Source: Business Standard
August 23, 2013
Tells US counterpart that govt is working to further open the financial services sector
To increase the dwindling foreign capital inflows, Commerce and Industry Minister Anand Sharma held a meeting with his US counterpart Michael Froman, urging American investments in the newly launched infrastructure debt fund (IDF).
Both sides also discussed the recent issues related to trade and investment-related matters, laying the groundwork for Prime Minister Manmohan Singh’s meeting with US President BarackObama next month.
Sharma, who met the US Trade Representative (USTR) on the sidelines of the East Asia Summit in Brunei on Wednesday evening, pitched for investments by US pension funds and insurance firms in IDF, officials in the commerce ministry told Business Standard.
It is widely expected that Singh will apprise Obama of the recent measures taken by the government to encourage investments, when they meet on September 27. Bilateral trade ties between the countries suffered a substantial setback recently, with both countries dragging each other to the dispute settlement body of the World Trade Organization.
Finance Minister P Chidambaram had launched the country’s first, $1-billion IDF scheme — the IIFCL Mutual Fund IDF — in June to mobilise resources from insurance and pension funds. The guidelines for IDF were introduced by the Securities and Exchange Board of India in July 2011. Interest payment on the borrowings of these funds is subject to a reduced withholding tax of five per cent, instead of the current rate of 20 per cent, and income from the fund is exempt from tax.
At the meeting, Sharma is believed to have told Froman India is working to further open the financial services sector, and discussed with him the recent measures taken to open some sectors for more foreign direct investment; telecom, aviation, retail and power exchanges, among others. Sharma also raised the issue of the proposed immigration reforms that might impact Indian services sector and steeply increase visa fees, sources said.
This is the third such meeting between Sharma and Froman as trade and investment irritants escalate.
US companies had lodged a series of complaints accusing India of resorting to unfair trade practices and promoting domestic manufacturing. The US Senate recently sharply criticised some of the “localisation measures” India was adopting, under which it was asking US companies to transfer technology to domestic firms or produce locally to get more access in the markets here.
On the taxation front, apart from the retrospective application of General Anti-Avoidance Rules (GAAR), the US companies, in particular information technology companies, were also concerned about transfer pricing, which, they claim, was imposing an enormous and unwarranted tax burden on multinational companies that have a base in India.
Sharma apparently also raised the issue of US companies’ scathing attack on intellectual property. He told Froman that India is within global trading norms and meeting the requirements of an emerging country.
The voices against Indian intellectual property laws became louder after US pharmaceutical companies cited the compulsory licensing issue in the case of a patent to produce Nexavar, a medication for cancer, to an Indian generic manufacturer (NATCO). It was seen as a sign that India does not respect intellectual property rights. The Supreme Court’s decision in the Novartis case generated significant adverse attention in US business circles.