Visiting US president Barack Obama and American business leaders on Monday raised concern over a lax intellectual property rights (IPR) regime and unpredictable tax system in India, prompting Prime Minister Narendra Modi to offer an open business climate and stable tax polices.
Obama also announced $4 billion worth of investment in India, including $1 billion for financing exports of made-in-US products. Both Obama and Modi pitched for the ‘make-in’ programmes of their respective countries.
At the India-US CEO Forum, the US president said exporters of his country were “very concerned” about issues like IPR as the US was increasingly becoming a knowledge-based economy.
He said the “absence of effective IP protection” in India was affecting business.
“We tend to operate at the higher ends of the global value chain,” he said at the meeting, which included Honeywell CEO Dave Cote, Indira Nooyi of Pepsico, Harold McGraw, chairman of McGraw Hill Financial, Ajay Banga, CEO of Mastercard, and Bob Iger, CEO of Walt Disney Company.
The Indian side included Tata Sons chairman Cyrus Mistry, who along with Cote was co-chair of the CEOs’ forum. Others who attended included HDFC chairman Deepak Parekh, RIL chairman Mukesh Ambani, ADA group chairman Anil Ambani, Adani group chairman Gautam Adani, ONGC CMD Dinesh K Saraf, SBI chairman Arundhati Bhattacharya, Jubilant group head Hari S Bhartia, BHEL head B Prasada Rao, Biocon CMD Kiran Mazumdar-Shaw and Sunil Mittal of Bharti Enterprises.
Mazumdar-Shaw later said US companies complained about counterfeiting and piracy in India, which she hoped would be resolved through a bilateral mechanism.
Parekh said Iger raised the issue of film piracy. Even Modi acknowledged that there was piracy in IT software and films. Finance minister Arun Jaitley, also incharge of information and broadcasting, said the issue would be looked into.
After the US Trade Representative (USTR) last year had said in its much-awaited annual special 301 report that India’s IPR laws and enforcement would be closely monitored by initiating an out-of-cycle review, the two countries tried to narrow down their differences through the trade policy forum. The department of industrial policy and promotion has put a draft on IPR policy in the public domain to revise the policy in general.
Indian companies expressed their worries over visa restrictions and restrictions on gas exports from the US to India.
Obama sought “consistency” and “simplicity” in the regulatory and tax environment in India to significantly increase trade and business between the world’s two largest democracies.
Seeking more US investment into India, Modi said at the India-US Business Summit, organised just after the CEOs’ meet by the US India Business Council, the Confederation of Indian Industry (CII) and the Federation of Indian Chambers of Commerce and Industry (Ficci), that his government had removed some of the “excesses of the past” and promised the visiting US dignitaries “we will now soon address the remaining uncertainties”.
The Modi government has repeatedly said retrospective amendment of the Income Tax Act had scared investors away and declared in this financial year’s Budget that all fresh cases arising out of the amendment would be scrutinised by a high-level committee of the Central Board of Direct Taxes before any action was initiated.
Pledging $4 billion in lending by US banks, Obama said his country was ready to help India grow by working with it in development of infrastructure such as railways, ports, roads and clean energy power plants. The $4-billion programme includes $1 billion for financing exports from the US, the same amount for small and medium industries and $2 billion for renewable energy projects.
At the meeting with CEOs, Modi said he would personally take charge of implementation of big projects and monitor them.
“You will find an environment that is not only open, but also welcoming. We will guide you and walk with you in projects. You will find a climate that encourages investment and rewards enterprise. It will nurture innovation and protect your intellectual property,” he said.
“There are still barriers,” said Obama, adding there was a need to streamline regulations, cut the red tape and jump through bureaucracy.
Appreciating Modi’s reform initiatives to bring investments, he said, “We need to incentivise trade rather than stifle. We need to be transparent, consistent and protective of intellectual property rights.”
“We can work together to develop new technologies to help India leap forward and partner in next-generation clean energy projects and upgrade railways, roads, ports, airports and broadband connectivity to provide the best connectivity to the world,” he said.
He also referred to the three smart cities –Allahabad, Ajmer and Visakhapatnam — that the US would help in upgrading infrastructure.
Reviewing his visit, Obama said the two countries had “a number of concrete” steps for more investments and referred to the breakthrough in civil nuclear agreement, defence cooperation, renewable energy and bilateral investment protection treaty (Bipa).
“When leaders make agreements, our agencies and bureaucracy will follow through,” he said. “We can grow and we can prosper together.”
Obama referred to the current bilateral trade of $100 billion and compared it to the US-China trade of $560 billion, saying, “It can give you an idea of what potential India can unleash.”
India only accounts for two per cent of US imports and 1 per cent of its exports, Obama said, expressing wonder that 1.2 billion people consumed such a small proportion of US exports. Notably, merchandise trade between India and the US was much less at $61.6 billion in 2013-14.
Listing the achievements of his government, Modi said the business sentiment in India was one of the strongest among major Asian markets and consumer confidence had turned positive after three years.
“Growth in eight core sectors of economy has increased sharply. Inflation is at a five-year low; 110 million new bank accounts have been opened in the last four months. Investments from the US have jumped by 50 per cent in the first six months of my government,” he said.
Obama said US companies could help India digitise the accounts opened under the Prime Minister’s financial inclusion programme.
Referring to the 50 per cent jump in investments from the US in India, Modi said, “I know that some of the pledges made in September in Washington have begun to flow in. Yes, I do keep track of these things.” The audience cheered his remarks.