While continuous industry and government deliberation between both the countries will help fix issues related to trade and business, it should also lead to creating a solid platform for investments and trade exchanges like a strong and workable Bilateral Investment Treaty that takes care of all concerns, including those related to tax.
The decision to expand the strategic dialogue between India and the US, to comprehensive strategic and commercial talks in 2015 by prime minister Narendra Modi and president Barack Obama, has turned out to be a fairly successful exercise in creating a strong framework for systematic talks.
The two countries will meet for the second Strategic and Commercial Dialogue (S&CD) tomorrow in New Delhi – while the Indian side is led by external affairs minister Sushma Swaraj and minister of state for commerce and industry, Nirmala Sitharaman, the US delegation is led by Secretary of State, John Kerry and Secretary of Commerce, Penny Pritzker.
Besides government-to-government interactions, the CEO forums of the two sides headed by Cyrus Mistry, chairman of Tata Group from the Indian side, and Dave Cote, chairman and CEO of Honeywell International from the US side, will also deliberate to take the already planned joint-initiatives further.
Based on their recommendations, both the countries are working on the US-India Energy Finance Initiatives that will mobilise $400 million by 2020, India has relaxed its defence production procedures and its three proposed Smart Cities are getting support from the US.
According to the Indian government data, thanks to the FDI reforms, inflows into India has increased despite tough global scenario – total FDI inflow into India increased from $36 billion during FY14 to $44.2 billion in FY15, and in FY16, the country received $55.4 billion as FDI, which has been the highest in a year so far.
While FDI from the US has also shown a positive growth trend with $806 million in FY14, $1,824 million in FY15, and $4,190 million in FY16, there clearly is huge scope for this to improve further in coming years – the US contribution to the total FDI coming to India between April 2000 and March 2016 has been just 6% of the total.
But, for this to happen, and also for a much stronger Indo-US business ties, both the countries need to sign a comprehensive Bilateral Investment Treaty (BIT) covering all kinds of disputes, including critical tax issues, and the US would need to support India at various regional and plurilateral trade fora like the Trans-Pacific Partnership and also WTO.
Another major area of concern for the US companies operating in the high-technology segment like GM crops and pharma, is that of handling of the IPR and pricing of products. Like the way deliberations between the Indian and the US tax authorities have succeeded in resolving the transfer-pricing disputes of the US companies, the commercial dialogue must help find ways in resolving issues in other areas.
The current round in that sense, despite the fact that a major breakthrough might have to wait till the election of the next US president early next year, should do the ground work for that.