The free your market trip

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The jumbo American delegation seems to have impressed Indian business.  Shantanu Guha Ray and Samiran Saha in New Delhi with Amrita Nair-Ghaswalla in Mumbai report on the ‘meeting of minds’

No elbow room US President Barack Obama is surrounded by captains of Indian industry at the Indo-US business meeting in Mumbai
No elbow room US President Barack Obama is surrounded by captains of Indian industry at the Indo-US business meeting in Mumbai
Photo: Reuters

A WEEK BEFORE Barack Obama touched down at the historic trading port of Mumbai, a strange request came to the India office from the chief executive of a top American bank. In a confidential mail, the CEO — one among the 250-strong business delegation that was part of Obama’s extended entourage — asked what he should carry if he were to accompany the US president to, as then rumoured, a party thrown by Mukesh Ambani at his 27-storey Antilia, said to be the world’s costliest home. A pair of golden Radha-Krishna statues, a porcelain Ganesha from Lladro or a personal invitation to India’s richest man to see grizzly bears in North America were among the options offered.

The party at Antilia, on which Rajya Sabha MP NK Singh and the president of the powerful US-India Business Council (USIBC) Ron Somers were keen, eventually did not happen. But the move, in some ways, underlined corporate America’s desperate attempt to understand a complex Indian market that could help pull the US economy out of limbo. The US president hopes to double exports in the next five years, and expects the burgeoning middle-class economies of India, Indonesia, South Korea and Japan — all with a distinct taste for American style — to fuel it. That the word ‘export’ is crucial in Obama’s India agenda was apparent, as exemplified by Forbes columnist Richard Epstein, who wrote cryptically: “Instead of deregulating at home, he will seek to persuade the plenipotentiaries of India, Indonesia and Japan and South Korea to accept our new, muscular trade export policy.” He found it strange that the President had not used the ‘import’ word even once.

And in India, considered one of the world’s most lucrative markets, Obama found the mood perfect for his big sales pitch that he himself said was better than relying on paper profits of financial speculation. He couldn’t have asked for a more receptive business audience than India Inc. The big White House idea is to produce goods for the export markets. And India is the first stop in the Asian tour. Obama’s rationale — explained in his meeting with the top honchos of corporate India — was simple: for every $1 billion of export, over 5,000 jobs would be created in the US.

In India, Obama had little difficulty pushing the agenda because the takers were far too many. In fact, seconds before Obama landed in Mumbai, a US security officer loudly called to an estimated 100 people waiting near the tarmac for the visiting US president: “Leaders move, the rest stay.” Almost immediately, he realised his folly as the entire group moved ahead. That every politician in India believes he or she is a leader and not a follower was unfathomable to the young officer who — in a jiffy — regrouped the reception party to cull only those who mattered.

In his address to corporate India, Obama promised fundamental reforms in export controls that guide trade between New Delhi and Washington. These included removing several Indian space and defence companies from the so-called entities list that identifies firms manufacturing products with dual civilian and military purposes. Such companies have serious difficulties in trading with the US.

Talking trade (Clockwise from top left) Pepsico CEO Indra Nooyi, USIBC President Ron Somers, US Commerce Secretary Gary Locke and Infosys CEO K Gopalakrishnan
Talking trade (Clockwise from top left) Pepsico CEO Indra Nooyi, USIBC President Ron Somers, US Commerce Secretary Gary Locke and Infosys CEO K Gopalakrishnan
Photos: AP

“The US has made it clear that India is an ally with immense business potential. This is good news to us,” said Anand Mahindra, managing director of Mahindra & Mahindra, in a brief telephonic interview to TEHELKA. According to Venu Srinivasan of TVS Motors, “the visit is strategically important to India because it aims to become an economic superpower”.

A wannabe superpower meets the leader of a fading glory? Not really. The US is likely to remain the globe’s engine for several decades to come. But for a country that had reluctantly shed some of its economic shackles not too long ago, a Democratic president coming with goodies, and promises of more, was very welcome. The pledges include pushing for India’s membership of four international alliances responsible for regulating trade in nuclear, chemical, biological and missile technology and materials, including the Nuclear Suppliers Group. That would expectedly remove barriers to expanding trade. “I am here because I believe that in our interconnected world, increased commerce between the United States and India can be and will be a win-win proposition for both nations. I realise that for some, this truth may not be readily apparent,” Obama told the USIBC in India’s commercial capital, drawing applause.

Corporate observers in India said Obama’s remarks placed the US economy at the centre of his Asian agenda. To underscore the point, the US president alluded in his speech to a set of newly consummated export contracts — including the sale of military transport aircraft, civilian aeroplanes, mining equipment, power turbines and jet engines — that totalled $15 billion and would support 54,000 US jobs.

There were other pitches as well, the most important of them being the ones relating to the agricultural sector. Observers in Delhi said Obama clearly pushed the agenda of seeds company Monsanto in his ‘Evergreen Revolution’ speech. “The Indian agricultural sector represents the largest market for seeds and agricultural inputs in the world and the sell-out to US multinationals (MNCs) is pretty much on track, judging by the rollout of legislations and policy decisions,” said Suman Sahai of Gene Campaign, adding: “The infamous Monsanto-Rajasthan memorandum of understanding (MoU) — signed a few months ago — basically permits MNCs to use state land, personnel and infrastructure to develop, produce and sell seeds, thereby driving everyone else out of the market and making farmers MNC-dependent for seeds.”

IN THE hype and hoopla surrounding Obama’s visit, Sahai’s voice was a minuscule minority, along with the Leftists’. Interestingly, Obama was not alone in making the big sales pitch. Ahead of his tour, US corporate captains dispelled concerns that India, a fast-growing economy of 1.2 billion people, was taking away jobs from Americans. David Cote, chairman and chief executive of Honeywell, told The Washington Post that the American public’s perception that companies send jobs overseas only to take advantage of lower labour costs is misguided. His firm, which manufactures avionics, jet engines and other technical products, operates in India because of superior engineering, he said. “I don’t think that’s as well understood in the US and the developing world as it should be,” Cote told the daily. His company has nearly 11,000 employees in India.

The Indian business community wholeheartedly endorsed that position. “He (Obama) is looking at India as a business partner, and is keen to see new models developing here. There will be more investments from the US post his visit,” says Ajay Piramal of Piramal Enterprises that in May sold its formulations business to Abbott Laboratories of the US for a whopping Rs. 17,000 crore.

Agreed Pepsico chief Indra Nooyi in a statement released to the media: “The US president has taken the opportunity to reach out to business leaders from both the countries. I view that as a very positive step. It is not just rhetorical charm; he recognises and appreciates the important role businesses plays in driving sustainable business growth in both the countries.”

Kris Gopalakrishnan, CEO of Infosys Technologies, India’s second largest software services provider, called the visit historic and was confident that increased trade would create jobs in both the countries. He found support in Venugopal Dhoot, head of Videocon, one of India’s biggest white goods manufacturers.

‘India will now engage with the US on more equal terms. The visit will change the game,’ says CII’s Banerjee

“Mind-to-mind meetings are very important. Without this, no business can prosper. In the very first meeting with us, he created such an atmosphere and instantly crafted a bonding,” said Dhoot, whose company has signed a deal with Liberty Mutual, an American firm, to start an insurance business, and is also looking for investment in its oil exploration business.

There are enough reasons for such optimism. The Indian economy is projected to grow more than 8 percent next year, and US exporters have found a lucrative market in a country where more than 60 percent of the population is under 35, a higher proportion than in some of the largest US trading partners.

The upbeat mood that the visit has generated can be gauged from the fact that Indian industry bodies have variously described it as ‘landmark’ and ‘historic’. When asked what the US president’s visit meant to corporate India, Confederation of Indian Industry (CII) Director-General Chandrajit Banerjee said: “This is a new 21st century partnership. India Inc will now engage with the US on more equal terms. The landmark visit will change the way we do business with the US.”

Federation of Indian Chambers of Commerce and Industry president Rajan Bharti Mittal agrees, saying, “The Obama visit will for years be considered a watershed in transforming the Indo-US relationship; one that ushered in a global knowledge partnership for achieving mutual prosperity and growth.”

Many US economists also believe that, by 2015, India will start outpacing China’s annual gross domestic product (GDP) growth rate of 8.5-9.5 percent, thanks to factors like a large educated labour force, few retired people to care for and increased infrastructure spending. Besides, Indians save approximately 33 to 36 percent of their total GDP, compared with 11-13 percent for the US.

But there were words of caution as well — from people who cited protectionist impulses shown by the current US administration. “There are two lessons the US could learn from India. The first lesson is that the US taught India and many other nations, but is now in danger of forgetting: openness to global trade in goods and services is crucial to taking full advantage of cost-cutting and new-product innovation that now takes place around the world,” Arvind Panagariya, a professor of economics and Indian political economy at Columbia University, and non-resident senior fellow at the Brookings Institution, said in an online debate organised by The New York Times.

HOWEVER, SHANKAR Raman, executive vice-president of finance, Larsen & Toubro, had a different take. “Obviously, the main theme of Obama’s visit was business and politics. Since he is on a bad footing in the US, he has to generate employment to recover the economic health of the nation. The only way I see that happening is through promoting trade and commerce with India,” he said, adding, “Though he wants to enhance the competitiveness of the American industry — so that new investment will flow into the country — this in turn will trigger a fresh economic cycle wherein all can prosper.”

Among the many fallouts of the visit is the effort by both countries to put India’s infrastructure sector on the fast track, through a $10 billion infrastructure debt fund modelled on public-private partnership. The contours of the fund are yet to be given final shape, but sector experts feel it would help India meet the huge fund gap.

Observers say Obama pushed the agenda of seeds major Monsanto in his ‘evergreen revolution’ speech

“A long-term infrastructure fund is crucial. President Obama has indicated that the US would positively contribute to the fund. It will help the sector grow at a faster rate,” said Vinayak Chatterjee, chairman of CII’s infrastructure committee.

SK Goel, chairman and managing director of India Infrastructure Finance Company Ltd, pointed out a few obstacles ahead. “The fund would give a fillip to India’s infrastructure, but such a fund requires legislative changes in the Banking Regulation Act, as it restricts banks from participating in such funds. Amendment of the Act is unlikely in the near future,” he said. Like Goel, Arvind Mahajan, executive director with global consulting firm KPMG, feels that there was too much talk of this in India. “I see it (the fund) with a degree of scepticism, although it would be good to have a long-term debt fund for infrastructure as it would enable projects with long gestation period,” he said.

Even as Obama nudged India to get tough with Iran and Myanmar for ignoring human rights, he also pushed the country to open up further. US Commerce Secretary Gary Locke voiced the concern of US companies seeking to expand their operations in India. The country’s tariff regime, he said, was “complex and nontransparent”, bilateral trade was hampered by non-tariff barriers and its FDI rules were “complicated and opaque”.

“These barriers to trade and investment will limit the long-term potential for business cooperation between the two countries and inhibit partnership in innovation that the two nations earnestly want,” Locke told the captains of Indian trade and industry at the US-India Conclave, organised after the Obamas took off for Jakarta on 9 November. The morning after is usually the time for sober reflection.

With inputs from Lalatendu Mishra, Shilpa Shree and Rachita Arya

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