‘PM Modi has a tremendous opportunity to drive reforms agenda’
Mukesh Aghi, President & CEO, Us-india Strategic Partnership Forum, says India has a superb services industry.
Global markets and stocks have nosedived, giving sleepless nights to investors and the corporate world. Even as the corona pandemic threatens worldwide unemployment, positive signals are emerging for India. This time, it is more because of the United States and Europe shutting their doors to China and trying to explore new markets in South and South-east Asia. India seems to be the top priority, but the choice comes with conditions—high quality and cheap production, end of permit raj and complete transparency in the regulatory mechanism. The Sunday Guardian spoke to Mukesh Aghi, President and CEO of the Us-india Strategic Partnership Forum (USISPF), who is currently at the helm of affairs to ensure multibillion-dollar worth investments and trade from the US come into India. Aghi spoke to ITV Network Editor MANEESH PANDEYA at length and raised hopes for significant US investments in India, but it will demand expediting of market reforms by Prime Minister Narendra Modi. Excerpts:
Q: Leaders look for an opportunity in crisis. Is there one for Prime Minister Modi in the corona pandemic?
A: India reacts and reforms during a crisis. The 1991 economic reform is an illustration, until we saw our gold reserves being transported as collateral, we were obstinate about economic liberalisation. Dr Manmohan Singh saw the crisis as an opportunity to open the domestic market and made all attempts to remove the permit raj. PM Modi has a tremendous opportunity to drive his agenda of reform so he can usher in inclusive growth for citizens of India. After the crisis, labour and land reforms are critical to encourage job creation in the country.
Q: Will shutting doors on China by the US mean the opening of shops in India? Is that as easy as said?
A: India does not have an open pass in the sense that when US companies look for alternatives, India is not the only choice in the region. Countries such as Vietnam, Cambodia, Thailand, and even Bangladesh have stolen the momentum. They have been aggressive, consistent, reformist, transparent and steady in their reform process. Hence, majority of these companies have chosen these destinations for their manufacturing rather than India. Q: Can India seize this opportunity?
A: Absolutely. India has the market, an intelligent work force, corporate tax competitiveness, and the will to execute.
Q: Do you think PM Modi’s “list of Dos” have been executed as desired? If not, what are the hurdles in the way of PM Modi’s dream to put India among the world’s top economies?
A: The PM’S heart and mind are in the right place. He would like to improve the quality of life of his citizens. Toilets, clean water, less air pollution, jobs, less government and better governance. The challenge is execution on the ground. While senior bureaucracy is supportive of his vision, the whole attitude changes as the vision percolates down to the lower level of bureaucracy. The biggest challenge the PM faces is how to change the attitude of India’s large bureaucracy. Every country has a tail number for its planes, which is an alphabet and number representing the nation’s registration of the plane— for the US, it is N, representing
North America, and India’s is VT, which means Viceroy’s Territory. Bureaucracy in India is still operating with the insignia VT.
Q: When I talk to Indian Americans, who have been doing thriving businesses in China, they have reservations in coming and opening factories and offices in India. Why?
A: China has an efficient and effective manufacturing and operating environment. Indian Americans have preferred manufacturing in China, not only because of cost, but a robust supply chain ecosystem. Q: You and the companies of your forum, which is Indous top business platform for investments, have pumped in US$50 billion worth investments in the last four years of the PM Modi-president Trump friendship era. What is the potential of the current state of Indo-us relations in terms of business (In volume of investments and dollars’ worth business)?
A: We are seeing actual investment increasing. We need to assess the impact of the coronavirus, but before the current crisis, the overall sentiment was very positive. India is no longer a labour arbitrage environment; its economy is creating and adding value. US companies have invested over $3 billion in India in 2018, just in R&D, and have captured approximately 50% of the patents. We are seeing more and more research coming into India, leveraging the innovative talent of India. Today, trade between the two countries is about $160 billion and is expected to go up again in 2020.
Q: I am sceptical if India can really make the most of the current situation. Indian bureaucracy and trade and commerce ministry could not cash in on the Us-china trade spat period and now with corona, another opportunity is there. How can India really move on?
A: The Indian government needs to have a unified approach to dealing with this potential opportunity. Structure and parameters need to be defined so certain decisions can be taken with speed. The current structure does not permit efficiency and speed. A structure such as USTR needs to be created under the PMO, which is authorised to decide overall trade strategy of India. This would remove fiefdoms and recalcitrant bureaucrats within respective ministries. Q: Which top US firms are eyeing Indian markets in the wake of the current situation? A: India is the future for US companies. Almost every segment of industry is interested in expanding into India and gaining foothold into the fastest growing emerging economy. We must also understand, at some stage MNC fatigue also creeps in if ease of doing business does not improve on the ground level. Corporations
want transparency, stable policies, and a level playing field for them to invest in the mid- to long-term. Q: What has been the business from the US side so far and what more potential in specific sectors the Indo-us trade and business hold? Can the unexplored areas of artificial intelligence, robotics, medicine and pharma supplies turn the tide for India? A: We need to focus more on infrastructure creation in India and how to attract investment in that arena. Today, there is over $2.3 trillion capital in the US. These investments come through either private equity or from insurance and pension funds. We need to explore why we have not been able to attract these long-term investments in infrastructure. Until we are able to sort these impediments for insurance companies, it will be challenging to attract large investments in infrastructure. China’s job creation started with massive infrastructure buildup, which led to its continued economic growth since 1979.
AI is an important segment for India to collaborate with the US. Large algorithms are being built in the US, and India has the necessary database to run those powerful algorithms. A partnership here would help both countries by exploring newer treatment, predictive forecasting models for preventive treatments, weather, crop forecasting, and pollution.
Q: What are the potential sectors for India Inc to enter the US?
A. India has a superb services industry. The IT industry needs support so it can go up the value chain and provide platforms and solutions to the US market. We need to build platforms for start-ups to expand in the US market, through IPOS and leveraging Fortune 500 spending in the services sector. Generic pharma is a great example where Indian companies have over 30% of the US domestic market, bringing almost $30 billion in savings to the US.
What India has achieved in generic, it needs to build a vision and eco-system in the defence arena. In the next 20 years, India should be a large export market for defence. The defence market is becoming more about software rather than pure hardware. India has the domain expertise and a vast pool of talent that needs to be channelled in this area. Its potential is enormous.