Editorial: Business first

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Updated: November 25, 2014 12:15 AM

That is behind President Obama’s Republic Day visit

US President Barack Obama agreeing to be the chief guest at India’s 66th Republic Day is not only a big coup for Prime Minister Narendra Modi, it is also a reflection of the changed reality. Apart from the US, there is, at the moment, no compelling macro growth story other than India, so it makes a lot of sense for the US President to work with India—it makes it more special that Obama will be the first US President to grace the occasion.

While there is a lot that India still needs to regain the US trust, and vice versa, there is a lot that has already been done. India’s moves on vital tax reforms remains work in progress, and US firms will anxiously await the passage of the insurance Bill that raises FDI limits to 49%, but there has been considerable progress in other areas. In the defence sector, where the US has large interests, the government has cleared well over R1 lakh crore worth of orders for buy-and-make-in-India, which is considerable progress from the previous government’s refusal to clear orders. While it is true the Airbus’s bid to produce transport aircraft in association with Tata Advanced Systems Ltd has not been approved as yet—the defence minister wanted more time to study the bid since it is a single-vendor one—a start has been made, and that is why the India chief of US aerospace giant Lockheed Martin was one of the star speakers at the make-in-India function chaired by the Prime Minister. It is in appreciation of this, and anticipation of more business, that the US helped India broker peace at the WTO over the issue of food subsidies—though the fine print is still awaited—and also cleared an immigration Bill that didn’t hit Indian interests as badly as was initially expected.
Apart from the defence deals, President Obama will also be hoping for movement on the nuclear liability Bill, without which none of the deals signed with US nuclear power plant manufacturers will fructify. While it is not clear when, and how, the Prime Minister will move on this, it remains true the current Bill hurts Indian interests as well—which is why, when NPCIL invited tenders for a nuclear power plant some months ago, it got no bids as Indian suppliers were also wary of the unlimited liability clauses of the Bill. Intellectual property rights is likely to remain a contentious issue between the two countries, but given that over 2 lakh Indian students go overseas to study each year—mostly to the US—and spend upwards of $10 billion annually, India has a lot to benefit from expediting the process whereby US universities can set up campuses here, either on their own or in collaboration with local universities. Given that cumulative US FDI in India is well under $30 billion, getting to the ambitious $41 billion the USIBC said would flow into India over the next 3 years, of course, will take a lot more effort.

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