India adds value to US cos; expect investment treaty soon

India and the US go a long way behind. But what is the way ahead? How are the policies structured for cooperative growth of both democracies? CNBC-TV18 and the Wadhwani Foundation put together an elite panel to discuss the India-US economic policy initiatives. The guests include minister Kapil Sibal, deputy chairman Dr Montek Singh Ahluwalia, Som Mittal, president NASSCOM and chairman of Wadhwani Foundation, Ramesh Wadhwani.

Below is part of the edited transcript of the discuss. Also watch the accompanying videos.

Bhan: Frank Wisner said that the India-US FTA is an idea whose time has come and we are in the process of putting together a bilateral investment treaty. The Obama administration says that talks have been productive but the sense is that on both sides there are sensitivities and apprehensions and perhaps we haven’t been able to move as fast as we ought to in trying to get this investment treaty going between the India and the US?

Ahluwalia: It’s true that both sides are working on whether they can have a bilateral investment treaty. This is actually handled by the Finance Ministry, so I don’t know what the current position is. It doesn’t actually surprise me that these things take a long time. Let me put it this way - the scope for India-US interaction in trade, investment, technology etc is very large whether we have a bilateral investment treaty or not. I think we need to let our negotiators loose. We need to let them workout the details. There are many things we want which I don’t think the US would want to concede and there are probably many things that US wants which we may not be able to concede. However, all that is totally consistent with a huge increase in trade, investment, technology flows. I don’t think that’s a big impediment.

Bhan: Kapil Sibal, you were talking about education as a big opportunity. It’s a revenue generator for US earning about USD 20 billion annually. Two years ago, we were having the same conversation about inviting foreign universities to collaborate with India. You said we need to get our house in order but they need to change their mindset as well and understand that it needs to be a collaborative process. What’s gone wrong? Because there was so much buzz and so much hype two years ago about this collaboration that could have taken place. We still don’t have anything on the ground.

Sibal: What’s gone wrong at this end is politics. Yes.

Bhan: Thank you for being candid.

Sibal: That's true. The problem is that whenever you talk about foreign universities the question comes up from the Opposition that what about our professors and academics in IITs, they will all take them away. Then they say what's going to happen to our institutions. The private sector in India is so large, 90% of engineering colleges and 50% of medical colleges in India are in the private sector. Which academic has left the IIT and gone to the private sector? None.

The attrition rate is very little. If that's the experience in India why do you imagine it's going to be any different? When people are going to invest in India why would they bring faculty from abroad, nobody would bring faculty from abroad. They were to develop the faculty at home.

Bhan: Is this idea going to be a nonstarter then?

Sibal: No, of course not because in the ultimate analysis they will have to agree because that's the need of the hour, the country needs it. So it is going to happen. It may not happen now, but I would imagine that some of the bills will be passed in the Budget session.

Bhan: You do expect that to happen?

Sibal: Oh, yes, yes. Absolutely.

Bhan: Budget session.

Sibal: Imagine the standing committee has cleared the Foreign Education Providers Bill.

Bhan: NASSCOM has just put out its report on the outlook for FY13. It is looking a bit gloomy. It is not just on account of what's happening in the US, it also has to do with the global volatility. But I want to pick up on what's happening in the US and we see this anti-outsourcing rhetoric every time the elections come around. We don't know eventually if an anti-outsourcing legislation will go through the Senate or not. But the fact of the matter is it's getting increasingly difficult to pull off the offshore model as we now know it. TCS has just inaugurated a center in Santa Clara. The offshoring model has got to change, does it not?

Mittal: No, the first thing is we must be clear of what value we add. It is not about offshoring. If we were not adding value to the US corporations, our business would not have grown. Even in the coming year with this gloom and doom around, we will grow this business by USD 9 billion. We should appreciate that there are political compulsions in every country.

We have ours, US has theirs, but in these there are a lot of misconceptions that are around. For example, President Obama himself says, they have a deficit in the area that Mr. Sibal spoke about. They don't have people who are going to the science, maths and engineering area. They need to have training going in here. So they need us more than ever before. If they have to keep those Indian and foreign students there, then they need to reform.

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