Exclusive: We support the idea of making India a global manufacturing hub, says US-India Biz Council

What has been the USIBC's agenda for this specific meeting and engagement between PM Modi and President Biden?

Over the past week, the US-India Business Council has been very active in Washington DC, promoting better relations between the two countries. We had our India Ideas Summit and the annual general meeting on Monday and Tuesday of last week, attended by many luminaries.

They included Secretary of State Antony Blinken, Secretary of Treasury Janet Yellen, Secretary of Commerce Gina Raimondo and Minister of Health for India Mansukh Mandavia.

It was really a curtain-raiser. It was an opportunity for senior government officials, executives, investors and traders to come together and talk about the US-India commercial and trade relationship. On June 21, we launched Indus X, which is a new platform for US-India defence cooperation.

It brought together startups from the US and India in an exhibition hall to display their technologies and innovations, through which USIBC was able to showcase technologies to senior officials from the Pentagon and the Ministry of Defence in India.

This has been termed a historic visit, in terms of the red-carpet treatment. How does this tie into bilateral trade? What are the key issues that have gained prominence during this visit and that both countries are looking at resolving?

Strategic cooperation, along with the digital economy, has really been the heart of this relationship. In May last year, the two leaders agreed to launch the initiative on critical and emerging technologies that cover areas like artificial intelligence, quantum computing, cybersecurity, 5G as well as 6G, along with bio-technology.

This has sort of grown to expand into other areas, and that is really helping to take forward the work between the two countries.

Indus X, in cooperation with the two governments, is something we hope will bring forward the defence relationship in a similar fashion.

It certainly appears as if there is going to be a great opportunity to move forward on the defence front, and strategic technologies for diversifying supply chains in key areas.

There may also be opportunities to move forward on energy and climate change, which would be a great step forward on a key issue to promote sustainability.

I think there may be some progress on space exploration and cooperation in outer space, as well as some step forward on visa issues, making it easier for Indian workers to remain in the US while they're renewing their visas.

I think those are the areas that are really shaping the agenda right now.

The US has been eyeing a bigger market in India for its agricultural products. Where do you think talks are on that?

Food and agriculture is an important aspect of the US-India relationship. However, my understanding is that it is not a top agenda for discussion right now. Most of the talks are going to be about strategic technologies, digital economy, energy, some visa issues, and space-related activities.

The US has been nudging India to join the Indo-Pacific Economic Framework trade pillar. How do you think joining this pillar would play out for Indian businesses and what are the Indian authorities saying on this and what is the US point of view?

While I don't speak for either governments, my expectation is that the trade pillar is a great opportunity for the countries to work out how to further expand bilateral trade. It's not a formal trade agreement but a forum for discussions.

I think when countries talk about this opportunity, it becomes important for the private sector as it (private sector) feels that the government cares about the concerns that companies have because, ultimately, you know, governments create the playing field and the framework for cooperation and increased trade investment. But it is the private sector that takes forward investment and trade decisions.

So anything we can do to make that process smoother for these companies is likely to grow trade relationships.

The trade figure was about $190 billion last year, which is an incredible growth through the pandemic. It was about $150 billion before the pandemic started. It is nice to see trade continuing to increase.

President Biden has set a trade worth $500 billion between the two countries. So, I think the trade pillar is one way to help facilitate that outcome.

What are the key areas where the two countries can cooperate to achieve the shared goals? What can we expect during the meeting?

I think semiconductors, packaging, testing and assembly would be a great way to de-risk supply chains, and to build trusted supply chains between India and the US in critical areas.

There may also be an announcement on fighter jet engines for India's domestically developed fighter jet (Tejas). I think it will help promote greater supply-chain integration between the US and India because it will involve co- production of an engine that is designed by GE Aerospace, one of our members here in the US.

Finally, it sounds as if there may be an agreement to purchase the MQ-9 Reaper drones, used for surveillance and are also armed. The outcome of that is you will likely be able to increase interoperability between the US and Indian militaries, which I think will help promote integration and cooperation between the two forces.  It is actually already quite robust, especially in the naval area, where they do multiple joint exercises annually.

When it comes to American companies shifting base from China to India, what are the key issues dominating the minds of American businesses that want to shift out?

Everyone is talking about supply-chain diversification. The pandemic showed that having all of the world's manufacturing base in one basket is not a good idea. So companies are thinking about diversifying where they build things, cost-competitiveness, ease of doing business and level-playing field.

When they think about diversifying, there are multiple options. India is one option. Mexico and Vietnam have turned out to be others.

In order for India to capitalise on that, it has to be competitive with these other jurisdictions. At the same time, you know, India has one comparative advantage, and that's a large domestic market.

When we speak with government officials in India, we emphasise that we support the idea of making India a global hub for manufacturing, and building trusted supply chains between India and the US.

One way the government of India can help do that is by attracting US companies to invest in India by creating a level-playing field in the domestic market -- in areas like finance.

You see a lot of infrastructure investments over the last three years by the government of India, and that's going to help to make it easier to do business.

A lot of regulatory burden has lessened in India. But there's still more work to do.

There are differences in taxation of foreign and domestic banks, which can kind of impede investment and advisory services in the insurance sector. There are different regulations for foreign and domestic companies when it comes to appointing senior executives and board members. Addressing these issues would really go a long way towards making American companies increase their investment in India, as they seek to diversify supply chains.

Another thing that would help level the playing field is public procurement orders. The central government basically has the local content requirement and that is not necessarily clear and may exclude foreign companies from bidding on those contracts. That is something which can create an uneven playing field when it comes to accessing the domestic market.

Education is a cornerstone of the bond between the US and India, the First Lady has tweeted. What discussions on education and skilling may we be looking at during the event?

I will say that skilling is a priority for both countries. One of the great opportunities that India has is its population. Basically, half the population is under 30, with the median age being 28. That means there is a potential demographic dividend because the young population has a working lifetime ahead of it, and the key is to help those workers be as productive as possible.

For that, they need skills and education. When our companies invest in India, they help skilled Indian workers. Many of them (American companies) are also at the forefront of building out skilling programmes for vendors and suppliers. So, you know, they're big contributors to that.

What does this meeting, which is coming at a crucial juncture for both countries, mean for India-US relationship, going forward?

It is definitely very crucial. If reports are true, some of the criticisms of the commentary on US-India relationship is defence cooperation. Prior to this point, there hasn't been any technology transfer in the areas of substantially advanced equipment.

If there is an agreement to co-produce the GE engines for the fighter jet, if there is an agreement to purchase the MQ-9 Reaper drones, and these are cutting-edge technologies, they would, in my view, represent a new phase in US-India defence and strategic cooperation.

I also think that diversifying the supply chain for semiconductors through packing, assembling and testing capacity in India also represents a sea of change.

That shows India moving up the value chain in the manufacturing area. This is a new kind of cooperation, it’s a deeper cooperation. It's a cooperation that focuses on building trusted supply chains, deeper integration and strategic as well as higher value areas that produce greater returns for both countries in terms of security and job creation