Ambassador Garcetti Says Improved Taxation Would Further Expand India-US Economic Ties

US Ambassador Eric Garcetti on Tuesday emphasised for a better taxation and regulatory framework in India to expand the bilateral economic ties. He also said that the rhetoric that everything has to be made in India could slow down the pace of the country’s growth.

The US envoy said “opaque corporate tax practices” still are a “barrier” to too many American companies that want to be in India and that export policies have to change if India is to achieve its goals.

While addressing the Indo-American Chamber of Commerce (IACC), Garcetti asserted that the US wants to see an India that doesn’t look at self-reliance as a “fortress” but as the strength of Indian companies to compete with anyone worldwide.

Diving into the various aspects of the fast-growing India-US partnership, Garcetti said there are no areas of cooperation that are “off limits” now. “We used to say the sky’s the limit; now we are beyond that.” “We are even working in space together; we are in the depths of the ocean together. We have literally no limits to this relationship, horizontally or vertically,” he said.

On the economic engagement front, the US ambassador noted that the flow of foreign direct investment into India is not registering at the pace it should be, adding the investments are going to Vietnam and other countries in Southeast Asia.

“Right now, we have a USD 40 billion trade deficit with India and an even greater one with China, and we want to see the foreign direct investment from China shift here (India). The FDI is not flowing into India at the pace at which it should be. It is going to countries in Southeast Asia like Vietnam, places like Mexico,” he said.

“I would selfishly like to see more of that happen here (India), and I need your help,” Garcetti said.

The “rhetoric” that everything has to be made here in India would slow down the pace, the ambassador said.

“If you tax inputs, many of you in manufacturing know that you are taxing your outputs — you are not taxing us, you are not protecting the market. What you are doing is limiting a market,” he said.

“So, we absolutely want a self-reliant India, we don’t want to contradict that, but we also want an India that doesn’t look at self-reliance as a fortress but instead with the strength of Indian companies that can compete with anyone in the world,” he opined.

Garcetti said: “This is not a paradigm of old that invaders are coming to extract…This is a relationship of equals that when we break down the walls in both of our countries whether they are bureaucratic, regulatory, taxation, whether part of the federal system, etc, can release more jobs, prosperity and more strength.” The US ambassador also highlighted the need to reform India’s taxation system.

“We also see opaque corporate tax practices still are a barrier to too many companies that want to be here. This is a great moment for you to recruit more American companies,” he said, adding CEOs of top American companies are very bullish about India and its growth.

“They want to invest, but we have to ensure that there is protection for intellectual property; courts often decide that there is a violation of intellectual property, but then there is no consequence,” he said. Garcetti also said this is increasingly important to Indian companies too, as they are producing patents at such a “roaring rate” now compared to the past.

“The strengthening of this is not just with the good rule of law and decisions, but the consequences will incentivise more investments as people will know that investment, deep investment into research and development will be protected for a longer period of time,” he said.

Garcetti mentioned that the export policy is a domain where both sides are “honest with each other,” emphasising that the robust ties enable candid discussions on these matters. He also highlighted that no one prefers a delayed permit for entry or exit from a country. He observed that efficient customs clearance and tax and regulatory stability consistently foster improved growth.

The US envoy also emphasised that “inner compatibility” is vital for achieving economies of scale. He expressed the view that countries prioritising their own standards over connectivity will encounter challenges in becoming global leaders.

“Remember Japan during the cellphone wars years ago, they bet big on their own standards. India is big enough to have its own market, but if (you) want to have dominance in the world market, we have to decide on the standards together,” he said.

It is exciting to see that happen in areas of 4G, 5G, and open RAN (Radio Access Networks), as what India and the US are doing in the area is very different from our “main competitor in the world who want to use telecommunication to spy on its citizens and also spy others around the world,” he said.

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