India Development News & Foreign Investment Opportunities

US investors call on India to accelerate pro-business reforms

USISPF President sees potential FTA


USISPF President sees potential FTA




US-based investors, leading cash-rich foreign corporations in major markets, have called on India to speed-up the process of pro-business reforms, making it easy for American manufacturers seeking to relocate out of China.

A Free Trade Agreement, once considered impossible given the Americans’ tough geopolitical demands in negotiating a trade pact, is also being recommended by a bilateral trade body from Washington side.

The latest call came from Mukesh Aghi, president of the US-India Strategic and Partnership Forum (USISPF), who said some 200 American companies were talking to them about how to set up an alternative to China by investing in India.

Aghi told Press Trust of India: “One recommendation, which I strongly believe is going to help India, is that we should now start thinking of a Free Trade Agreement (FTA) between India and the US.

“I think if India is concerned about cheap goods coming from China, an FTA will eliminate that need. You can put barriers to Chinese goods and still have the US providing access to the Indian market and Indian companies having more access to the US market, and issues like GSP would diminish.”

“If you look at our member companies in the last four years (they) have invested over US$50 billion,” Aghi said of the American investment dollar.

The call for pro-business reforms, often repeated by international investors for decades, is for easier investment terms and conditions, strengthening India’s position as near to be the next ‘global factory’, taking over from China.

Investors have often stressed on having production bases in India that serves the huge domestic market of 1.3 billion people as well as opportunities to exports globally.

USISPF’s recommendation to the new government would be to accelerate the reforms and bring transparency in the decision-making process, stressed Aghi.

“I think that’s critical. We would advise to bring more transparency in the process and to make it more consultative because in the last 12 to 18 months, we are seeing US companies look at some of the decisions being made, either e-commerce or data localisation, as more domestic-oriented than global,” PTI quoted Aghi as saying.

“We need to understand how we can attract those companies. And that means all the way from land issues to customs issues to being part of the global supply chain. Those are critical issues. There’s a whole plethora of reforms that need to go further down, and I think that is also going to create a lot of jobs,” he said in the report published 27 April 2019 in Indian newspapers.

Mark Linscott, the former Assistant US Trade Representative for South and Central Asian Affairs, is working with USISPF member companies to come up with a recommendation as to what India needs to do to enhance its exports and work up from that perspective, according to Aghi.

Observers commenting on the report said it would not get any better for India-based businesses to capture some Chinese market share in the United States.

Aghi has talked about India-US Free Trade Agreement, which is possible but not till India has brought about transparency in manufacturing sector and raised the standard of finished products.

India is still far from concluding FTA with European markets where negotiations have not made much progress since they were launched in 2007 and suspended in 2013 and or mentioned once in a while.

Aghi said that they have formed a high-level manufacturing council within the member companies, led by John Kern, Senior Vice President of Supply Chain Operations at Cisco, who are putting a document together detailing what India needs to do to turn it into a manufacturing hub.

“We plan to have the document ready by the time elections are over as part of recommendation,” he told PTI.

This simply implies that the ‘Make in India’ initiatives is not yet up to the American wish list.

The American companies want a backup strategy to start manufacturing in India, according to Aghi.

American heavyweight manufacturers such as Lockheed Martin, has been evaluating the option of investments for several years, but has yet to get into a comfortable spot for manufacturing fighter jets such as the remodeled F16. However, the group has a joint venture in place to make components and major parts.

“There are small-small issues, which can slow them down,” according to Aghi. “And at the moment most of them are waiting for elections to be over. But there’s a large deluge of companies keen to not only manufacture in India but also who want to go after the domestic market,” he said.

India, grappling with its noisy democracy, is holding General Election, outcome of which will be known in the last week of May 2019, or 27 May to be exact.

Investors are watching the fiercely contested elections.

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