Finance Minister Arun Jaitley began his 10-day tour of the United States on 18 June 2015. The trip to the US comes at a crucial juncture when India is consolidating its spiritual and well-being leadership in celebrating the International Yoga Day on 21 June.
The US trip holds significance beyond just celebrating yoga, as the government has recently completed one year in office and the world community is taking stock of what was promised at the time of taking office and what has been delivered so far. Jaitley has gone with a mandate to instill confidence amongst the international investor community that the India growth story is very much on track and that this is a good time to park investments in India.
While the tour is still underway, here are 7 key takeaways from Arun Jaitley’s trip to the US thus far.
Emphasis on his government’s delivery on promises made
The government took office on the back of a massive mandate and under the watchful eyes of the international investor community. In his various talks with policy makers, investors and government officials in the US, the Finance Minister spoke on how his government inherited an administration that was low on motivation and slow on decision making, and how his government has been able to enthuse the bureaucracy and improve the overall fiscal situation by reigning in inflation. He also spoke about the legacy of the previous regime where decision making had come to a virtual standstill and how government had kick-started various stalled infrastructure projects.
Bilateral engagement on Totalisation Agreement, proposed Bilateral Investment Treaty, and other areas of mutual interest and concerns
India and the US are in the process of broadening the areas of mutual interest covering strategic engagement, security, stepping up of trade & investment and issues relating to taxation.
India has existing Bilateral Investment Treaties with several countries and has been engaging with the US to sign the proposed Bilateral Investment Protection and Promotion Agreement, a move that will help step up mutual trade and investment between India and the US. Both sides are discussing ways to address concerns. The US has been concerned over protection of intellectual rights as also, further opening up of the insurance sector. FDI in retail has also been something that the US has been pushing India on.
A large pool of Indian professionals working in the US has been contributing a large chunk to the US social security pool without getting the requisite benefits. This has been a major concern for the Indian government, which has been pushing for the Totalisation Agreement that will ensure that all Indian professionals working in the US get their due benefits.
The Finance Minister will also be holding discussions on several other pending issues to facilitate greater trade and investment.
Confidence building meetings with large investors for greater investment flow into India
The US has some of the largest pension funds like the California Public Employees’ Retirement System (CalPERS), Los Angeles County Employees’ Retirement Association (LACERA), etc, which hold large funds that are invested in areas that can earn a higher rate of return. With India welcoming international investment in areas like infrastructure, these pension funds could make a sizeable investment into India. Some funds have already invested in India and the scope to absorb larger flows is significant.
Towards this objective, the Finance Minister Arun Jaitley has had extensive discussions with heads of various pension funds along with several senior officials from the US government, to assure them of easier tax laws and safety of their future investment in India. The response has been positive.
On track for higher growth rate
In his various meetings with industry leaders and government officials, Arun Jaitley re-iterated that India was likely to surpass the existing projected growth figure between 7 to 7.5%. He explained various fiscal measures taken by the government to spur further investments into infrastructure and manufacturing that was likely to bring India onto a higher growth rate. He re-affirmed his government’s commitment to ensure a higher growth rate and backed the same by highlighting various measures taken so far.
Stepping up various reforms and speeding up GST implementation
International investment in India could have been significantly higher through the last decade but for our archaic laws, lack of political will to reform and traditional mindset regarding opening up of various sectors for international investment. Much needed reforms have been slow which has been the primary reason for the lack of higher investment flows into India.
The FM drove home the actions taken by his government on introducing various reforms including the update on status of the Land Acquisition Bill, labour reforms and the government’s resolve to meet the April 2016 deadline for introducing the GST, all of which was likely to improve the overall investment sentiment as also ease of doing business in India.
Allaying fears on retrospective tax
Action taken on retrospective taxes by the previous UPA II regime had resulted in several international investors holding back planned investments in India. Arun Jaitley has tried to allay fears of the international investor community by clarifying that his government was not in favour of exercising its right on retrospective tax. He assured the investors that the government had referred the legacy issues from the previous government on retrospective tax to the judiciary and hoped that all issues would be amicably resolved.
Reviewing of excessive judicial intervention
Excessive judicial intervention in commercial disputes has been an area of concern for the government and investors, and so the FM went out of his way to assure investors that the government, along with the Law Commission, was in the process of reviewing various laws to improve the dispute redressal system.
Summing up on a successful visit along with a good monsoon
As Arun Jaitley’s hectic tour of the US draws to a close, he will be able to look back positively on the takeaways and on the fact that the month of June saw an almost 21% excess monsoon in many parts of India. This will give the government further reasons to cheer and should enable Governor Raghuram Rajan to breathe easier.