US Urges More Economic Reforms from India for Treaty to Work

India and the US have discussed a bilateral economic treaty at great length, but little actual progress has occurred. According to a senior US trade official, progress on the bilateral investment treaty has been “slow” due to the absence of economic reforms by India that would ensure ease of doing business. Until such reforms occur, the US estimates the likelihood of reaching an agreement on a bilateral trade agreement as “low.”

India and the US have discussed a bilateral economic treaty at great length, but little actual progress has occurred. According to a senior US trade official, progress on the bilateral investment treaty has been “slow” due to the absence of economic reforms by India that would ensure ease of doing business. Until such reforms occur, the US estimates the likelihood of reaching an agreement on a bilateral trade agreement as “low.”

According to a report in the Economic Times, Undersecretary of Commerce for International Trade at the US Department of Commerce Stefan Selig said of the discussions “Frankly, it has been going slowly.” His comment came during a discussion organized by the Indian Council on Foreign Relations ahead of the US-India Strategic and Commercial Dialogue in Washington, scheduled to take place next week.

He went on to say “For us to get there, to have a BIT [Bilateral Investment Treaty] that works for us and works for them [India], it fundamentally means that they make progress around some of the economic reforms…that the [Narendra] Modi government has mentioned around the general ease of doing business framework … And absent progress on those topics, the likelihood of us getting to a BIT is low frankly but with progress on those topics we can get closer and closer.”

Selig points to India’s enormous workforce growth as a major source of concern. Given that one million Indian workers enter the workforce each month, the nation’s economic growth should be greater than the 7 percent it has experienced. Moreover, the nation needs to address issues like ease of doing business, tax policy, and fairness to foreign investors, problems with infrastructure, intellectual property protections, and bureaucratic corruption and inefficiency, among other issues.

India and the US last discussed the bilateral trade treaty in April, at which point the US made it clear to India that it would only enter into the treaty if the agreement is comprehensive, and India makes the needed reforms.

Selig felt optimistic overall about the effect the treaty could have on US-Indian relations: “If we are able to do so, we do think it will allow us to take our relationship to a new level … The BIT will be great for US companies in terms of their ability to invest in India. Frankly it will be even better for India because it will gradually create a framework for economic growth within the country … It is one of those perfect win-win opportunities if we are able to get there in terms of the high-standard agreement.”

Modi has set a goal to take India to the top 50 countries for ease of doing business. Currently the nation ranks about 142 on the list. Selig praised Modi’s goal setting, noting, “That was the first time that an Indian government official was not only that specific but that audacious in terms of setting a goal.”

Selig went on to note that this could be the opportunity for India to take advantage of the challenging situations facing other emerging economies like China, Russia, and Brazil. “India now really has the opportunity to assert itself in a leadership role commercially around the world.”