So What Gives?

US sets sights on

• FDI in multi-brand retailing
• lMore stringent Indian IPR laws, copyright compliance
• Greater market access; lower import duties in general
• Dilution of nuclear mishap liability

India’s wishlist

• Removal of US restrictions on dual technology transfer
• Clear roadmap on science & technology, agriculture collaboration
• “Totalisation agreement” to protect interest of IT workers
• Greater market access for goods that are exported

The likeliest outcome

• FDI in multi-brand retailing likely—but by end of the year
• Indian assurance of greater compliance of IPR norms
• US will not ease fears on outsourcing
• Indian imports without adequate safeguards are unlikely
• Some easing of nuclear liability regime likely

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Whether the visit will remove the major irritants to the two-way trade in goods and services, including lifting curbs on dual use high-tech trade, is anybody’s guess. Not many are banking on it, given Obama’s diminished strength in the US Congress. The recent US action to check outsourcing of jobs shows which constituency Obama is aiming to please. Given that both countries already don’t see eye to eye on many issues—like the Doha Round of WTO negotiations or commitments to address climate change concerns—it would be unrealistic to expect too much from Obama’s visit. Will this then be a symbolic, formal visit?

Dr Anwarul Hoda, ICRIER acting director and a WTO expert, is cautiously optimistic. He says bilateral negotiations tend to yield more ground as “much more straight talking is done” unlike in multilateral negotiations, where India and the US have often been on opposing sides. But given the long-standing and contentious nature of issues on the table—from restrictions on dual technology transfers, to the Indian IT sector’s worries about persecution—there is little optimism among experts that Obama may yield ground at this juncture when his popularity in the US seems to be on the wane.

On the other hand, the US continues to apply pressure on India to yield some ground on the nuclear mishap liability regime (brought into being by its new domestic legislation) to fully indemnify American companies and hence enable them to do business—though the politico-legal window for this is rather constricted. On FDI in multi-brand retail, the direction is clear when Planning Commission deputy chairman Montek Singh Ahluwalia states, “If modern retail is good for India, I don’t see why we should oppose FDI in multi-brand retail.” However, fear of it being seen as a US-pushed move may see the government defer an announcement to sometime later this year.

The irony is that equations have clearly changed. “Unlike 20 years back, today due to the huge size of our market, India has a strong bargaining power next only to China, so we should not give in to things,” stresses Hoda. From being India’s top trading partner till a few years back, the US has been overtaken by the UAE and China. Many other countries are fast catching up. Is it necessary then to subvert Indian interests to woo US technology and trade, when Indian companies continue to face several non-tariff barriers?

With the government being guarded, experts are wary about speculating about possible outcomes. But they agree that India is better placed than four years back (when former US president George Bush visited) to concretise many of the collaboration agreements (some signed over a decade back) that seem to have gone nowhere. “There are a lot of bilateral cooperation agreements like in science and technology, agriculture and energy, which can be fruitful if India can take advantage. But the roadmap is not clear,” states Biswajit Dhar, director-general of global think-tank ris.

Since 1992, when the US investment in India was negligible, the two-way investment flow has grown in double digits and is currently around $11 billion each way. Bilateral trade has also been increasing in double digits to reach $43 billion, though this is less than one-tenth of US trade with China. For the bilateral trade and investment to realise its potential, experts feel many niggling issues need to be resolved. “While India is in a better position now geopolitically, much depends on the capacity and leadership to negotiate,” says political and economic commentator S. Gurumurthy.

However, Ron Somers, president of US-India Business Council, is optimistic that Obama’s visit will trigger “positive movement on export controls and dual-use licensing policies specific to India”, helping them become “strategic partners”. Speaking from the US, Somers is banking on Obama’s visit to reinvigorate the bilateral investor treaty, “which will be the baby step towards what could become a free trade agreement”. Similar optimism is voiced by FICCI’s Amit Mitra who says the fact that “developing economies like India have become the centre-point in the US approach to global economy” has ensured that India now sits at the top table in global negotiations.

Just as the US is seeking greater Indian investments to create jobs, India too is banking on funds flow to bridge infrastructure gaps. Stating that “investment is not negotiated”, the Planning Commission deputy chairman points out that “any significant reduction in technology restrictions would be a very positive outcome for India”. He is banking on the Indo-US CEO Forum proposal of setting up an infrastructure fund, if approved, to help bridge widening infrastructure gaps.

Would India then be able to get its way in pushing for clean energy, critical technology and boosting its exports? It’s not clear. CPI(M) politburo member Brinda Karat says many of the economic issues of concern to India “are not likely to be addressed during Obama’s visit”. A sampling of deals in offing—from the $917-million export deal from Bucyrus International to India’s Sasan Power or Boeing’s $2.7-billion deal for supply of aircraft to Indian low-cost airlines—shows which way the wind is blowing.