TeaThe Biden Administration Should Be Concerned Lately Verdict By many foreign corporations either to exit the Indian market or to put their long term plans on hold. The US has for years looked forward to aiding India’s rise as a way of curbing China’s growing power. but even though India world’s fastest growing major economyIts economic policies have continued to frustrate American, European and Japanese officials and investors.
Western democracies, who see India as a natural ally, believe that India will be able to fulfill its economic and military potential only when it achieves high growth rates. In turn, this will be possible only with large inflows of foreign investment and further opening up of India’s markets. Although India’s economy is expected to grow at 8 per cent in 2022 and 6.9 per cent in 2023, it is less than 12.5 per cent and 8.5 per cent originally estimated. International Monetary Fund (IMF).
India’s growth is attributed to its large consumer market rather than an increase in foreign direct investment (FDI). Indians think India’s exports are high, its stock market is doing well and India’s vibrant middle class is engaging in what economists call “revenge spending” in the aftermath of the pandemic. But India’s western partners see India as a “challenging place to do business,” according to the US State Department. 2021 Investment Climate Statement,
The Heritage Foundation of 2022. According to index for economic freedomIndia is ranked 27th out of 39 countries in the Asia-Pacific region, with an overall score lower than the regional and world averages.
From the point of view of Western partners of America and India, this is a matter of unfulfilled expectations. India cannot move ahead with China without overcoming the large gap in the relative size of its economies. China currently has a nominal GDP of $17.7 trillion while India’s GDP is at Only $3.1 trillion. On the other hand, India is expected to across China, set to become the world’s most populous country in 2023, has raised its domestic challenges of providing food, education and jobs for a growing young population.
Given its economic gap with China and the needs of its growing population, it would seem reasonable that India would like to attract FDI. But between 2019 and 2021 the share of global FDI inflow in India has shrunk from 3.4 percent to 2.8 percent. Meanwhile, China’s share in global FDI increased from 14.5 per cent to 20.3 per cent.
Even though the US, Europe, Australia and Japan all see India as their future partner, their corporations are either Carrying out or reducing the size of its operations in India. Swiss building-materials firms Holcim, Royal Bank of Scotland, Harley-Davidson and Citibank have already announced plans to shrink or leave India.
german retailer Metro AG Selling its Indian operations after two decades. Both ford motor company and Tesla announced that they have put on hold plans to manufacture electric vehicles (EVs) in India. The decision, at a time when the Indian government is backing renewable energy, is related to India’s high tariffs and tax barriers.
This week, French spirits group Pernod Ricard, makers of Chivas and Absolut, announced the decision to halt new Indian investments because “everlastingTax disputes with local authorities that date back almost 30 years.
Some $100 million in assets of Amway, an American multi-level marketing company that sells health, beauty and home care products, has been frozen by Indian law enforcement, while the company is Investigated Apparently “the operation of the pyramid scheme.” Ironically, the company has been doing business in India for over three decades with the same business model of direct selling.
Furthermore, Ricard is not the only international business facing taxation challenges in India. $865 million has been stuck in IBM’s escrow account since 2009. tax dispute On retrospective taxes through the legal system of India. India could use about $1 billion of IBM if it were put to productive use.
Two UK companies – telecom giant Vodafone and energy company Cairn – were hit by huge capital gains tax demands based on legal changes after the merger or acquisition. It took a decade for the Government of India to withdraw its retrospective taxation policy, only Later India lost two cases to the World Bank’s International Center for Settlement of Investment Disputes (ICSID) and The Hague Tribunal.
Despite the challenges, India’s sheer size and location make it a prized market for foreign businesses. Air IndiaThe state-run airline, formerly owned by the Tata Group, announced plans to overhaul its entire fleet of 300 narrow-body jets in one of the largest orders in commercial aviation history. Boeing and Airbus are the main contenders for the deal. Access to the large Indian consumer market is a dream, as is expected to contribute to the upgradation of India’s civil and military infrastructure.
But on the whole, the western hopes of a modern, fast growing, prosperous and free market oriented India have not been realized at that pace. Predicted by some in the first few years of the 21st century. India’s current rate of economic growth is inadequate for India’s domestic goals as well as its objective of becoming a serious rival to the global economic juggernaut, China. The latter makes India’s economic policies a strategic concern for US policymakers.
Hussain Haqqani is the director of South and Central Asia at the Hudson Institute. He served as Pakistan’s ambassador to the US from 2008 to 2011. Aparna Pandey is the director of the Washington-based Hudson Institute’s Initiative on the Future of India and South Asia. Thoughts are personal.
This article was first published by The Hill. you can read the original Here,