Trump’s visit may encourage US firms to start manufacturing ops in India
Talks may be held to smoothen out issues such as tariffs, visas, and policy stability that hamper ease of doing business
NEW DELHI :
The visit of President Donald Trump to India could encourage American companies to start manufacturing in India in the coming months, potentially boosting Prime Minister Narendra Modi’s flagship Make in India programme.
Though Trump has dialled down expectations of a broader trade deal immediately, his personal rapport with Modi will likely pave the way for follow through discussions to smoothen out thorny issues such as tariffs, visas, and policy stability that hamper ease-of-doing business, according to industry executives.
“We have very high expectations that there would definitely be some movement forward," said Lalit Bhasin, president of the Indo-American Chamber of Commerce’s North Indian Council.
Trump, the seventh US President to have visited India, is here amid heightened trade tensions between the US and China, the world’s two largest economies. Rising costs of manufacturing in China, which will be aggravated by the coronavirus outbreak, is likely to prompt more US companies to take a close look at India, said the industry executives who did not want to be identified.
“There will be a major turnaround in favour of an US-India relationship, which will result in more investment inflow into India and more direct investment into American companies present here and new companies coming into India," said P.M. Sinha, a former chairman of Pepsico India. “I do believe firmly that the US companies will shift not only manufacturing facilities but also production of branded items that are made and copied in China," Sinha said.
New trade and commercial relationships propelled US-India goods and services trade to $160 billion last year from $100 billion just five years ago, according to the US India Business Council (USIBC). In the US, Indian investment supports more than 100,000 jobs.
The US and India are seeking to increase two-way trade to $500 billion. Against this backdrop, USIBC urged both countries to come up with a “bilateral trade deal that would reduce barriers to trade and resolve some of the longstanding irritants that stand in the way of a deeper economic partnership."
Over the last 10 to 15 years, US companies are “discovering that doing business in India is not that tough", said Gautam Mahajan, a former president at the Indo American Chamber of Commerce.
“The second thing that has happened is that many American companies that have set up business in India have said that they have made a mistake and that they should have entered India first," he said. There are challenges of setting up business but it is no more than in many other countries, he said.
Trump is expected to be accompanied by a 15-member delegation of chief executive officers of US firms. Besides, 40-50 CEOs of US companies based in India are also expected to meet around 100 of their counterparts with Indian companies during an event conducted jointly by the Confederation of Indian Industry (CII), USIBC, and others.
Business deals that could materialize immediately in the wake of Trump’s visit could be defence contracts, including a $2.6 billion deal for Seahawk helicopters and a possible follow up order for Apache helicopters. There could also be a reduction in tariffs by India on some items, including farm goods, medical equipment and technological products, said the industry executives.
“The visit by the US head of state comes at a very important time when the Indian economy is facing broad headwinds. This visit could help US companies explore diversification of their manufacturing operations to India from China and thereby provide a much-needed boost to the various ‘Make in India’ initiatives of the government," said Rajat Wahi, a partner at Deloitte India.
US digital giants such as Amazon, Facebook, and Google dominate the internet market platform and social media in India. Hardware firms such as Hewlett Packard, Dell, and Apple also have a significant presence. However, other manufacturers such as Ford and Harley Davidson motorcycles have a small presence here. Last year Trump had highlighted how a call to Modi resulted in a 50% cut in import duty on Harley Davidson motorcycles, but the remaining duty was still too high. This is likely to be reduced significantly, government officials and industry executives said.
Leroy Leo and Nandita Mathur contributed to this story.
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