nanjundaiya blog

Citing recent bilateral deals, the U.S. and India have become close economic partners in 2020, opines this Indian American writer. Seen above: This photo taken on April 27, 2020 shows a pharmacy employee displaying hydroxychloroquine tablets, which will be exported to the U.S., in his store in New Delhi. (Sajjad Hussain/AFP via Getty Images)

Both Indian Prime Minister Narendra Modi and U.S. President Donald Trump have been very active lately on bilateral relationship building on important issues such as:

(1) Indian Intellectual Property Rights to be developed via the USA model,

(2) Purchase of high-end defense helicopters by India worth US$ 3 billion,

(3) New Scheme - Productive Linked Incentive PLI Scheme to Apple USA to manufacture in India.

(4) Export from India to USA of hydroxychloroquine, and to top it all

(5) A "joint statement" among others, was issued in support of global efforts to prevent, detect, and respond to disease outbreaks such as novel Covid-19, by Prime Minister Modi and President Trump (during his recent successful visit to India) who committed to continuing their successful efforts, open communication lines in the areas of prevention, early detection, and rapid outbreak response.

India is seeking to lure U.S. businesses to manufacture in India, including medical devices giants and large electronics manufacturers. As an incentive and add on benefits, the Government of India is offering what is termed as the Productive Linked Incentive PLI Scheme to Apple USA which has decided to manufacture approximately US$ 45 billion worth of smart phones in India mostly for exports via its contract manufacturers. This is a mutually beneficial win-win situation both for Apple and India.

Many large U.S. electronics manufacturers currently in China are studying this PLI proposal of India before considering shifting their production. What is PLI India? The Union Cabinet in India has approved production-linked incentives for electronics manufacturing companies including medical electronics devices, to boost manufacturing of electronics products. India is keen to make itself a hub for electronics manufacturing and electronic medical devices. The incentives of 25% will be linked and given to capital investments covering incremental exports and sales.

Basically the scheme is aimed at boosting domestic manufacturing and to attract large overseas investments in mobile phone manufacturing and specified electronic components, including Assembly, Testing, Marking and Packaging. The incentive will be 4 to 6% on incremental sales over base year. Last month the Government of India reportedly reached out to more than 1,000 companies in the U.S. and through overseas missions to offer incentives for manufacturers seeking to move out of China. India is prioritizing medical equipment suppliers, pharmaceuticals, mobiles, food processing units, textiles, leather and auto parts.

India is promoting the fact that the country is more economical in terms of securing land, basic infrastructure and affordable skilled labor as against the overseas company moving back to the U.S. or Japan or Korea or Vietnam, even if overall costs are still higher than China. The push by Prime Minister Narendra Modi’s government comes as India tries to regain lost ground after many companies chose countries like Vietnam over India as an alternative destination when Trump started his trade war with China. Modi has tried to shore up U.S. investments and improve ties through corporate tax cuts.

During April 2020, India partially lifted a ban on the export of hydroxychloroquine and paracetamol following a request from Trump. It also approved U$1.7 billion worth of investments to make more bulk drugs and medical devices, and to boost local manufacturing of drug intermediates and active pharmaceutical ingredients. India is now getting geared up to push through long-stalled reforms on land, labor and taxes that have hindered investment for years. To make this more robust, what India is planning is to ramp up its supply chain mechanism so as to gain a place in global supply chain sector.

All said and done, USA knows that today India is a big market with a population of 1.3 billion and a consumerism oriented society and way bigger than Vietnam or Cambodia. After Trump’s maiden visit to India on Feb. 24-25, the Indian government decided to fully review the country’s IPR laws. An MOU has been signed with the USA and reportedly the agreement covers the full IPR regime including patents and copyrights and is not specific to any sector. There would be training sessions and experts, and officials will travel to the US to study their IPR system. the official.

Today there is abundant capital in the U.S. that’s looking for geographies outside particularly India. The India and the U.S. defense deals worth over $3 billion for 24 MH-60R Seahawk Multi-Role Helicopters for the Navy and six AH-64E attack helicopters for the Army was a major business clinch for the U.S. All in all, the U.S. and India have become close economic partners in 2020.

(The writer resides in Sunnyvale, California.)

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