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India's economic reforms not enough: US official

July 12, 2013 11:33 IST

Indian flagExpressing concern over the investment and innovation environment in India, a top US trade official has said the recent set of economic reforms initiated by the country were not enough to return to the path of robust growth.

"Let me stress that as a friend of India and one of the caretakers of our economic relationship, I am concerned about the investment and innovation environment in India, not just from the perspective of our bilateral relationship, but from the perspective of India's own economic aspirations," US Trade Representative Mike Froman said on Thursday.

Welcoming the recent reforms initiated by the Indian government or being proposed, Froman said everyone knows they are necessary, but not sufficient to pull in the investment that India needs to return to the path of robust growth.

"After all, in a highly competitive investment environment, investors look for a consistent commitment to, not sporadic outbursts of, reforms.

"Most importantly, they look for the enduring confidence that comes from long-term, sustained, high levels of growth," Froman said, delivering the keynote address to the 38th annual Leadership Summit of the US India Business Council, which among others was attended by Finance Minister P Chidambaram, and Commerce and Industry Minister Anand Sharma.

"The challenges we face are well known to all of you," he said, adding that indeed it is the business community, which has been such an important proponent of deepening US-India ties.

The business community has in recent months become increasingly vocal about certain policies, he said.

"There has been great concern about localisation measures that are meant to stimulate domestic manufacturing and achieve other important domestic policy objectives, including preferences for solar developers who use domestically manufactured solar equipment," Froman said.

Similarly, in the area of intellectual property rights, there has been substantial concern raised about recent actions to impose special rules for the patenting of medicines that otherwise meet the internationally accepted criteria, he said.

Asserting that the US supports India's endeavour to take steps to create jobs, promote domestic manufacturing, mitigate threats to security, and support public health, Froman said: "But we hope to work with India to achieve these ends with policies that enable, rather than thwart, these vital objectives and that do so in a way that brings our economies closer together, rather than distorts trade and investment and discourages innovation".

Both countries, he said, want a vibrant manufacturing sector and the good jobs that come with it.

Rather than the import substitution policies that some have pursued in the past, building uncompetitive industries behind a wall of protectionism, India has the potential to be a key participant in globally competitive value chains, he noted.

As such he welcomed the positive step the Indian government took this week to ensure that the revised Preferential Market Access policy would not require private firms to purchase domestically manufactured goods.

US, he said, has a strong interest in working with India to meet its public health needs.

"We firmly believe that there are ways to aggressively pursue public health objectives, support innovation and promote India's generics industry to save countless lives, all at the same time," he said.

"An easy and quick step in this direction, which would have an immediate effect on access to medicines, would be to eliminate India's tariffs and other internal charges on medicines, which in some instances run well over 20 per cent," the US official said.

Sharing India's concern about and commitment to food security, Froman said the US recognises New Delhi's need and right to feed its people.

"But just as in the case of manufacturing policies, we think there are more and less trade-distortive ways to achieve that objective," he said.

"We are certainly willing to work with India to address its legitimate food security needs, but we underscore the importance of doing so in a way that minimises the distortion of global trade," Froman said, adding that the US looks forward to working with India in a way that allows the broader WTO agenda to proceed as they examine the full range of trade-related issues affecting food security.

Referring to his meeting with Sharma, earlier in the day, Froman said the two agreed to direct their officials to lay the foundation for a productive ministerial-level Trade Policy Forum that will make progress on key outstanding issues.

"Consistent with this renewed dialogue will be a much greater emphasis on engagement with the private sectors of both countries, including through a reinvigorated Private Sector Advisory Group and through engagement with groups like the USIBC and the US-India CEO Forum," he said.

Froman said there is much the US can do with India, as two great democratic market economies, to strengthen the international trading system.

"For example, we have common interests in combating the growing piracy that threatens our creative industries. We have common interests in responding to unfair trade practices that create an unlevel playing field," he said.

"And we have shared interests in ensuring that trade and investment plays a critical role in the economic development of the poorest countries and contribute to the elimination of poverty.

"There is much we can do together, for the international community, based on a strong bilateral partnership," Froman said.

Lalit K Jha in Washington
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