Just days after US Treasury Secretary Timothy Geithner flagged concerns over retrospective tax proposals in his meeting with Finance Minister Pranab Mukherjee in Washington,the new United States Ambassador to India Nancy Powell said the US faced several challenges to trade and investment in India including defence offset requirements,high tariff and non-tariff barriers,lack of transparency and restrictions on foreign investment.
In her first public remarks at the annual general meeting of the American Chamber of Commerce,Powell,who presented her credentials to President Pratibha Patil earlier this week,said: There are also several recent policy decisions that dampen sentiment about Indias investment climate… The adoption of manufacturing policies discriminatory to foreign companies and the inclusion of retroactive tax provisions in the Finance Bill are two examples.
Stating that the business of the US Mission in India is business,Powell listed bolstering trade and investment; expanding defence cooperation; increasing cooperation on counter terrorism and encouraging Indias role in promoting a prosperous and democratic Indian Ocean region as her top objectives.
Referring to last weeks meeting between Mukherjee and Geithner,the US Ambassador said that the Treasury Secretary encouraged the FM to reassure foreign investors that India will continue to welcome foreign capital by advancing important economic reforms that will increase opportunities for bilateral trade and investment.
As part of the Finance Bill,2012,the finance ministry has proposed changes to Section 9 of the Income Tax Act,1961,virtually amending the law to ensure that cross-border transactions such as the Vodafone-Hutchison deal come under the tax net. Nearly a dozen US industry bodies had requested the US Treasury Secretary to discuss the proposal with Mukherjee,who has termed these amendments as merely clarificatory and not substantive.
Powell hoped that the proposed Bilateral Investment Treaty (BIT) between the US and India would be signed soon. We are hopeful that Washingtons announcement last week of a new model BIT will provide a basis for us soon to launch formal negotiations. A BIT would enhance transparency and predictability for investors,and support economic growth and job creation, she said.
Powell added that US companies are set to sign $8-billion worth defence deals in direct commercial and foreign military sales.
India is the 13th largest trading partner with the US with bilateral trade in goods and services expected to touch $100 billion this year.