of work. The Bill assumes, incorrectly, that the US has no shortage of Science, Technology, Engineering and Mathematics (STEM) workers and Nasscom has done a good job of busting this myth, perhaps why the House of Representatives Bill is quite different. While there is no immediate danger, a more permanent dialogue on how US immigration can accommodate the needs of Indian IT firms needs to be addressed.
US universities in India: Given over 2 lakh Indian students go overseasand spend $10-12 billionto study each year, and there are several times more who want to go but cannot, opening up the Indian education sector has been big on the US agenda for a long time. This benefits both countries, more so given Indias dismal score on the global universities ranking. The question is whether it will find favour with the RSSs swadeshi thinking that has got the government to go slow on even allowing trials of GM crops.
Bilateral Investment Treaty: Given how sections of the government wish to relook all existing BITs with various countries, perhaps the last thing on Modis mind will be to enter into a BIT with the US. Given the troubles US firms have had with the Indian taxmanthe mutual agreement procedure (MAP) talks between the two countrys taxmen havent progressed much and top US firms are at loggerheads with the Indian taxmanit is clear some progress is required in assuaging their fears. At his interaction with leading CEOs of US firms like Amazon, which is facing all manner of problems in India, Modi will probably get to hear their fears firsthand.