US warns India
India’s ‘Make in India’ reform, designed to benefit the producers and suppliers of the Indian soil, has been repeatedly modified, creating thorny issues in trade relations between India and the US. Addressing the same issue on trade delegation, the US commerce secretary Wilbur Ross, in his 3 day visit to India to participate in a US-government sponsored trade forum has been at bilateral talks with the Commerce minister Suresh Prabhu, the finance minister and PM Modi.
The Reason Behind the American-Indian Trade Fissure
The trade imbalance between the two countries is increasing, which can pose as a serious problem, considering US to be the largest source of FDI in India. Ross accuses India of imposing restrictive trade policies that creates growth barriers on US companies operating in India. In his meeting with PM Modi, Ross mentioned that the US wanted India to eliminate trade barriers for American firms and remove restrictions related to data localisation.
Ross says that American companies have fully supported and cooperated towards Make in India and other such Indian programs but there has to be a limit on the discriminatory behaviour, else it might worry investors to invest in India. India’s exports to the US in 2017-18 stood at $47.9 billion, while India imported goods worth $ 26.6 billion during the year. Ross said there was a “real imbalance” in bilateral trade.
In February, the Indian government laid down more regulations for the ecommerce sector, focusing on data localisation. This action led the RBI to push payments providers such as Mastercard and Visa Inc to store Indian users’ data locally.
Several foreign companies have faced trouble in selling in Asia’s third largest economy. Ross showcased his worries on letting India allow a fair playing field to let American companies compete in the Indian markets.
The Case of Walmart and Mastercard in India
Ross believes that the whole case of Walmart after their acquisition of Flipkart is an important issue. Walmart is continuing to expand in India. Similarly with MasterCard, there are problems with data localisation when MasterCard is still continuing to invest.
The new Indian reform that came into effect Feb 1, barred online retailers such as Flipkart and Amazon from selling products of companies in which they own stakes, in the best interest of local offline retailers. The government also banned ecommerce companies from forming exclusive selling arrangements with sellers or offer steep discounts to consumers based on those deals, on December last year.
The RBI too, on October 16 initiated a new regulation wherein, the payment companies were to store all the data related to Indian customers within the country, focusing on data localisation, improved privacy safeguards and measures to combat the sale of counterfeit products. This posed a major downfall to all the payment firms, including Mastercard, Visa, American Express and PayPal.
The Trump administration, highly unhappy with these rules, announced that it has withdrawn the GSP benefits for India, which will come into action from May 1, 2019, calling India ‘Tariff King’. Industry participants feel Ross’s visit should also be an opportunity for the Indian government to discuss trade and tariff issues with the US administration, considering how important US is for Indian trade. With trade problems already ongoing with China, India must surely sort out its trade differences with the US before things get ugly.