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India needs policy ‘predictability’ to be an alternative to China: US-India trade body

US companies are looking at a “China plus one” strategy to reduce their “overdependence” on China, but for India to capitalise, it needs to have “predictability” in policymaking like Vietnam and Cambodia, according to Mukesh Aghi, president & CEO of the US-India Strategic Partnership Forum (USISPF).

The USISPF is a trade advocacy body established in 2017, which states that it is a non-profit with an aim to enable businesses and governments to collaborate. John Chambers, the chairman emeritus of Cisco Systems, is its founder, while the likes of Punit Renjen, CEO of Deloitte, and Shantanu Narayen, the head of Adobe, and many other industry leaders are on its board of directors.

In an interview to ThePrint, Aghi said the “fissure” between the world and China will continue to widen as countries manage the impact of the coronavirus pandemic.

“From the US perspective, there has been overdependence on China on the supply chain. So, companies are looking at how do you manage the risk factor, and they are seriously looking at ‘China plus one’ strategy,” Aghi told ThePrint from Washington over Skype.

‘World upset with China’

He said a “titanic shift is taking place in the global order”, and as countries begin to adjust to such changes, “different centres of power will be emerging”, which will include China, but will also throw up opportunities for India “to establish itself as a regional power”.

“The world is upset with China on the pandemic… I am not saying that US companies will come completely out of China, but they will be looking at other alternative sites for manufacturing so their supplies are not completely dependent on China,” he said.

“And India could be one possible place if it starts making some things easier for these companies, compared to Vietnam or Cambodia or Thailand or other geographies.”

US Secretary of State Mike Pompeo had earlier said America is in talks with its “friends”, including India, “to share information and best practices as we begin to move the global economy forward”, even as the trade war between Washington and Beijing intensifies with the Covid pandemic.

‘No sense of evenness in policy’

According to Aghi, to attract foreign capital, it is imperative for India now to have policies that are stable and transparent, and create a level playing field for global companies.

“People invest for the long term, and they look for predictability in policymaking, transparency in policymaking, and a level playing field as they come into the market. And when you don’t have predictability, it sends a wrong signal to the boardrooms where these decisions are made,” he stressed.

Aghi said the reason why a lot of US companies are now moving to Vietnam is due to the predictability in policy, and even though it is much smaller in size compared to India, American firms find a basic “comfort level” in doing business there.

“There is a comfort level (in Vietnam) that at least policies will not switch overnight… This is critical when international firms come into your geography,” he said.

Aghi gave the example of the Indian government’s recent clampdown on American e-commerce firms to illustrate his point.

“On e-commerce, we keep on flip-flopping on policy and you have company like Walmart which spends $16 billion plus and invests in Flipkart, and we keep on changing the policy. In fact, two weeks ago, we allowed every e-commerce company to get into food and grocery business and put a stop on Flipkart getting into that… You cannot have a policymaking where it favours certain players. There is no sense of evenness,” he said.

“India still remains a viable market, it’s an open market, and I think what we are suggesting is we need to grab the current opportunity where the supply chains are shifting. And if we can get more and more of that to India, more innovation will come in, more investment will come in, and more and more jobs will be created.”

Data localisation, H-1B visa remain sticky issues

According to Aghi, India-US trade has grown by leaps and bounds, only now it will slow down due to the pandemic and its aftermath. However, he believes both sides need to iron out issues such as on intellectual property, data localisation and H-1B visas.

“Issues will come up, but the question is, is there maturity on both sides to be able to handle those issues? Both sides can pick up the phone and talk about these issues and find a win-win value proposition,” Aghi said.

Earlier this month, the Office of the US Trade Representative (USTR) launched investigations against India and others for levying digital services tax that can adversely impact American companies. The US has also been also upset about India’s move to roll out a national e-commerce policy that restricts cross-border flow of data.

Recently, the US has also sought to make changes and put some restrictions on H-1B visas. Aghi said such a move may impact companies such as Google, Facebook and Tata Consultancy Services (TCS), which rely on these visas to run their operations.

“US businesses benefit substantially from mobility of Indian professionals coming to the United States. Today, we have a shortage of over a million software engineers in the US,” he said, adding that unemployment in certain sectors in the US makes H-1B a “political football”.

“There could be some changes,” he said, adding that discussion to prevent such an action is under way because it benefits both countries. “If (H-1B visas are) closed down, it will have impact on the trade between two countries.”


15 June, 2020

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