The Modi-Obama show PDF Print E-mail
Wednesday, 24 September 2014 00:00
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At the end of the day, important to keep in mind that many of the 'concessions' to the US end up benefitting India as well

While the BJP position on the nuclear liability law is clear, the law makes it impossible for even Indian firms to build nuclear power plants—whose interests can that possibly be serving?

There are many contenders for what should get top billing in the talks between Prime Minister Narendra Modi and US President Barack Obama during Modi’s US visit later this week. They range from the most immediate Indian stand on WTO issues, to revisiting the Civil Liability for Nuclear Damage Act of 2010, enlarging defence cooperation/production between the two countries, getting the US to reconsider its hostility towards Indian IPR laws—the results of an out-of-cycle review of India’s IPR regime will be out after Modi’s visit and could even result in specific sanctions—as well as review its protectionist immigration law that is hurting Indian IT firms.

And somewhere in between, there are the issues of greater cooperation in the energy sector, more access for US universities and financial institutions such as insurance firms to Indian markets, and signing a Bilateral Investment Treaty which will protect US investments from appropriation as well as a more agreeable tax protocol—while Indo-US tax ties had plunged to an all-time low last year, there are more meetings today, but there hasn’t been much movement on the tax issues US firms face in India.

Whatever the particular order in which Modi and Obama choose to take up issues—they could, for instance, leave the sticky issues to their colleagues and just highlight the positives—a useful principle to keep in mind is that while it is important for India to get the US to see things its way on issues like IPR and the immigration law, many of the so-called concessions to the US actually benefit India as well. While the two countries already have a trade of nearly $100 billion if you include services—India has a surplus of $25 billion—US FDI is very small, well under $30 billion cumulatively. The important thing for Modi to keep in mind is that, as talks on the ambitious US-led Trans-Pacific Partnership (TPP) progress—TPP is a trade agreement being negotiated by the US with 11 countries including Australia, Japan, Malaysia and Mexico—India stands increasingly isolated in terms of global trade, more so if the WTO process India is railing against gets derailed.

Civil Liability for Nuclear Damage Act, 2010: Given the Bhopal shadow, it is understandable that India should want to have an Act that puts punitive sanctions on firms responsible for industrial disasters, but the unlimited suppliers’ liability in the Indian law will prevent India from developing a meaningful nuclear power capability. Firms, neither Indian nor global, can possibly buy insurance for such unlimited liability provisions—in which case, India will have to give specific exemptions as it gave for some Russian plants if it wants them to come up. The Times of India has recently reported L&T writing to the Nuclear Power Corporation of India Ltd (NPCIL) that it cannot bid for the new 2,800 MWe nuclear plant in Haryana till the law is in place—NPCIL, for the record, plans to build 16 new power plants in the current Plan period. And how can equipment suppliers be held responsible beyond the basic warranty if the plant is to be operated by the public sector NPCIL—under the supervision of the atomic energy regulator?

Defence cooperation: Though the government has given into the defence lobbies by hiking FDI levels to just 49% instead of 51%, this is something it may want to reconsider if its current strategy of clearing more make-in-India defence deals does not result in enough world-class players coming in. The US defence industry will certainly welcome it, but so should India given what it could potentially mean as the $16 billion annual defence procurement is slated to rise to $80 billion annually by 2025, according to a BCG study—based on this, CII-BCG believe this could be the next big thing for Indian industry and could lead to the creation of 1 million jobs over the next five years.

Intellectual Property Rights/WTO: This has to be the most delicious irony in recent times. After the relentless US pressure on India’s IPR laws, India has said its laws are WTO-compliant and, should the US like, it is free to take India to WTO’s dispute settlement board! Coming as it does, just before India derailed the WTO process on the issue of its subsidies for the poor—which the government’s submission to the WTO puts in the non-actionable category!—it does sound hypocritical, but the fact is that India does have a good case here since Section 3(d) of the Indian Patents Act (which US firms object to) is fully compliant with the WTO’s requirements. The problem, however, is twofold. For one, India has not pointed out its record in granting new patents has been good—1,500 patents have been granted to the top 9 global pharma firms since 2005. And the US India Business Council’s (http://goo.gl/UJ6rGa) defence of India’s patent laws needs to be re-cited.

But, given their non-epidemic nature, it does appear the government was too hasty in its compulsory licence (CL) action on Bayer’s liver and kidney cancer drug Nexavar. The good news here, of course, is that when, some months ago, the health ministry was pushing for a similar CL for Bristol-Myers Squibb’s anti-cancer drug Dasatinib, the industry ministry was against the idea. Insisting, as India does on many occasions, that ‘working’ the patent involve local manufacturing, is a needless irritant, and can easily be done away with. Hiring more patent examiners, a US grouse, is easily dealt with and it is not clear why a CL clause was put in the National Manufacturing Policy for clean energy innovations.

Immigration and problem STEMs: India and the US have traditionally sparred over the quota of H-1B visas for Indian IT firms, and the Senate’s Immigration Bill was tilted against Indian IT firms like Infosys while benefiting US firms like Accenture that were doing the same kind of work. The Bill assumes, incorrectly, that the US has no shortage of Science, Technology, Engineering and Mathematics (STEM) workers and Nasscom has done a good job of busting this myth, perhaps why the House of Representatives’ Bill is quite different. While there is no immediate danger, a more permanent dialogue on how US immigration can accommodate the needs of Indian IT firms needs to be addressed.

US universities in India: Given over 2 lakh Indian students go overseas—and spend $10-12 billion—to study each year, and there are several times more who want to go but cannot, opening up the Indian education sector has been big on the US agenda for a long time. This benefits both countries, more so given India’s dismal score on the global universities ranking. The question is whether it will find favour with the RSS’s swadeshi thinking that has got the government to go slow on even allowing trials of GM crops.

Bilateral Investment Treaty: Given how sections of the government wish to relook all existing BITs with various countries, perhaps the last thing on Modi’s mind will be to enter into a BIT with the US. Given the troubles US firms have had with the Indian taxman—the mutual agreement procedure (MAP) talks between the two country’s taxmen haven’t progressed much and top US firms are at loggerheads with the Indian taxman—it is clear some progress is required in assuaging their fears. At his interaction with leading CEOs of US firms like Amazon, which is facing all manner of problems in India, Modi will probably get to hear their fears firsthand.


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