'India must offer competitive investment incentives to attract supply chains'8 min read . Updated: 01 Nov 2020, 12:29 PM IST
- Former US assistant secretary of state Nisha Biswal in an interview says India is very attractive in terms of its market, and young, educated, skilled workers but needs policy and regulatory stability
Reducing dependence on supply chains based in China will be a policy followed by the US whatever be the outcome of the 3 November polls results, says former US assistant secretary of state Nisha Biswal. To attract those firms wanting to relocate, India will have to compete with countries such as Vietnam and Malaysia and offer competitive investment incentives, improve policy and regulatory stability, Biswal, who now heads the US India Business Council, told Mint in an interview. On the just concluded 2+2 talks between India and the US and the signing of the Basic Exchange and Cooperation Agreement (Beca) for geospatial intelligence after the dialogue, Biswal says that the move indicates the increasing maturity of the US-India defence relationship. It is also a sign of the Indian government’s increasing desire to play a role as a regional power. Edited excerpts:
How would you assess the third round of the 2+2 talks that took place last week in terms of outcomes, ideas, takeaways and plans for the future?
High-level discussions such as the 2+2 ministerial have played an important role in advancing US-India strategic partnership. As we work to combat the covid-19 pandemic and foster economic growth and jobs creation in both countries, that partnership is more important than ever. As we have come to expect from these engagements, the 2+2 was productive, featuring the signing of five bilateral agreements, including the Basic Exchange and Cooperation Agreement (Beca). The last of four framework-enabling agreements for military cooperation, Beca will allow the US and India to share geospatial intelligence data, which will support interoperability between the US and Indian militaries, as well as the sharing of intelligence and analysis.
The dialogue also moved forward the conversation on a number of bilateral strategic issues, including efforts to enhance supply chain resilience during the covid-19 pandemic; a shared vision for the Indo-Pacific and enhancing India’s regional leadership; defence and security partnerships, military exercises, and inclusion of the Australian Navy in the upcoming US-India-Japan Malabar Naval Exercise. We were also pleased to see the leaders recognize the enduring importance of people-to-people ties between our countries, and commit to enhancing the government, military and commercial ties that underpin the relationship.
The Trump administration has been looking at India as part of an alternative supply chain to China. What do you think this actually entails in terms of policy and practical aspects on the ground? Will this survive post the Trump administration?
Reducing America’s reliance on supply chains in China has been discussed for some time, but we have seen an increased focus recently as the Trump administration has weighed new tariffs against Beijing. The US commerce department, state department and other agencies have been looking for ways to encourage companies to move both sourcing and manufacturing out of China, including potentially offering tax incentives and potential re-shoring subsidies. This drive to reduce reliance on China is likely to continue no matter what the outcome of the the election is.
Diversification and building some redundancy in supply chains is a focus for many companies given the risks revealed by the covid-19 pandemic. Although we have seen some increased interest in supply chain relocation to India, we don’t see a rush for exits by companies doing business in China. Many US companies have invested heavily in Chinese manufacturing and rely on China’s domestic market of 1.4 billion people for a large portion of their sales. For India to attract supply chains, it needs to compete with other countries such as Vietnam and Malaysia. India is very attractive in terms of its market, and its young, educated, skilled workers. But it also needs to offer competitive investment incentives and improve policy and regulatory stability. To support these goals, USIBC launched a Destination: India series of meetings earlier this year to highlight investment opportunities in over a dozen Indian states.
The joint statement after the 2+2 spoke about annual meetings between the foreign ministers of the Quad countries. Will the Quad and the Indo-Pacific survive after the Trump administration?
Maintaining security in the Indo-Asia-Pacific region has been a long-time priority for US administrations. While the terminology may change, both President Donald Trump and his predecessors have recognized the importance of US engagement in the region, as well as the value of collaborating with partners and allies through the Quad and other groupings. While it is possible that the approach to the Quad may shift in the future, we currently see broad-based support across the political spectrum in each of our partner nations, and an enduring commitment to the Quad as an important security dialogue. In the US, we anticipate longstanding bipartisan support for Indo-Pacific engagement and the Quad will continue regardless of the outcome of US elections this week.
Indian foreign minister S. Jaishankar has spoken about the need for collaboration in innovation to allow India to become a high tech economy. What can the US government do on this front? And how can American companies help India?
The US and India both have innovation and entrepreneurship imbedded in our societies. Some of the great technology breakthroughs in Silicon Valley have been driven by Indians and Indian-Americans, and India has an impressive start-up culture that is driving new technology development. There is enormous potential for the two countries to collaborate and technology investment is one of the leading drivers of FDI (foreign direct investment) into India. However, we need to strengthen IP (intellectual property), harmonize policies on data and digital trade and streamline cross border collaboration. We encourage both governments to restart formal dialogue on these issues through the US-India IP Dialogue, and include a larger stakeholder community in consultations. In the absence of conversations between the governments, the US chamber of commerce and USIBC have organized an industry-led IP discussion that brings together academic and business experts to discuss the polities and frameworks that can protect innovation and spur new investment.
Trade is likely to be a key issue for any US administration going forward. How close or far apart are India and the US on this? Do you expect a breakthrough soon? Will the pact that India seems to be close to with the Trump administration work if a Biden comes to power? Or will that need to be reworked?
Based on our conversation with government officials on both sides, we understand that there are important areas where negotiators have already reached agreement. We have encouraged them to use this as a basis for a mini-deal and create momentum for broader negotiations. Unfortunately, they were not able to seal an accord before the election and it’s very unlikely anything will happen until after a new administration comes to office. Still, we hope that whoever emerges as the winner of the US presidential elections will recognize the progress already made and use it to further strengthen commercial ties between the two countries.
There is a reference to how USAID will work together with India’s development partnership division in the ministry of external affair on financing of projects in the neighbourhood. How do you think this will work? What would it take for India to join the Blue Dot initiative?
The US is the world’s pre-eminent hub for innovation and implementation of technology, policy and regulation across energy and infrastructure. As one of the world’s largest and most dynamic economies, India is poised to double its energy consumption in the next two decades—targeting 450 GW of renewable energy by 2030—build a national gas grid, double its aviation fleet size in and fully electrify its railways by 2024. USAID has been at the forefront of efforts to promote cross-border trade of energy in South Asia.
USIBC welcomed the recent announcement that USAID will fund collaboration by experts from South Asia and the United States to develop energy models and effective regulatory structures, as well as advance research and development to create new energy solutions. The establishment of a permanent US international development finance cooperation presence in India is a particularly positive development in efforts to finance infrastructure development. The Blue Dot network’s certification of projects that are market-driven, financially sustainable and socially and environmentally responsible should help spur new private sector development financing.
What does the signing of Beca mean for India-US defence cooperation? How will it boost arms trade between India and US? How does it help in the purchase of weapons/defence platforms and also the quality of arms that India could be looking to buy from the US?
The signing of Beca signals the increasing maturity of US-India defence relationship, as well as the recognition that partnership will allow us to do more in the region than either country could alone. It is also a sign of the Indian government’s increasing desire to play a role as a regional power. Information-sharing under the Beca makes existing US-sourced equipment already in the Indian inventory more capable, unlocking the full potential of India’s military systems. This will allow for more complex missions with greater fidelity—especially relevant for maritime intelligence, surveillance and reconnaissance, as well as missions in the high-altitude border regions contested by India and China. Along with the previously signed Comcasa (Communications Compatibility and Security Agreement), enhanced interoperability under Beca also provides greater impetus for future acquisitions of US platforms, as new platforms can include enhanced geospatial data-sharing capabilities from the outset.
How long will it take to operationalize Beca?
From a logistical perspective, the Beca could be implemented in a matter of months. However, the extent to which it deepens interoperability and prompts more data sharing will depend on the operational needs of the armed forces and the level of sustained engagement between the US and Indian governments. The agreement creates the mechanism and safeguards needed to share vast amount of data across myriad applications, but sharing sensitive data is neither obligatory nor immediate. The US and India may choose to share in a gradual and phased manned as they build greater trust and as required for more complex military missions.