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Indo-US economic ties: Time for a rethink?

September 04, 2013 11:14 IST

Several US industries, groups and think tanks have lobbied the US government and legislature to take action against India -- and at the very least to strip India of privileges under the Generalised System of Preferences scheme, which waives some import duties for developing countries.

HandshakeIndia is not the flavour of the month in Washington, DC.

Indeed, in the American capital, a major effort has just begun to quantify the supposed degree to which various economic policies of India’s government have impacted and will continue to impact US firms and trade.

Both Houses of the US Congress are involved: the House of Representatives’ committee on ‘ways and means’ and the Senate committee on finance have asked the US International Trade Commission to submit a report next year on the subject.

This is not the first such indicator: attitudes on Capitol Hill have been becoming frostier with time.

Before US Secretary of State John Kerry visited India in June, 200 legislators, including 40 senators, handed him letters demanding he discuss specific Indian policies, including those meant to promote domestic manufacturing and some that are seen as further weakening the protection of intellectual property.

Several US industries, groups and think tanks have lobbied the US government and legislature to take action against India -- and at the very least to strip India of privileges under the Generalised System of Preferences scheme, which waives some import duties for developing countries.

India is the biggest beneficiary of the scheme.

It is clear that when Prime Minister Manmohan Singh meets US President Barack Obama later this month, there is much that he will need to repair in this relationship.

But it is worth wondering why, exactly, so much pressure is being brought to bear.

After all, foreign investment in India continues to be relatively strong, and it is not as if India’s trade presence is so strong that such measures seem warranted -- there are a dozen countries that trade more with the US.

It seems, however, that this pressure on the US government and lawmakers is coming from local industry -- which, like equivalent interests anywhere, recognises when a government is weak and can be pressured.

It appears, however, that a major influence on US industry’s attitude to the Indian government is, in fact, the orientation of Indian industry.

It is undeniably the case that leaders of Indian industry have unhesitatingly run down the performance of the Indian state, insisted that it is anti-business, and even sought the help of their fellow business leaders in the US to bully the Indian government into line.

First made only in private, such statements are increasingly public, as Ratan Tata’s recent remarks on the subject show.

Indian industry has a right to express its displeasure, and to push the government into re-examining its recent policies and its growing antipathy towards capital.

However, there are clearly complications to this strategy -- and it is, in this respect, short-sighted.

After all, Indian business’ US allies will push the Indian government only on those issues, such as openness and intellectual property, that cause them to lose profits.

There is no reason to suppose that Indian industry’s interests mesh with US industry in this respect.

In the past, India Inc’s voices were better organised.

Indeed, in the 1990s, industry bodies such as the Confederation of Indian Industry and the Federation of Indian Chambers of Commerce and Industry played a major role in convincing the world that the Indian growth story was real, and to engage constructively with the Indian government.

It appears that this is no longer a priority. If not, then it will not help Indian business.

A New Delhi assailed on all sides might give in to ever-fiercer condemnation from Washington.

And that would not, in the least, be in the interests of Indian industry.

A more unified approach from the leaders of India Inc is perhaps advisable.

Business Standard
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