Originally Published 2015-09-29 06:13:26 Published on Sep 29, 2015
PM Modi has made another high decibel visit to the US, once again holding out hope that India is ready to do business. However, unfortunately not much has changed back home between his last trip and the ongoing one. Rules, laws and regulations remain inflexible.
Modi first needs to change the way government works
Prime Minister Narendra Modi's high decibel visit to the US, encompassing the west and east coast, once again holds out hope that India is ready to do business. His second visit to the US during his 16 month tenure as PM is noteworthy for the fact that the PM understands that India-US economic cooperation is critical to address India's capital, energy, power and infrastructure deficit inadequacies. With well-meaning Modi, sadly over promise has become a bit of a mill stone around his neck. His enormous people connect once again on display during this American trip has to translate into investments in India's ailing manufacturing sector and creaking infrastructure swathes. There cannot be two Modis, one who rightly over sells India abroad and the other who fails to keep his word by not taking the right decisions back home to supplement these changes. There has to be unison of voice and ideas, what we say, we mean and finally we do. There is no other alternative now. In order to future-proof India, Modi, who won a decisive mandate, has to show intent at home. His rhetoric overseas needs genuine manifestation through enabling policy mechanisms. The bureaucracy hasn't moved effectively, a strange fear factor has enveloped the main frame, frequent transfers and sackings have lowered morale just as judicial over reach did during the UPA administration. American investors, both brick and mortar and digital, must have told the PM why India remains a perishable commodity, how difficult it is to do business, how multiple permissions drive people round the bend. He must have heard endlessly both during his interface with top-of-the-line CEOs and tech cars that 'it ain't happening yet in India.' The confluence of perception and reality is most dangerous. Instances like Nestle's Maggi fiasco show why India cannot be trusted. Punitive taxation and its retrospective application has damaged India's credibility and reputation. A survey of US-based multinational firms by Washington based Hudson Institute recently demonstrated hesitation to do business in India due to its failure to protect Intellectual Property (IP) rights. IP rights have become a bargaining chip in India-US trade negotiations and have sparked fears that foreign multinational companies will monopolise local economies and horde technology from others. India's weak IP laws are holding three sectors back in particular: technology, entertainment, and pharmaceuticals. Over the last two years, the Indian government has attacked foreign pharmaceutical companies aggressively. In March 2012, firms were permitted to make generic copies of a kidney cancer drug still patented by Bayer AG. Pfizer's patent on Sutent, a tumor and kidney cancer drug, was revoked later that year. Gilvec, a leukemia drug, was denied patent protection in early 2013 and Roche relinquished rights to the drug Herceptin after warnings that the Indian government would challenge the patent in court. Meanwhile, the Business Software Alliance reported that India's piracy levels are at 60% and US $2.9 billion worth of software was illegally installed in 2013. A first step in bilateral collaboration between the United States and India on IP rights came in September 2014 during Modi's official visit to Washington. Modi appealed to the Indian-American community to invest in India, pledging to repeal obsolete laws. True to his word, 125 meaningless Appropriation Acts were rescinded by May. He also met with multinational corporations to discuss corporate sector procedural reform and enhanced investment incentives. Obama and Modi issued a joint statement declaring commitment to the promotion of a positive business environment. The leaders established an annual high-level Intellectual Property (IP) Working Group which will hold "appropriate decision- making and technical-level meetings" as part of the Trade Policy Forum. Unfortunately not much has changed back home between his last trip to the US and the ongoing one. Rules, laws and regulations remain inflexible, labour reform though being pursued partially in two BJP ruled states - Rajasthan and Madhya Pradesh - has no takers, executive decision making is virtually at a standstill, implementation and roll outs which need undivided attention are static and stagnant. On July 16, Finance Minister Arun Jaitley announced new measures to simplify foreign investment rules. Various types of foreign investments will be grouped together to form a single composite cap in several industries including tea, mining, and retail. Banks in India reacted positively to the news, and expect to raise up to $1 billion in capital as a result. Other industries like defence and insurance have had their FDI cap increased to 49%, before having to undergo extensive government regulations. But all this isn't enough, for intent has to be backed by a willingness to take hard decisions, to bite the bullet as it is said. This unfortunately has not been seen regularly. Once Modi returns he has to emphasise to the rest of his Cabinet and the steel frame called the bureaucracy which continues to impede him that India is running out of opportunities. The world will move on again, it has other fish to fry. India cannot afford to miss its tryst with the global high table. As a resolute economy which has withstood several seismic shocks in recent years, it needs to unfetter itself and show the world that it is willing to do business. (The writer is a Visiting Fellow at Observer Research Foundation, Delhi)
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