Obama triggers trade rush hope
New Delhi, Jan. 11: US President Barack Obama’s visit during Republic Day is expected to set the tone for closer engagements with India as the two nations look to boost bilateral trade to a targeted $500 billion.
Obama is the first US President to not only attend the 26th January parade but also visit the country twice during his tenure. He had visited India in November 2010.
The change in the government at the Centre led by Narendra Modi provides a new opportunity to the leaders to push trade ties.
The ordinance route taken by the NDA regime to implement key economic legislations such as increasing FDI in insurance, coal auction and the easing of norms for land acquisition indicates that the government wants to put reforms on the fast track.
Global companies have been lobbying the Indian government to increase the foreign investment limit in insurance to 49 per cent from 26 per cent. American and European companies had been seeking such a move since the global economic slowdown in 2008.
Recently, Bupa of the UK has indicated its plans to increase stake in its India operations to 49 per cent.
Obama’s visit comes within months of Prime Minister Modi’s visit to the US in September. Both the leaders have also given a name to the bilateral ties – ‘ Chalein Saath Saath’ (Together we move forward).
Analysts said “though this visit might not yield anything fruitful immediately, it will set the right tone for the years to come. This visit is very crucial in terms of the improving the sentiment, which is very important”.
US secretary of state John Kerry, who is in India to attend the Vibrant Gujarat summit, set a positive note for Obama’s visit, saying it is the perfect time to tap “incredible possibilities” between India and the US”.
India is keen on investments from American companies for its Make in India programme to increase the share of manufacturing to 25 per cent of the gross domestic product by 2022 from 15 per cent.
During his visit to the US, Modi had held meetings with companies such as General Electric, Boeing, Goldman Sachs, IBM, BlackRock, PepsiCo, MasterCard and Kohlberg Kravis Roberts.
The two countries have also settled their differences on food security to seal a deal at the World Trade Organisation for a trade facilitation agreement to ease customs norms.
After the trade policy forum meeting between the countries, held after a gap of four years in November, the government announced a committee to identify the bottlenecks faced by US companies and fast-track investments.
Both sides also plan to resolve their differences on intellectual property rights through a working group.
India will be looking to take up issues relating to the totalisation pact, market access for farm products and services, energy trade, tariffs and non-tariff barriers with the US President.
Officials said India would pitch for a totalisation pact to protect the interests of Indian professionals who contribute more than $1 billion each year to America’s social security system through federal taxes without getting any benefit in return.
New Delhi wants an early conclusion of the totalisation agreement. Under this pact, an expatriate in either country need not contribute to the social security schemes of the host country.
Indian officials will also raise concerns over non-tariff barriers with the US labour department targeting certain textile products, alleging the use of child labour.
Fatca effect
Stringent compliance requirements under the Foreign Account Tax Compliance Act (Fatca) of the US have led to several mutual fund houses avoiding fresh investments from American investors.
Many mutual funds, including HDFC, ICICI Prudential, Quantum, Baroda Pioneer and DSP Blackrock have barred investment from residents of the US and Canada for some schemes.
