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India First Group CEO praises New Delhi’s focus on infrastructure, opening up of insurance sector.
By Raif Karerat
WASHINGTON, DC: Ron Somers was the public face of the US-India business relations in Washington for many years. He ran the US-India Business Council, a trade group of more than 260 companies that do business in both the United States and India, for a decade. During his presidency, USIBC became the largest bilateral business association in the United States, and he brought the organization to the forefront of Indo-American policy.
Last year, he left the group to found India First Group, a strategic consulting firm. In his own words, the firm is “committed to helping companies from North America invest in major development projects in India, as well as helping Indian companies locate opportunities and secure these across North America.”
A prominent figure in U.S.-Indian relations, the Massachusetts-born Somers played a lead role in orchestrating the passage of the Indo-U.S. civilian nuclear agreement of 2008.
In an interview with the American Bazaar, Somers talks about U.S.-Indian relations, immigration, Indian budget, economic reform in India and the work he does at Indian First Group, among other issues.
What has your reaction been to the Indian budget?
The first full budget of the [Narendra] Modi government is extremely positive. The budget includes all the signals needed by investors to differentiate India from other BRIC countries and emerging markets and was a welcome signal to the investment community, both domestically and worldwide. The FM’s masterstroke is to refocus the budget on infrastructure, investing savings being realized from cheap prices into infrastructure. [The] “Make in India” [program] can only succeed if proper infrastructure is in place to support manufacturing. The FM’s refocus on infrastructure, investing savings from low oil prices in this vital sector is extremely encouraging. The finance minister, Mr. [Arun] Jaitley, put in all the right messages to intrigue and enthuse investors to take a fresh look at India.
Is India equipped to maintain the economic momentum it’s gained since the last election?
Absolutely! When an investor scans the global landscape and sees Russia indulging in adventurism, Brazil awash in scandal, and China looking inward, this scenario allows India to stand out as the only viable investment destination. Added to this is the fact that India is correctly projecting political stability under the leadership of Prime Minister Modi and the new government, which making all the right moves, taking very proactive steps like opening up the insurance sector. Such bold moves give the investment community confidence that more structural reforms are on the way and that the overall reform agenda is viable and possible.
I think the most important thing we are blessed by is the fact that, I think, we’ll be enduring low oil prices for a considerable time to come. What, I think, we need to be appreciating is Mr. Jaitley’s brilliance in reinvesting the savings that are going to be accrued by virtue of the oil prices into infrastructure. The reason this is so important is that we can talk about “Make in India” until the cows come home, but without infrastructure in place we’re never going to be able to truly develop large scale, massive amounts of manufacturing in the country. Therefore, I’m very happy this budget focused us all back to the necessary requirement to develop infrastructure in the country. I think the brilliance of the budget is now that we’re enjoying savings from low oil prices — keeping in mind India imports 80 percent of its hydrocarbons, and keeping in mind that India is benefitting greatly from low oil prices which are possibly going to be driven lower — the fact that Mr. Jaitley is investing those savings into infrastructure is a masterstroke.
You’ve mentioned energy as a lynchpin for India’s future and I know you were heavily involved in the U.S.-India civil nuclear initiative. What is the current state of the initiative?
We want to see implementation proceed. [On Wednesday] in New Delhi the government convened a high-level meeting with suppliers of equipment, as well as with U.S. government stakeholders, to unveil the minutia regarding the insurance pool and how the issue of reliability will be addressed going forward. This is a very important step. I’m assuming what’s going to happen next is that the suppliers of equipment, namely Westinghouse and GE and others associated with developing and building infrastructure relating to nuclear power. They will need to assess the liability package that’s being put forward by the Government of India. But my hope will be that all the i’s are dotted and all the t’s have been crossed, and that there is a sufficient package addressing the issue of liability concerns so that we can see implementation proceed in right earnest. I think it’s very important that we remember the New Care deal was announced in 2005. It was passed by the American legislature in 2008, subsequently by the Indian parliament in 2008, and here we are in 2015, literally 10 years have passed and no major direct foreign investment has taken place so far in nuclear power in India. This is a non-carbon emitting energy badly needed by India and, therefore, it’s very important now that we can get past the liability question — which the government is addressing — and get into implementation.
Now that there is a plan to shore up infrastructure, what will the timetable be for implementation?
The strong suit of the Modi government is implementation. If I look at projects in the state of Gujarat during the leadership of then-Chief Minister Narendra Modi, major projects including Tata Nano, Ford Motor Company, Abbott Laboratories — major projects have gone forward in being implemented in record time with minimal hurdles. My hope now is that with the government firmly in place and with this — the first full budget of the Modi government — all attention is turned to project implementation.
It’s very important now that we see success on the ground, because success breeds success. And because of the situations in competing countries like in Russia, China and Brazil, India is preeminent and, therefore, has the attention of the international investment community. If companies are willing to seed implementation of major projects, it’s going to attract further investment and it’s going to propel India’s growth story beyond the seven, eight, or nine percent range, which it needs to be.
To that effect, what is the most important reform for the Indian government to focus on at the present and what is the biggest threat to progression?
In addition to GOI dedicating the recent budget to refocus attention on infrastructure development, the most welcome news in recent times has been India’s passage of the long-awaited amendment to the Insurance Act, allowing 49 percent FDI up from 26 percent FDI in the insurance sector. This sends a very powerful, positive signal. Why is this? Because with infrastructure requiring massive capital, which is long-term, with each major project having long gestation periods and requiring years to implement, there is a need in India to attract long-term capital for such projects. Insurance provides just such capital — long-term tenure capital well-suited for infrastructure. Accordingly, the PM’s passage of the Insurance Amendment sends a very positive, “can-do” signal which will cheer investors.
The government of India sent a signal that not only are we open for business, we are listening to you, we are hearing you, and we understood the need to raise foreign investment in the insurance sector from 26 to 49 percent. So that was a major signal beyond the budget Mr. Jaitley just presented to parliament.
Where more work still needs to be done is on the tax front. Now that the PM has demonstrated that he can work with Parliament to address big issues, like the opening of the insurance sector, he must now apply his persuasive powers to achieve passage of GST for India. Regularization of India’s tax structure is essential. The lack of tax efficiency in India presents a drag on business. In addition … it is necessary for the GOI to mitigate collateral damage arising from high profile tax disputes. Investors seek clarity in matters of tax and want to believe in a predictable tax environment. The more the government can do to resolve high profile tax disputes, the better.
What role will defense contracting play in the future relationship of the U.S. and India?
Robust defense collaboration creates a vital dynamic that promotes growth, namely transfer of technology. The more the U.S. and India can do to deepen collaboration in this strategic sector, the more technology that will transfer between the two economies, which will generate sustained growth, spurring jobs, and enriching research and development. The back-and-forth transfer of technology is vitally important to the growth of the economy.
Ten years ago, U.S.-India defense collaboration was literally nil. Here we are now — a decade later — and U.S.-India defense trade is in the range of $14 billion. This is impressive growth, but so much more can and should be done. Every business leader and leaders in both government should strive to deepen collaboration in defense and homeland security and cyber security even further. The bottom line is that this will strengthen the core values and beliefs we share, presenting a powerful beacon of hope for other nations which yearn to be free.
Does your firm, India First Group, work more with U.S. or Indian companies? In a nutshell, what is the work that you do?
Having lived and worked in India developing major infrastructure projects for more than 12 years, and being dedicated to the idea of a deeper U.S.-India relationship for the past 23 years — my entire adult life — India First Group is a strategic advisory firm committed to helping companies from North America invest in major development projects in India, as well as helping Indian companies locate opportunities and secure these across North America.
With the controversy that has arisen regarding H-1B visas, do you think further visa reforms are in the cards?
With the Republican-controlled House and Senate which appreciates the vitality of a deeper partnership with India and the need to facilitate greater movement — back and forth — of our technical professionals to keep our free-market democracies growing and strong, I feel the emergency of a year ago regarding the H-1B Visa issue is behind us, for the time-being. This does not mean that we should be complacent. On the contrary, we must remain absolutely alert and vigilant. I am hopeful leadership in both the House of Representatives and the U.S. Senate understand the need to deepen collaboration between our two economies, which necessarily requires the ease of movement of our technical professionals. There is an absolute need to attract talent to the United States and to work closely with India to enable innovation to take place round the clock, 24 hours a day, seven days a week. Liberal immigration reform which facilitates and enables such collaboration and partnership will secure the legacy of our free-market democracies, spurring growth of both economies.
Why isn’t the U.S. fixing issues for legal immigrants such as the increasingly long waits for green cards?
The United States and India to a lesser extent are still reacting to the events surrounding 9/11, when the U.S. was attacked by terrorists, and India’s Parliament was attacked a few months thereafter on December 13, 2001. Movement of people is, therefore, still an area of concern. Added to this, we have witnessed the global economic meltdown which hurt job growth in both countries, causing the governments to be more protective. We are now experiencing better job growth in the United States. And there is a greater appreciation on Capitol Hill for forging a deeper, more strategic partnership with India. Immigration reform in the United States is a very big issue. The goal of business must be to promote ease of movement of technical professionals between both economies and not to have India fall into the rut of the larger debate about immigration. In my view, the United States should welcome all those who wish to belong and contribute to the vitality of a strong and vital America.
What else is in store for U.S.-India relations this decade and the next? What will the definitive storyline be?
It is imperative that we not take the U.S.-India relationship for granted. We must always listen carefully to one another, respecting each other’s point of view, appreciating that we both share the same core values of freedom, rule of law, and democracy for all. So long as we listen respectfully to one another and hear each other’s views, taking into consideration the goal to deepen trust and partnership, I see only blue-sky ahead for the relationship. After all, as partners we represent for many other countries around the world the best example of freedom and democracy. We share a common duty to responsibly demonstrate to our own citizens and to others around the world the benefits that freedom and democracy can yield. We must start by listening respectfully to each other — always, and by building and nurturing trust. The definitive storyline must be the convergence of two great democracies that will shape the destiny of hope and freedom and prosperity for the 21st Century.
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