India-US CEO Meet, New Vision for Asia Pacific and Indian Ocean Region’s Benefits for Business, Defence and Regional Security And Impact of Breakthrough in Indo-US Civil Nuclear Deal

India-US CEO Meet, New Vision for Asia Pacific and Indian Ocean Region’s Benefits for Business, Defence and Regional Security And Impact of Breakthrough in Indo-US Civil Nuclear Deal

Q. “India-US CEO Business Summit 2015, Defence and the New Vision for the Asia Pacific and Indian Ocean region has enhanced the business climate, defence and regional security of India while the long stalled Indo-US Nuclear deal has received fresh impetus during recent times.” Elucidate.M

A. India-US CEO Meet 2015: Impact on Business Climate

About India-US CEO Business Meet 2015

• The India-US CEO Business Meet was held in New Delhi on 26th January 2015
• US side led by Honeywell Chief David Cote, Indian side led by TATA’s Cyrus Mistry
• Joint address by Prime Minister Modi and President Obama at the meet
• 30 Business Leaders from the US present such as Indira Nooyi(Pepsico), Harold McGraw (McGraw Hill Financial) and Ajay Banga (MasterCard)
• FM Arun Jaitley and top Indian business leaders such as Adi Godrej, Mukesh Ambani, Sunil Mittal and Vishal Sikka also attended the meet.

Focus of Business Meet:

Diane Farrell, Acting President, US-India Business Council said focus was on:

• Two way trade, Ease of doing business
• Market Access of both countries
• Examination of consistency and predictability of Indian markets
• Potential of Digital India and Make in India

Impact on Business Climate

1. Promotion of Open Business Environment

• Environment that is welcoming and predictable
• Assurance from Indian side regarding help

2. Promotion of Climate That Encourages Investment

• Boost for foreign investors
• Low risk projects working for mutual benefit of all stakeholders

3. Protection of Intellectual Property

• Emphasis on protecting intellectual property through PM Modi’s address

4. Increase in Ease of Doing Business

• Greater clarity regarding business opportunities in India
• More stress on making business less influenced by red tape.

5. Stress on Predictable, Competitive Tax Regime

6. Emphasis on Economic Growth

• Indian projected as attractive investment destination through figures cited:
• Increase in economic growth by a percentage point
• Strong business sentiments
• Positive consumer confidence
• Growth in 8 core sectors on a high
• Inflation on a 5 year low
• 110 million new bank accounts in past 4 months
• Increase by 50% in US investments in last 6 months

7. Projection of India’s Untapped Potential (PM’s Address)

• Indian Railways carries more people daily that 3/4th of population of countries across the world
• Clean Ganga project encapsulates 500 million people, 100s of towns and 1000s of villages
• Urban waste management to deal with 500 cities possessing population exceeding 100,000
• Vision of connected rural India in 600,000 villages

8. India’s Role in World Emphasised, Provides Impetus for Business

• India home to 1.25 billion persons, 1/6th of humanity
• India’s economic growth will spur positive developments on global scale such as:
• World with less poverty
• Better survival rate of mothers and infants
• Global resource of 800 million empowered and skilled youth
• Indian an anchor for global economy and growth

9. Emphasis on India-US Economic Partnership

Collaborations in:
• Green revolution
• Space
• Education
• Digital projects
• Technology
• Medicine
• Renewable Energy

10. Two Way Partnership: Win-Win Situation

• US companies transferring advanced skills and technologies
• India fuelling US businesses
• Indian IT startups creating jobs in US
• US Indians helped the military veterans
• Education:
- More than 100,000 Indian students in the US
- Thousands of visiting American students in India
• Success of 3 million Indian Americans

11. Potential for Growth Emphasised (President’s Address)

“Growth cannot just be measured by GDP, it has to make people’s life better in more tangible and lasting ways”: Barack Obama

12. Positive Announcements Towards Close of Summit by President Obama

• Working to develop new technologies for helping India leap forward
• Exim Bank (US) commits USD 1 billion for project financing
• US Trade and Investment Development Agency to provide USD 2 billion for renewable energy projects
• Great interest on part of US companies to find
- consistency, clarity, greater simplicity in regulatory and tax environment in India
• USD 4 billion worth of initiatives to boost Indo-US trade and investment ties
• USD 1 billion loans for SMBs across India through OPIC (Overseas Private Investment Corporation)
• Appreciation of business environment fostering transparency and accountability


13. Change in Climate on Account of New Commitment

• Emphasis on combating:
- Bureaucratic red-tapism
- Corruption
• Arbitrary and aggressive taxation

14. Formation of High-Level US India Strategic and Commercial Dialogue

• Dialogue for monitoring progress on pacts and vision statements

15. Financing of Social Development Ventures

• Financing of such ventures through:
- Indian Diaspora Investment Initiative
- through PPP mode

16. Two US Trade Missions in India

• Infra development through trade missions in the field of:
- Rail
- Road
- Port
- Airport

17. Emphasis on PPP for Growth

• Economic engine to receive boost through PPP to generate new stream of financing for Indian businesses in overlooked markets such as:
- Rural healthcare
- Sanitation
- Water

B. New Strategic Vision for Asia Pacific and Indian Ocean Region: Impact

1. Emphasis on Closer Partnership between US and India

2. Building Peace, Prosperity and Stability in the Region

3. Support for Sustainable Development from Africa to Asia

4. Emphasis on US-India partnership as Important Regional Growth Driver

5. Increasing Regional Economic Integration

• Accelerated infrastructure connectivity
• Economic development for linking South, Southeast and Central Asia
• Enhancing energy transmission and free trade
• Higher number of people to people linkages

6. Promotion of Regional Prosperity Linked Security

• Link between regional prosperity and security
• Importance of safeguarding maritime security
• Freedom of navigation and overflight throughout the region, especially South China Sea
• Avoid threat/force and pursue resolution of disputes via peaceful means
• Working within universally recognised international laws such as United Nations Convention on the Law of the Sea
• Opposition to terrorism, piracy, proliferations of WMD from or within the region
• Promotion of shared values and recognition of common interests in peace, stability and prosperity
• Commitment to UDHR (Universal Declaration of Human Rights)

7. Joint Commitment to Strengthen EAS

• Committed towards strengthening East Asia Summit for promotion of regional dialogue on political and security issues
• Roadmap to leverage respective efforts to increase bonds and relations among Asian powers
• Better response to economic, diplomatic and security challenges in the area

8. Boost for India’s Bid to Join Asia Pacific Economic Cooperation Forum

9. Strengthening Regional Dialogues

• Investment in trilateral consultations with third countries in the region
• Promotion of regional integration
• Making regional forums stronger
• Exploring additional multilateral chances for engagement
• Capacity building to bolster long term peace and prosperity

10. Declaration of Friendship

a. Overview

• “Chalein Saath Saath: Forward Together We Go”
• Close ties and strategic partnership elevated with Declaration of Friendship
• "Sanjha Prayaas, SabkaVikaas; Shared Effort, Progress For All”
• Step towards strengthening the relationship and shaping:
- International security
- Regional and global peace
- Prosperity and stability
- Declaration promotes higher level of trust and coordination
- Working for the betterment of the world
- Declaration for tapping the potential of the 2 democracies

b. Key Points of the Declaration

• Equal opportunity for people through

- Democracy
- Governance
- Fundamental freedoms
- Open, just, sustainable, inclusive rule based international order
- Strengthening bilateral defence ties
- Adaptation and mitigation of climate change at all levels
- Positive impact of sustainable, inclusive development on the countries and the world
- Centrality of economic policies for supporting strong and sustainable jobs, inclusive development and increase in incomes
- Rule based, predictable and transparent markets to ensure social upliftment and economic progress

c. Commitments of the Declaration

• Holding regular summits with increased periodicity
• Elevation of Strategic Dialogue to Strategic and Commercial Dialogue
• Establishing Secure Hotlines between India PM and US President as well as respective NSAs
• Development of joint ventures on projects of strategic significance
• Creating security and effective cooperation for countering terrorism
• Scheduling regional and multilateral consultations
• Leveraging talents and strengths of people to ensure sustainable and inclusive development around the world

11. Joint Production and Co-Development of Weapons System

12. Defence Framework Agreement

• Renewed by both sides
• Aim to undertake joint military exercises under the framework agreement
• In-principle agreement to pursue co-development and co-production of specific advanced defence projects
• Deeper cooperation in cybersecurity
• New chapter in bilateral military ties
• Military to military engagement
• Increased opportunities in technology and trade

13. Defence Projects for Joint Production and Development

14. Extension of Defence Cooperation Agreement

• 4 Projects under DTTI or Defence Technology Trade Initiative to be developed
• Exploration of cooperation for jet engines and aircraft carrier systems
• Aim to upgrade the nation’s domestic defence industry and expand manufacturing sector
• Joint Working Group to explore aircraft carrier technology as well as design, develop jet engine technology in India
• Projects identified under DTTI include:
- Next generation Raven mini-unmanned aerial vehicles(UAVs)
- Roll on, roll off intelligence kits for transport aircraft and mobile electric hybrid power source
- 4 pathfinder projects of which two are with US companies and 2 with the US government
- Good impact
- Result oriented, operational projects
- Major step forward for aircraft carrier and jet engine technologies
- Increase bilateral anti-terror cooperation, intelligence sharing and maritime security
- Enhancement of counter-terrorism capabilities

C. Impetus for Civil Nuclear Deal

Background of Deal Logjam

• Nuclear agreement was first established between President George Push and Prime Minister Manmohan Singh in 2005
• Talk on Civil Nuclear Deal stalled on account of administrative arrangements
• US objections raised in regard to India’s Compensation for Nuclear Liability and Damages law of 2010
• 2 sections of the law which US indicated would indemnify companies supplying nuclear reactors:
• Sections 17(b) and 46
• This is beyond the required International law or Convention on Supplementary Compensation/CSC


1. Breakthrough Understanding

• Commercialisation of Indo-US Civil Nuclear Deal Launched in 2005
• Considerable diplomatic victory for India

2. No Dilution of Liability Law

3. Though Higher Cost to Nuclear Deals Concluded with US Companies

• Risk assessment moves onto commercial operators and suppliers such as GE-Hitachi and Westinghouse

4. Reported Reasons For Breakthrough

• Indian government would not allow change in laws itself
• Insurance companies to be bearing the cost now
• Enhanced insurance pool with liability package of around USD 200 million
• Clarification or explanation of section 46 of the liability law
• Insurance pool sweetens the deal

Extent to Which Civil Nuclear Deal has Received Fresh Impetus:

i. Negatives:

• American companies react to breakthrough, called it a “first good step” (USIBC Diane Farrell). Yet technical commentary needed about proposed changes

• Left parties see agreement as compromise

• Insurance pool offered to Americans=More dues for Indian taxpayer

• Clarity needed from Government

ii. Positives

• India better placed to conclude more nuclear deals
• Opens up path with nuclear reactor supplier nations such as Russia, France, Australia and even Japan
• US assurance of support for 4 nuclear groups as a result of the breakthrough:

- the Nuclear Suppliers Group,
- Wassenaar Arrangement,
- Australian group and the
- Missile Technology Control Regime (MTCR)

• Apart from that, support for India in reformed UNSC
• NTPC does not have to pay for the damages in case as suppliers have to be liable in case of nuclear accident while international law says primary liability lies with operator
• Governments of India and US have come to an understanding

Conclusion

Regarding India-US Business CEO Summit 2015

• India-US Business Summit 2015 is an excellent step forward for improving the business climate in India and expanding Indo-US business relations.

About New Vision on Asia Pacific and Indian Ocean Region and Defence Framework Agreement

• The New Vision on Asia Pacific and Indian Ocean region is a movement towards a deeper friendship with implications for security and defence across the region: However, no concrete steps were taken for eliminating terrorist outfits such as D-Company, Haqqani Network and LeT. More needs to be done on this front.

• The existing Defence Framework Agreement should also take into account the wider global climate and promote more research and development assistance for indigenous/ homegrown military and surveillance equipment; this could be the agenda for the next meeting/summit.

Regarding Civil Nuclear Deal

• Finally, the civil nuclear deal has received an impetus but if the cost of this has to be borne by the Indian taxpayer, this can backfire. However, the breakthrough has certainly opened doors for India as a nuclear power. In sum, the civil nuclear deal has its own pitfalls and advantages.