12 July 2019
New Delhi: Even as India and the US were engaged in hectic talks to smooth over ruffled trade ties, in the backdrop of US President Donald Trump's warning India that high tariffs on American products were "no longer acceptable", the Indian government has been quietly giving top US brands such as Apple and Walmart relaxations in FDI norms to boost their market.
In the recently announced Budget, the Modi government relaxed FDI norms for single brand retail including the critical 30% local sourcing rider.
Teams from India and the US on Friday sat down for official talks, a day after holding informal talks, to resolve their trade differences.
The US delegation, led by Assistant US Trade Representative (AUSTR) for South and Central Asia, Christopher Wilson, and USTR Deputy Assistant Brendan Lynch, held talks with a team of Indian officials from the Ministry of External Affairs and Ministry of Commerce. The Indian team was led by Sanjay Chadha, Additional Secretary in the Ministry of Commerce.
The meeting comes days after Trump tweeted: "India has long had a field day putting tariffs on American products. No longer acceptable!"
Though the meeting between Prime Minister Narendra Modi and President Trump in Osaka, Japan, had been amiable and very positive, where both sides agreed to resolve all issues including trade and 5G, the US President has been disconcerting India with his sudden, angry tweets.
However, unfazed, India has been looking at the big picture of the ties.
"It is important to keep in mind when we engage on this issue - that the trajectory of the relationship remains positive. And we have to keep in mind the bigger picture, and within that big picture we have to address all the issues," Ministry of External Affairs Spokesperson Raveesh Kumar said at a briefing on Thursday.
India on July 5 announced a relaxation in the mandatory 30 per cent local sourcing norms for FDI in the single-brand retail sector for tech companies, which would be a boost for smartphone makers.
Tech companies have maintained that it was difficult for them to procure goods from India to meet the 30 per cent condition.
The relaxation comes as a relief for Apple that is facing a tough time in the Indian smartphone market in the wake of stiff competition from Chinese brands.
Similarly, US-based Harley-Davidson Motor Co is reportedly planning to enter India in a big way. The iconic bike maker is in talks with India's largest two-wheeler maker, Hero MotoCorp Ltd, to outsource the production of 250-500cc motorcycles that it plans to develop for emerging markets.
In June, Trump had tweeted that even though India has reduced its import tariff on American motorcycles from 100% to 50%, it is still too high and not acceptable to him, referring to Harley-Davidson bikes.
Fully-built imported Harley-Davidson motorbikes attract customs duty of 50%. Building them in India with an Indian company would help bring down the price.
Apple is also reported to have zeroed in on several upscale sites in Mumbai for its first retail store, as it plans to give strong competition to Chinese brands that are making rapid inroads into India. The store is to match the level of some of the company's most prolific outlets around the world.
Apple CEO Tim Cook had stressed the importance of the Indian market, especially as the company is facing a tough time in China where competition is high.
Industry analysts say the relaxation of local sourcing norms to tech companies will provide the necessary growth stimulus for the Indian economy and enable the country to potentially attract the likes of Apple and others.
"As enterprises look at relocating outside China, and setting base elsewhere, India has a clear opportunity to take the leadership mantle, attract them, and potentially emerge as a key manufacturing hub for the new world," Prabhu Ram, Head, Industry Intelligence Group (IIG), CyberMedia Research (CMR), told IANS.
"It is a big boost for Apple which is looking to expand in India and retail expansion is a strategic move which has already delayed by their end by couple of years," he added.
The meeting between Indian and US officials comes as the US-India Strategic Partnership Forum (USISPF), a US-based India centric advocacy group, said that bilateral trade between India and the US could reach $238 billion by 2025 from the current $143 billion given the present dynamics of the commercial engagement.
It said that growth will occur if trade grows by 7.5 per cent each year, as has been the trend for the last seven years.
It said sectors such as defence trade, commercial aircraft, oil and LNG, coal, machinery and electronics are areas of potential growth in US investments and commerce into India. Similarly, Indian industry has an opportunity to promote the automotive, pharmaceuticals, seafood, IT and travel services to the US market, it said.