On the Eve of His US Visit, American Private Sector Sees Modi’s Record as a ‘Mixed Bag’

The idea that the business of the US is business has never been more true than under President Donald Trump, whose “America First” and “Buy American, Hire American” slogans have rattled Indian policy makers.

The following piece appeared on The Wire

When Prime Minister Narendra Modi meets Trump next Monday, the art of the deal might lie in preventing the tensions around contentious issues of H-1B visas, trade deficit and intellectual property rights from boiling over. The government’s decision to control the price of more drugs and medical devices has raised new alarms in the US pharma industry.

Modi’s image as a reformer has dimmed somewhat after the initial bout of hope and longing in the US business community that he would liberalise the Indian economy along the lines they desired. The term “mixed bag” is commonly used to describe the prime minister’s policies at the three-year mark. One executive described the scenario as getting “a little muddier” after demonetisation and price controls.

Modi is expected to get an earful when he meets CEOs on June 25, including for a round table and one-on-one meetings where both sides can be frank with each other. Hopefully, it won’t turn into a “grievance cell” of complaints.

There are both good stories and bad in terms of experiences US companies have had over the years. While Ford, GE and Gilead have been successful in the Indian market, Apple and Adobe have faced difficulties in their plans for India.

GE has grabbed one of its largest deals in India with a $2.6-billion contract to build diesel locomotives while Gilead has worked out local licensing agreements with Indian companies making generic drugs to manufacture low-cost versions of HIV and hepatitis C medicines.

Apple, on the other hand, is facing hurdles because it wants to open a plant to refurbish iPhones, which the government considers “dumping”. Adobe, meanwhile, has reportedly been blocked from inaugurating its R&D centre in Noida, Uttar Pradesh, at the last minute, allegedly because it didn’t obtain proper environmental clearances.

More worryingly, US executives are increasingly being asked by their CEOs to explain and assess the impact of the apparent rise in communal violence. Cow vigilantism doesn’t play well on Wall Street, even if it may in the minds of Modi’s political strategists.

A senior executive, speaking on the condition of anonymity, said he was getting e-mails from superiors about communal incidents asking, “What’s going on in India?” He took pains to say there may be more media reporting about religious tensions – a point repeatedly made by the Indian government -–but wondered if the atmosphere “reflected a very Hindu nationalist or saffron agenda.”

Even if there is more media focus on “social dimensions”, it’s an indicator for those who were a lot more optimistic about the direction of the Modi government, he said. “The Trump administration doesn’t care about all that but the companies are beginning to look at it.”

If these are unhappy tidings, Trump’s views on economic issues as they relate to India aren’t joy-inducing either. In his worldview, the US is a victim of unfair trade, unremitting immigration and unrelenting demands from allies.

One of the first acts of the Trump administration was to order a review of trade policies of 16 countries, including India’s, through an executive order to identify “every form of trade abuse and every non-reciprocal practice that now contributes to the US trade deficit,” in the words of commerce secretary Wilbur Ross. The US trade deficit with India is around $24 billion compared to a $347- billion deficit with China.

The 90-day review, expected in July, will examine the scenario “country-by-country, product-by-product” and determine the Trump administration’s “solutions” to the problem. In addition, the annual report by the office of the US Trade Representative on foreign trade barriers included a 20-page chapter on India, criticising New Delhi for everything from restricting American cheese to cosmetics.

Then came the executive order on H-1B visas, asking for an overhaul of the programme to ensure that the temporary work visas go to the “highest paid” and more qualified applicants. The move is aimed at stopping abuse and fraud in the granting of 65,000 visas given through a lottery.

Trump’s chief strategist, Steve Bannon, has noted the large number of Asian American CEOs in Silicon Valley and implied that the trend undermines “civic society.” The nationalist faction in the White House is determined to make life difficult for Indian IT companies that depend on H-1Bs.

Trump’s White House has gone to the extent of naming Indian companies (Tata and Infosys) for “putting extra tickets in the lottery raffle” to get the “lion’s share of visas.” Nearly 70% of the H-1B visas go to Indians, including those working for US companies.

As if on cue, Infosys announced plans to hire 10,000 Americans over the next two years, saying the nature of the work the company performed was changing. Infosys reportedly asked the White House if Trump or vice president Mike Pence would be part of the announcement but the answer was no. The Infosys announcement had low impact and did little to wash the stigma off H-1Bs.

A long-time observer of Indo-US relations, who has worked on US policy, asked why Infosys and the government of India couldn’t do a combined announcement during Modi’s visit. “No one knows Wipro from Infosys. People know Brand India. If these companies think they can fight the battle alone and separately, they are wrong.”

No powerful Indian businessman has come as the prime minister’s emissary to “do the needful” and talk the kind of language Trump understands. Alibaba’s Jack Ma came early January reportedly as an unofficial representative of China’s President Xi Jinping to smoothen the wrinkles and help towards a good summit when Trump was talking trade wars. Ma made a pledge to create one million US jobs.

Richard Rossow of the Center for Strategic and International Studies, who tracks India’s economic reforms more closely in Washington than most through an interactive website, said that Modi is “clearly an economic reformer even if the jobs numbers remain weak and there remain questions over India’s economic data.”

Rossow says Modi’s track record is “not a bad” one for three years. He has opened the coal and railways sectors while his government is working to rebuild broken electric power grids, complete UPA’s project of giving every citizen a unique identification number for direct digital payments to cut corruption, auctioning public resources like mining licenses in a fair manner and has passed the Goods and Services Tax Constitutional amendment.

Rossow says US companies are concerned about “anti-trade measures like the expansion of price controls and local content mandates in India,” just as India is concerned about potential limitations on H-1Bs and Trump’s trade review, he said.

According to Reuters, 18 members of the US House of Representatives wrote to the Indian ambassador last month to complain about the government’s decision to cut the prices of certain stents by 75%. A stent is a small tube used to treat narrow coronary arteries to reduce the chance of a heart attack.

The government cited “huge unethical mark-ups” in prices charged by private companies for this life-saving device. India’s medical technology market is estimated at $5 billion, a big slice of which is captured by US companies.

The letter, typically alarmist in tone, claims India’s decision would “hamper innovation and jeopardise investment.” It is likely the issue of price controls will be added to the old list of complaints by the pharma industry about India’s patent law and compulsory licensing.

None of these long-standing issues is likely to be resolved any time soon but it’s also good to remember that the US private sector is capable of a relentless and unforgiving campaign against countries that try to take them on. It is interesting that members of the US Congress dispatched a letter to the Indian government when they themselves are trying to lower prices of prescription medicines.

They have tried to shame drug company executives for arbitrarily raising the prices of life-saving drugs, the most notorious being the case of Martin Shkreli who raised the price of Daraprim (pyrimethamine) from $13.50 to $750 a tablet simply because he could after acquiring the rights to the 62-year-old drug.

As Rossow said, “In this environment, progress may simply mean inaction” when the two sides meet during Modi’s visit.

Seema Sirohi is a Washington DC-based commentator.