People's Democracy(Weekly Organ of the Communist Party of India (Marxist)
May 14, 2006
Strategic Economic Partnership”:
To American Big Business
Report of the US India CEO Forum titled “US-India Strategic Economic
Partnership”, which was released during the recent Bush visit, has not
attracted much media attention in contrast to the hype over the nuclear deal.
The CEO Forum was formed during the visit of the prime minister Manmohan Singh
to the US in July 2005 with “a mandate to develop a road map for increased
partnership and cooperation between the two countries at a business level”.
The roadmap unveiled in the report, however, goes much beyond partnership and
cooperation between the Indian and the American corporates. It seeks to rework
entire policy frameworks governing almost all the major sectors of the Indian
fact that a majority of the recommendations of the CEO Forum are related to
changes sought in Indian laws and regulations and only a few are meant for the
US government shows the unequal structure underlying the economic partnership.
The Indian corporates led by Ratan Tata (co-chair of the CEO Forum) have happily
accepted this junior partnership to US big business as the most convenient means
of their class development in the current global setting. The joint declaration
issued by the prime minister along with the US president welcomed the CEO Forum
Report, agreeing to consider its recommendations and directed the chairs of the
Indo-US Economic Dialogue to “follow up expeditiously with the CEO Forum”.
The deputy chairman of the Planning Commission (who co-chairs the Indo-US
Dialogue) lost no time in announcing the formation of 26 committees to carry
forward each of the recommendations meant for India. This zealous haste implies
that the government wants to implement at least some of the recommendations
before the US visit of the prime minister later this year.
faithful adherents of neo-liberalism, the prime minister and the deputy chairman
of the Planning Commission seem to believe that what is good for American and
Indian big business is also good for the people of India and the Indian economy.
A closer look at the recommendations of the report not only exposes the
fallacies of neo-liberal thought but also points towards several imminent
measures which would take the UPA government further away from the vision
underlying the National Common Minimum Programme.
recommendations of the report are summarised under the last section of the
report titled “Enabling Environment”. The creation of an enabling
environment is premised upon the usual prescription for greater liberalisation:
“tariff and non-tariff barriers to be reduced in respect of all products,
agricultural and manufactured, over a specified period of time by the US and
India”. Underlying this formulation is the completely misplaced notion
harboured by Indian corporates that there is a convergence of interests between
India and the US as far trade liberalisation is concerned. The role played by
India during the Hongkong Ministerial Conference of the WTO betrayed a similar
understanding currently prevailing within the Indian policy establishment that
India would benefit immensely from liberalisation of services and therefore it
is justifiable to concede ground to the developed countries in return, in terms
of tariff reduction in industry and agriculture. This shows that the Indian
corporates are willing to trade off the interests of the overwhelming majority
of our people in their narrow self-interest.
closer scrutiny of the 30 recommendations made by the CEO Forum reveal that only
four recommendations are directly related to some concrete benefit accruing to
India and its corporate sector. These are as follows:
of high technology to India to be relaxed by the US government in extension
of COMSAT rules to India and ISRO.
government to allow/accelerate the transfer of dual use items/technologies.
to pursue transfer of civilian-nuclear energy technology to India to enable
India to meet its energy needs and achieve energy security.
the US visa regime required for service providers in IT (H1B/L1), nurses
(EB3), i.e. wherever US is facing shortages of trained personnel. Also, ease
quantitative restrictions/yearly quotas of such visas. Other impediments
such as attestation requirements, reduction of periods of stay and
prescriptive wage levels may be dispensed with.
comprise most of what the Indian corporates seek to achieve through the
strategic economic partnership with US big business. If this ultimately
translates into actual policy changes in the US, which seems unlikely anyway,
benefits would be restricted to some transfer of technology in space research
and nuclear energy and a few thousand more US visas for skilled personnel in
sectors like IT, Healthcare etc.
addition there are a few recommendations, which are meant either for the US or
to be jointly acted upon by the US and the Indian government. These are:
to consider instituting a new business facilitator proposal to support US
countries need to make tourist visas easier to obtain.
Dual Taxation Treaty to be revised to include state taxes and federal social
IT firms should be permitted to bid for US technology programs after
receiving appropriate clearances.
Indian & US economies to be opened up further for freer trade in
services and products. Dialogue to be initiated on a US–India FTA to take
bilateral trade and investment to a new level.
may provide some benefits to the Indian corporates, especially the IT and
Tourism sector. The effort is clearly to lure India into greater trade
liberalisation by making some concessions to some of the successful Indian
exporters in the Services sector.
The rest of the 21 recommendations are all exclusively for India. Most of them are in the form of demand(s) for policy changes related to specific sectors of the Indian economy to the obvious benefits of the US corporates. They are as follows:
Infrastructure: (i) Need to foster speed, efficiency and transparency in the bidding process for BOT contracts in infrastructure in India.
Need for Indian power sector reforms to ensure sanctity of contracts, encourage
competition, promote market-driven tariffs and separate regulatory and
Insurance Industry FDI cap to be reviewed and raised by India.
allowing FDI in Indian private sector banks; schedule for liberalisation to be
advanced from 2009. (ii) Restrictions on expansion/new branches by Indian banks
in the US to be removed/norms liberalised.
Further liberalisation of FDI in retail in India to be considered.
& Gas: (i)
The proposed Petroleum and Gas Regulatory Board Bill to be enacted in India.
(ii) The Indian Natural Gas Pipeline Policy to be adopted.
Estate & Urban Development: (i)
India to consider reducing restrictions on FDI in the Real Estate sector. Also
move ahead on urban land reforms, streamline the regulatory, tax and duty
structure, revamp stamp duty and title registration regimes and reconsider
change of use restrictions as was done in the US for decaying cities.
India to pursue truly technology-neutral policies in telecom, and ensure a level
playing field so as to allow the full range of private telecom companies and
public sector (government owned) companies to compete fairly and fully.
Licensing requirements for certain information sector products and for services,
which support business activity, should be reviewed and eliminated by the
government of India.
Elimination of FDI caps in sectors such as print media, broadcasting, cable and
satellite systems and e-commerce to be considered by government of India.
The Offset Policy of India needs to be framed considering global best practices
and the use of “indirect” offsets.
other recommendations of the CEO Forum seek changes in the Indian judicial
system, and the Intellectual Property regime along with changes in tax and
Reform & Regulatory Framework: (i)
Strengthen the Indian judicial system to address case backlog, expedite
legal proceedings, address the issue of no limit on the number of adjournments,
inadequate number of judges, large number of court holidays and civil
infrastructure. (ii) Strengthen
the regulatory environment in India, to be clear and consistent with legal
enforcement through special courts at both central and state levels. (iii) Need
to resolve commercial and contractual disputes quickly through an independent
tribunal under the Arbitration and Conciliation Act, 1996.
Intellectual Property Regime: (i) Specialized IPR courts to be established to enforce IPR laws. (ii) India needs to develop a TRIPS compliant IP system and IP protection, especially for software and published materials, print or electronic.
Law: (i) Review the Indian Companies Act, with
respect to provisions relating to private companies, as many US companies are
India to consider treating dividends received from overseas companies in the
hands of an Indian resident at par for tax as domestic dividends, so as to make
outward FDI no less attractive.
Regime: India to
consider providing visas for up to five years and removal of FRO/FRRO
requirements for US citizens to report physically once a year.
of the reasons that have prompted the Indian corporates to endorse such a skewed
‘partnership’ – heavily loaded in favour of the US corporates – is the
perceived need to attract more FDI from the US. Ratan Tata, who co-chairs the
CEO Forum, also chairs the Investment Commission set up by the prime minister.
This commission has recently submitted a report, which has underlined the need
to attract FDI over $70 billion in order to sustain a GDP growth rate of 8 per
cent over the next five years. Given the fact that India has attracted FDI worth
around $38 billion between August 1991 to January 2006 (of which FDI from US is
less than $5 billion), the target set by the Investment Commission seems totally
has not been able to attract larger volumes of FDI, especially in comparison
with countries like China, South Korea or Malaysia, despite having a much more
liberal FDI regime. India has foreign ownership restrictions in very few sectors
and 100 per cent FDI is permitted in most sectors through the automatic route.
China, which has a far more restrictive regime where FDI proposals are approved
on a case-by-case basis and foreign ownership is restricted in many sectors, has
been able to attract more than ten times the volume of FDI that India attracts
annually. Rather than reviewing this experience properly, Indian corporates are
prodding the policymakers to move towards lifting whatever little regulation
that exist in India vis-à-vis foreign capital. The effort is to
increase the share of FDI not through greenfield investments like in China but
by facilitating the takeover of Indian companies by US-based MNCs through
mergers and acquisitions, a policy that was followed by Brazil in the late 1990s
to its own detriment. Besides failing in its objective to meet the
over-ambitious FDI target, the adoption of such a policy course would neutralize
the benefits of FDI accruing to the Indian economy in terms of technological
advancement and generation of skilled employment.
Forum has identified six major areas for cooperation. These include Physical
Infrastructure Development, Energy Security, Human Resource Development,
Technology Exchange, Trade and Industry Promotion, and Intellectual Property
Protection. Cooperation in Physical Infrastructure Development involves setting
up of a $5 billion private sector Infrastructure Fund (minority government
participation) with the participation of US companies to fund infrastructure
projects under the supervision of multilateral agencies like the World Bank, ADB
and IFC. There are further proposals to involve the US in the development of
Mumbai into a ‘Regional Financial Centre’ and the setting up of large scale
Special Economic Zones. The Forum has called for a change in the bidding process
for infrastructure projects to foster ‘speed, efficiency and transparency’.
What this implies is that the development of infrastructure in India, especially
key infrastructure projects like roads, sea and airports and Special Economic
Zones etc will be undertaken by the private sector with US corporate lending
through the Infrastructure Fund.
the fallacy in assuming that the government of India lacks adequate resources to
develop such infrastructure through public investments, which underlies the
logic of such ‘Private-Public Partnerships’ (PPP), the problem with such a
model of infrastructure development lie in the conditionalities that come along
with private funding in terms of high cost borrowing which are passed on as high
user charges (higher toll taxes for roads for example). Moreover, the fact that
‘flexible, internationally competitive labour laws’ have been demanded for
the Special Economic Zones to be set up under PPP also point to such
objectionable conditionalities. In the area of Energy Cooperation also the
conditionalities have been clearly specified. The precondition set for further
infusion of US capital into the Power and Oil sector is the promotion of a
‘market driven’ structure of power tariffs and pricing of petro products. A
US-India private sector Task Force comprising power companies has been proposed
to work with the central and select state governments to “facilitate on-time
implementation of investments being made and resolution of legacy disputes in
the Indian power sector”. An early passage of the Petroleum and Natural
Gas Regulatory Board Bill has been advocated. It is clear that further
neo-liberal reforms in the Power and Oil sector to benefit the US corporates
have been accepted as a quid pro quo to cooperation in civilian nuclear energy
and ‘clean fuel’ between the US and the Indian governments.
in Human Resource Development, besides involving US institutions of higher
learning like MIT, Lincoln Labs, Bell Labs, John Hopkins and Carnegie Mellon to
set up research institutions and Phd programmes in India has also proposed to
upgrade the ITIs with the cooperation of the US companies. However, such
cooperation also comes with the precondition of giving private educational
institutions a “free hand in terms of fees, course structure and
affiliations”. While the CEO Forum has called for relaxation of US norms for
transfer/export of high technology to India including dual use categories (like
advanced electronics, semiconductor technology, aviation related technology, key
software systems and equipment), removal of restrictions on R&D
collaboration by the US companies and encouragement to R&D collaboration in
product design and development as well as agricultural research, such transfer
of technology and R&D collaboration is envisaged only under a drastically
restructured Intellectual Property Protection regime in India. For instance, on
cooperation in biotechnology the Report says, “Partner in Biotechnology by
jointly developing a regulatory pathway to ensure regulations surrounding the
sector are based on sound science, are transparent and supportive of policies
that encourage investment in and commercialisation of biotechnology, and promote
trade in biotech goods and services. Both countries (i.e. US FDA working with
the Indian FDA) should harmonise legislation to provide opportunities and
protection for US as well as Indian companies in biotech related IPR.”
of legislations related to Intellectual Property Protection between India and
the US has serious implications for India. The CEO Forum Report says,
“Intellectual Property Rights (IPR) protection has separated and divided US
and Indian businesses in the past but there is an increasing convergence in the
approach to IPR and supporting legislation. There is now a mutual, agreed agenda
to frame laws, rules and processes to sustain the highest standards of
protection to the inventor or the organisation, which invests in IP. “The
next ten years can witness a new surge in partnership in IPR between the US and
India which includes mutual cooperation in IPR implementation and enforcement as
well as building a ‘patents’ culture.” (Emphasis added). The key
institutional changes which have been suggested by the CEO Forum in order to
usher in a ‘patents culture’ in India includes setting up a national unit
dedicated to IPR enforcement (HRD and I&B ministries have been asked to take
the first steps in coordinating the IPR enforcement efforts as a first step) and
setting up of specialised Intellectual Property Courts to handle both civil as
well as criminal cases related to IPR. A particularly significant recommendation
calling for a “national initiative to crack down on piracy in the educational
and research sectors” has been made in the Report.
The Report says, “The Ministry of Human Resource Development (and other
relevant ministries, such as Health, for medical
schools) could issue directives to all public and private educational and
research institutions to stop using unauthorised photocopies of books and
journals; take action against on-campus copy-shops engaged in illegal activity;
and report periodically to the ministry on what steps have been taken. This data
would form the basis for more targeted efforts in the future.” Whether such an
initiative is at all possible in India is another matter; but the fact that the
Indian corporates could agree to such a proposal shows how much they are out of
sync with the Indian reality.
seriousness with which the IPR regime and the policy framework is sought to be
restructured by the CEO Forum is evident from the section on the pharmaceutical
sector in the Report. A report
recently prepared by a Task Force under the chairmanship of Dr Pronab Sen of the
Planning Commission has recommended that price controls be expanded to every
medicine on India’s essential drug list. It has further recommended that
patented medicines be subject to a price monitoring system with mandatory price
negotiations and compulsory licensing if agreement on the price cannot be
reached. Also, the task force has suggested that if a medicine reaches a certain
volume it should be genericised. Besides calling for a review of the
pharmaceutical price controls policy the CEO Forum Report has specifically
challenged the Task Force recommendations. On the recommendation of
genericisation of an essential drug once its sale exceeds a specified volume,
the CEO Forum Report says, “Although the industry is confident that this
particular recommendation will most likely not be adopted, it is troubling as it
could portend future anti-industry actions by the government”.
lopsided nature of the Indo-US business partnership is best manifested in the
cooperation on Trade and Industry Promotion. The most important demand is for
reducing restrictions on foreign investment. The demands to expedite the
decision to allow FDI in the Retail sector in India as well as an accelerated
timetable for raising the FDI caps in the Insurance and Banking sectors have
been specifically articulated vis-à-vis the government of India. These
have been demanded along with a call for liberalising the US visa regime for
service providers, particularly for IT (H1B / L1) and nursing staff (EB3). This
bargain between the Indian and the American corporates also underlies the
ongoing collaboration between the Indian and the US governments on the GATS
negotiations in the WTO. For a few thousand more US visas for IT professionals
and nurses in India, which would solely benefit the IT and private healthcare
sectors, the Indian corporates are arguing on behalf of the US multinational
retail giants like the Walmart and US based transnational banks and insurance
companies for the further opening up of these sectors in India. The interests of
the millions of Indians who are employed in the retail sector, especially in
unorganised retail, or the security of the savings of millions of Indians in the
banks and insurance companies, which have so far been protected by extant Indian
regulations, are being sacrificed.
role of the American and Indian corporates in the Defence sector has been
increasing under the ongoing Indo-US Defence Cooperation. The CEO Forum report
states that “with the opening of defense supplies
from the US to India, there are new opportunities emerging for private sector
defense cooperation”. In
order to address the insecurity about the reliability of US Defence supplies,
the CEO Forum has envisaged the integration of “Indian
private sector companies into the global supply chain of US defense
manufacturers, combined with co-production”. In return the adoption of a
“liberal offset regime” in India has been demanded, which would imply a
dilution of the current Indian policy which requires direct offsets for defence
purchases over Rs 300 crores. Thus the lure of cooption of some Indian
corporates as junior partners into the military-industrial complex of the US is
being used to make India a major buyer of US defence supplies.
setting up of a Dispute Settlement Mechanism in India, with the “power
and jurisdiction to resolve commercial and contractual disputes quickly” has
been proposed in the Report. The Report says that “An independent tribunal
formed through the Arbitration and Conciliation Act 1996 should be a forum for
dispute resolution. Specific focus on resolving legacy issues such as those
impacting Dow/Bhopal tragedy of 1984 and the Tamil Nadu IPPs would send a strong
positive signal to US investors.” It is clear that a parallel judicial system
favourable for the corporates and unaffordable for the bulk of Indians has been
envisaged. Far from providing any justice to the victims of corporate negligence
and crimes, like the Bhopal Gas tragedy, this is meant to refashion the judicial
system to pre-empt any possibility of litigation against any company by common
citizens in the Indian courts in future.
The Report of the CEO Forum on “US India Strategic Economic Partnership” has brought out clearly the class basis of the “strategic alliance” that the UPA government seeks to cement with the US. This junior partnership to the US, especially American big business, while serving the interests of the Indian corporates who have forsaken all pretensions of autonomous development, would be severely detrimental to interests of the Indian people. Indian big business, which had suffered a jolt in the aftermath of the 2004 Lok Sabha elections when their darling, the NDA government, was booted out unceremoniously, is seeking to push forward the discredited neo-liberal policies in India in a direct alliance with American big business. It has to be ensured that the cheerleaders of neo-liberalism within the UPA government are prevented from taking this anti-national agenda forward.