Need to see consistency in regulatory mechanisms: USIBC President

In India to meet with the government and other stakeholders in India-US relations, USIBC President Nisha Biswal tells Subhayan Chakraborty that issues like retrospective taxation are still worrying US companies working or investing in India. Speaking on the current threat of a trade war between the two nations, she adds that the protectionist measures like tariffs may cause a lot of collateral damage to both sides. Edited Excerpts.

What are the issues holding back India-US trade and investments?

We need to see that there is a consistency and a predictability into the regulatory mechanisms that govern the economy. Shifts on policy, whether it be on price controls and other issues mean that all the momentum that India has, in moving towards a certain direction, starts to kind of slow down and concerns start arising.

What kind of concerns are these specifically?

So, I have heard companies having concerns about the predictability on the tax issues with some companies now again starting to worry that not only the change in the tax structure but also the potential retroactive application of tax liability is a concern. To their credit, the current BJP government had initially come in on a strong position on that, almost calling it tax terrorism and saying that this was not something that they would entertain. Also, there has again been discussions on greater measures protecting domestic industry, there's also talks about certain steps to protect certain domestic industries. So, I understand that instinct and the politics that drive it. 

Do you feel India-US trade relations will suffer as a result of the current trade narrative?

The glass of water that represents US-India trade is partially full. Now, we have seen a lot of progress in many ways to get us here today. So, we should absolutely acknowledge that the glass is half full because of all of the efforts that have gone into it. I often get asked by the Indian government, why I am not talking about everything that's been done. For instance, India moved 32 places in the ease of doing business index and that's a big development. We should also acknowledge that GST happened in the first term of this government. Then, demonetization - and I know the people are of mixed minds on this - at the end of the day, however, it was implemented and whatever impact it may have had on slowing growth for a couple of quarters, helped move India towards a less cash society and pushed businesses into the formal economy. 

But if we don't focus on the things that are keeping the rest of that glass from being filled, then we're missing out on the full potential of where India needs to be. We cant only say that India's growing at 7 and a half percent and India is attracting FDI, all of those things are true but we need to look at an India that's growing at 9 and 10 per cent. We've got to see where we want to go and not just how far we've come. That's where, I think, we see the sharpening of the rhetoric a little bit. It gets harder now.

So, rather than focusing solely on the tariffs, do you feel there's the need for a more wholesome conversation?

One thing the US Chamber has done is say that that protectionist measures like tariffs are a blunt instrument that ends up causing a lot of collateral damage and ultimately don't advance the interests of the consumer. They hurt a lot of companies that are dependant on trade, particularly in an era of global value chains where you really need to source globally and sell globally. If you're erecting barriers, then you're disrupting the entire supply chain. That disruption is going to raise prices and create knock-on effects in ancillary industries. Ultimately, it is not the way you want to help domestic industries compete.