The US-India relationship has been called as one of the most defining partnerships of the 21st century by none other than US President Barack Obama. In an interaction with The Dollar Business, Richard R. Verma, US Ambassador to India, talks about the ties between the two democracies and the way forward for bilateral trade and investments.

Ahmad Shariq Khan | September 2016 Issue | The Dollar Business


TDB: Bilateral relations between India and US are characterised by historical cultural linkages, extensive economic and trade interests, and a convergence on major international issues. How do you see the future?

Richard R. Verma (RRV): There is no question that this is a defining time for US-India relations. President Obama has called it “one of the defining partnerships of the 21st century.” Our partnership is deep, producing important gains for each of our countries. Trade, for example, has grown from $25 billion to over $100 billion in just 10 years. We believe that trade could reach $500 billion.
 
So yes, the partnership between the United States of America and India is not only vibrant, but growing. I am confident the best is yet to come.


TDB: Bilateral trade between US and India reached a record $107 billion in CY2015. At the recently held Atlantic Council US-India Trade Initiative Workshop, you had said that India and US are targeting a four-fold jump in bilateral trade in the near future. Can you please share the roadmap with us?

RRV: Reaching $500 billion in trade is certainly an ambitious goal, but I am confident we can reach that mark. Our bilateral trade continues to grow rapidly. As you note, our trade reached a record $107 billion last year. This is four times more than what our two-way trade was 10 years ago. And within that record growth, increases in trade and investment occurred in both directions.

Both United States and India have taken important steps to help facilitate greater economic growth and investment. For example, we elevated our economic ties by holding our first-ever Strategic and Commercial Dialogue last year.  This year’s dialogue will be held here in New Delhi at the end of August, and our delegation will be led by our Secretaries, John Kerry and Penny Pritzker. The Commercial portion of the dialogue has several important components, including discussions on how to strengthen the business climate by creating and supporting initiatives, policies, and frameworks that focus on reducing barriers for trade and investment. Furthermore, it’s not just government doing all the effort. Our private sectors play a critical role in increasing trade. As one of the world’s fastest growing economies, India offers some remarkable opportunities for businesses from both countries.


TDB: Under the revised rules, India now allows 100% FDI in civil aviation, defence, and e-commerce. How do US companies wish to capitalise on this opportunity?

RRV: US firms are taking note of the recent reforms in India. There are huge opportunities for our industries to collaborate in defence, in infrastructure development and clean energy, just to name a few exceptionally promising sectors. While we need to see some structural reforms to move our trade and investment levels even higher, I know that deeper trade and investment ties between our countries will bind us together, encourage us to play by the same rules and enable us to do more for the world together than we would accomplish otherwise.

TDB: In 2015, India climbed 12 places in the World Bank’s Doing Business report. How do you view this? What major bottlenecks do you still perceive in terms of investing in India?

RRV: We were pleased to see India move up 12 places and want to see India move even higher. In a globalised market, India must continue to improve its ease of doing business to compete with other countries. We are seeing an increasing competitiveness among Indian states to attract investment, including foreign direct investors, which is good for India and for our relationship as well. The recent passage of an amendment to introduce a Goods and Services Tax is one reform to attract investment, and we will continue to work with our Indian counterparts to improve the ease of doing business, ensure consistent tax policies, develop a healthy regulatory environment, protect intellectual property and open more sectors of the economy for direct investment.


TDB: What are your views on the Indian government’s ‘Make in India’, ‘Skill India’, and ‘Digital India’ initiatives?

RRV: India’s economic and investment climate, will in, part determine the success of such initiatives. Over the past year, we have seen several major US companies participating in these initiatives. General Electric announced a $2.5 billion deal to supply and manufacture 1,000 diesel locomotives in Bihar, while Boeing has partnered with Tata Group to manufacture AH-64 Apache helicopter fuselages in Hyderabad. Also, during Prime Minister Modi’s recent visit to United States, Amazon CEO Jeff Bezos announced a $3 billion investment into India, on top of the company’s earlier $2 billion investment. Part of that calls for the expansion of Amazon’s Hyderabad campus, which is estimated to generate 13,500 jobs. In all, American member companies of the US-India Business Council have announced plans to invest $45 billion into India in the next two to three years. As implementation of ‘Make in India’, ‘Digital India’ and other initiatives progress, and as India’s ‘Ease of Doing Business’ ranking increases, we expect those investment figures to further increase.


TDB: How do US and India plan to strengthen people-to-people ties?

RRV: People-to-people ties form a key pillar for the growing US-India Strategic Partnership. Thousands of Indians have participated in professional and academic exchanges with American citizens, and a growing and active diaspora in United States continue to build personal connections. These relationships have brought our countries closer together in ways governments alone cannot achieve. One area that strengthens these ties is the growing importance of travel and tourism. In 2015 alone, US welcomed more than one million Indian visitors, who contributed $11 billion to the American economy. Even the number of Indian students studying in America reached 130,000, the highest number ever. Altogether, the Indian diaspora has made enormous contributions to American society, in tech startups in Silicon Valley, inside halls of academia and Fortune 500 companies, and in various levels of US government. At the same time, more than one million Americans travelled to India to become India’s largest source of foreign tourists. I expect these people-to-people ties to only grow stronger in the years ahead.

 
TDB: According to a recent CII report, Indian companies have invested some $15.3 billion in US. What makes US an attractive destination for Indians?

RRV: India is now the fourth fastest growing source of investments into America – this is a critical aspect of the burgeoning bilateral US-India business story and one that has an immediate and visible positive impact on the local communities where these companies operate. Indian companies collectively have a geographical footprint in every state in America, are diversified in sectors from IT to automotive to construction, and the overwhelming majority of these companies intend to make additional investments and hire more employees in United States. FDI from India is expected to continue to grow in the future. PM Modi and President Obama’s vision for the US-India relationship is in many ways best exemplified through these Indian companies in America and it’s a story that needs to be told and re-told.

On what makes US an attractive investment destination, I have to point to the nation’s diversity and openness as key factors that allow businesses from all countries and industries to thrive. Of course, the United States of America offers the largest consumer market on earth with a GDP of $18 trillion and 320 million people. US is also a leader in research and development, and registers more international patents than any other country. Today’s innovators are safeguarded by a robust intellectual property protection framework, while the innovators of tomorrow are nurtured at leading universities and incubators across the nation. USA is consistently ranked among the best internationally for its overall competitiveness and ease of doing business. The US workforce is diverse, skilled, innovative and mobile – and US workers are among the most productive in the world. And in terms of access to capital, US hosts the most developed and efficient financial markets in the world. A wide range of funding sources – from banks and investment firms to venture capitalists and angel investors – enable innovation and expansion, giving companies in the United States an important advantage.


TDB: How do you visualise India’s role  in global economy in the coming times, with regard to your strategic interests?

RRV: In the recent Joint Address to the Congress, PM Modi rightly noted that “a stronger and prosperous India is in America’s strategic interest.” No Indian prime minister has ever been so direct and clear. In short, the Prime Minister’s visit marked a new level of strategic convergence and consolidation in our partnership. It underscored that the world benefits when United States and India lead together. We will continue to need each other in the years ahead when it comes to strategic and commercial matters. So, I visualise India and United States playing the roles of close partners in the future to achieve our shared interests. This partnership is rooted in shared values of freedom, democracy, universal human rights, tolerance and pluralism, equal opportunities for all citizens, and rule of law. We have a wide array of critical issues on which we will continue to cooperate, including combating climate change and encouraging the use of clean energy; strengthening global nonproliferation; maritime security, including in the South China Sea; collaboration on anti-terrorism efforts; and last, but not least, building our ties in the realms of science and technology and economy.


TDB: President Obama has strengthened his support for India’s role in global institutions, by supporting India’s participation in a reformed Security Council, India’s interest in APEC, India’s accession to the multi-lateral export control regimes, India’s entry into the Missile Technology Control Regime, and India’s membership to the NSG. Would you please comment?

RRV: First, let me congratulate India for its entrance into the Missile Technology Control Regime. The President has reinforced our strong support for India’s role in global institutions, like having a seat on a reformed UN Security Council; we continue to welcome India’s interest in APEC; and we strongly affirm our support for India’s accession into the multi-lateral export control regimes.  With regard to the Nuclear Suppliers Group (NSG), six years ago, President Obama first expressed his support for India’s membership in NSG. Since then, we have worked closely with our Indian counterparts and NSG members to help advance India’s case for membership. India has a strong record and deserves to be included in NSG. That is why the Administration, including senior White House and State Department officials, made a concerted effort to secure India’s membership in the recent NSG plenary session held in Seoul. We were disappointed India was not admitted during this recent session, but we will continue to work constructively with India and all NSG members on India’s accession in the months ahead.

TDB: US has expressed concerns over “difficulties” arising during the Bilateral Investment Treaty negotiations with India. You also recently highlighted the need for a robust IP protection mechanism. Would you please elaborate on your concerns?

RRV: With regard to enhancing IPR protection, which is a necessity for attracting greater foreign investment, we welcomed India’s recently released IPR policy as a step in the right direction towards nurturing a culture of innovation and entrepreneurship. India has always been an innovative society, with much to contribute in cutting-edge technologies and creative content. It is, after all, the society that pioneered mathematics, created Yoga, and recently launched 20 satellites into space. I think Indian innovators want a strong intellectual property protection and enforcement regime. So, I actually think we have a similar mindset when it comes to having a system that protects innovation and creative works. Both our nations look forward to continual progress on crafting a much more robust IPR system.


                                                                                

[Aerial view of Port Newark in Bayonne, New Jersey. The area is known for oil storage and international shipping.]

TDB: In what sectors should India and US reinforce partnerships?

RRV: The recent meetings between President Obama and Prime Minister Modi helped to cement our bilateral cooperation and put us on a long-term footing for close collaboration in several key areas. Let me list a few examples. On civil nuclear cooperation, we moved forward on a 15-year project to build six Westinghouse reactors producing power for some 60 million people. This is a deal that had been pending for 10 years, and we were pleased to see it move even closer to fruition. 

On defence cooperation, our designation of India as a Major Defense Partner will bring our militaries, industries, and defence ministries ever closer in the years ahead as we move India to a level on par with our closest allies and partners with regard to technology transfer. This comes in addition to the 10-year defence framework that was agreed to last year. In climate and clean energy, we launched several new clean energy financing programmes to support India’s 175 GW target for renewable power. The President and Prime Minister also committed to full implementation of the historic Paris climate agreement. Together, both our nations aim to bring clean reliable power to the 300 million Indians who lack electricity, and ensure that we keep the earth’s temperatures from rising to dangerous levels.

Across other sectors like space, health, science and innovation, and internet connectivity, we continue to deepen our cooperation. And in the critical field of cybersecurity, we have agreed to enter into a new framework, which will help reinforce international norms and create stronger network defences.


TDB: Is US pitching for a free trade agreement with India?

RRV: We would love to see a trade agreement in the future, but we need to take important steps before we can arrive there. We would like to agree to a high standard bilateral investment treaty. In India’s recent model draft BIT (bilateral investment treaty), there were departures from the high standards that we had seen in other treaties India had negotiated, for example, with South Korea and Japan. The new model actually substantially narrows the scope of investments covered by the treaty and requires that disputes be exhausted in local Indian jurisdictions before alternative investor-state dispute mechanisms can be initiated. We will keep working to narrow our gaps, but today, unfortunately those gaps do prevent us from moving forward and putting in place the kind of structural protections that investors in both our countries have come to expect in international commerce. In the end, my hope is that further integration into world trading markets and lowering of tariff and non-tariff barriers is the path India chooses. That’s the best way to support worthy initiatives like ‘Make in India’, ‘Digital India’ and others.

Despite these differences, we are very encouraged in the strong trajectory our commercial relationship has been on for these past several years. The best is yet to come.