US Ambassador Eric Garcetti on Tuesday pitched for reform in India's taxation, export control and intellectual property rights regimes for deeper bilateral economic engagement and said the "rhetoric" that everything has to be made in India could slow down the pace of the country's growth.
The envoy said that "opaque corporate tax practices" are still a "barrier" to American companies wanting to invest in India and that export control and export policies have to be changed if the country is to achieve its goals in the economic sphere. In an address at the Indo-American Chamber of Commerce (IACC), Garcetti asserted that the US wants to see an India that doesn't look at self-reliance as a "fortress" but instead as the strength of Indian companies to compete with anyone in the world.
Delving into various facets of fast-growing India-US engagement, Garcetti said there are no areas of cooperation that are "off limits" now and cited fast-growing bilateral engagement in areas of defence, critical minerals and semiconductors. "We used to say the sky's the limit; now we are beyond that. We are even working in space together; we are in the depths of the ocean together. We have literally no limits to this relationship, horizontally or vertically," he said at the event on the theme 'Strengthening Indo-US relationship in '.
The US ambassador noted that the flow of foreign direct investment into India is not registering the desired pace, adding the investments are going to Vietnam and other countries in Southeast Asia. "Right now, we have a USD 40 billion trade deficit with India and even greater one with China and we want to see the foreign direct investment from China shift here (India)," he said.
"But if you look at the honest numbers… the FDI is not flowing into India at the pace at which it should be. Instead, it is going to countries in South east Asia like Vietnam, places like Mexico," he said. "I would selfishly like to see more of that happen here (India) and I need your help," he told the industry captains and officials.
"The rhetoric that everything has to be made here in India will slow down the pace. If you tax inputs, many of you in manufacturing know that you are taxing your outputs. You're not taxing us, you are not protecting the market, what you are doing is limiting the market and we want to bring in greater investment," he said. Garcetti said he wants to see supply chains critical to America coming to India.
"We absolutely want a self-reliant India, we don't want to contradict that but we also want an India that doesn't look at self-reliance as a fortress but instead with the strength of Indian companies that can compete with anyone in the world," he said, adding "this is not a paradigm of old that invaders are coming to extract". "This is a relationship of equals, that when we break down the walls in both of our governments, whether they are bureaucratic, taxation, regulatory (and) part of our federal system, you only release more jobs, more prosperity, more investment and more strength," he said.
The US ambassador also underlined the need for reform of the taxation system in India. "We also have to see that opaque corporate tax practices still are a barrier to too many (US) companies that want to be here," he said, adding CEOs of top American companies are very bullish about India.
Garcetti said American firms also want to ensure protection of intellectual property. "They want to invest but we have to ensure that there is protection for intellectual property. Courts often decide that there is a violation of intellectual property but then there is no consequence. This is now increasingly important to Indian companies too because Indian companies are producing patents at such a roaring rate now compared to the past," he added.
"The strengthening of this is not just with the good rule of law and decisions but the consequences will incentivise more investments as people will know that investment, deep investment into research and development will be protected for a longer period of time," he said. Garcetti said the export policy is an area where "we are honest with each other" and that the strength of the ties between the two sides facilitated frank discussions on these issues.
Nobody wants a slow permit whether that is for entering or exiting a country, he said, noting speedy customs clearance, tax and regulatory stability always encourage better growth. The US envoy also argued that "inner compatibility" is a crucial characteristic for economies of scale, saying countries that prioritise their own standards over connectivity will find it difficult to make for the world.
"Remember Japan during the cellphone wars years ago, they bet big on their own standards. India is big enough to have its own market but if you want to have dominance in the global marketplace, you have to decide on these standards together. It is so exciting to see that happen with 4G, 5G, Open RAN (Radio Access Network)," he said. What India and the US are doing in these areas is very different from our "main competitor in the world who wants to use telecommunication to spy on its citizens and also on others around the world, he said.
The comments are seen as an apparent reference to China. While talking about India's potential to grow further, he cited the example of the Association of Southeast Asian Nations (ASEAN) and said the 10-nation bloc with a population of 700 million has a 20 per cent larger GDP and a per capita income twice that of India.
This is because of trade agreements that account for 25 per cent of regional trade and an inter-connected area that works hard to listen to companies regarding changes, the envoy said and described ASEAN as a well-oiled interconnected region. Applauding India's manufacturing prowess, Garcetti said that as the country did with the iPhone, it would soon do the same with Tesla.
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