1 | P a g e President Obama’s India Visit by Edelman India - Public Affairs

President Obama’s India Visit

Overview

On November 21, 2014 Prime Minister Narendra Modi

tweeted about his invitation to the President of the United States, Barack Obama, to be the Chief Guest at

the 66th Republic Day celebrations. The invitation, which the American leader accepted, was hailed by the

media as a diplomatic coup. The President will be the first American chief of state to visit India twice during

his incumbency. He will also be the first President to be received as the guest of honour at the Republic Day

celebration. After the much talked about 4-day visit of the Indian Prime Minister to the US in September 2014,

this visit is likely to take forward the government's strategic policy of multi-alignment and pursuance of

close ties with each of the world's major power centres.

The President, who is travelling with the First Lady, his daughters and a delegation consisting of government

officials and industry leaders, will meet with the Prime Minister and several Indian officials “to strengthen and

expand the US-India strategic partnership”. Several CEOs from Fortune 500 companies are expected to

accompany the President. These include Harold Terry Mcgraw of Mcgraw Hill Financial, Indira Nooyi of

Pepsico and Ajay Banga president, and CEO of Master Card, among others. The primary focus of the meetings

during the visit is likely to be on trade and investment as both India and the US seek to advance their

business focus. The Obama administration’s goal is to increase bilateral trade to $500 billion a year from

about $100 billion currently. The leaders of the two countries, both from government and business, are

expected to discuss increased co-operation in areas such defence, security, energy (renewable and

nuclear), climate change, insurance and financial services, bilateral and multilateral trade, and issues

such as transfer pricing. The discussions during the visit are also likely to focus on promoting

manufacturing in India under the ‘Make in India’ banner and building of smart cities, where American firms like

Dell, IBM, Cisco have shown interest.

Over the past two decades the India-US relationship has progressed significantly. Indian and American

trade and investment are buoyant, defence trade has surged, and strategic consultations, intelligence

sharing and counter-terror cooperation have become more closely aligned. It is accepted that a strong,

successful and prosperous India is good for the US, and vice versa. The summit is being seen as an

opportunity for an all-encompassing look at geopolitics and geo-economics across the region and beyond. The

real challenge for the “natural partners”, going forward, will be expanding the relationship, deepening strategic

and economic cooperation and setting newer and

bigger goals for the relationship.

Contents Page 2 India-US Trade Insights Page 3 Areas of Discussion Page 6 Itinerary of the President

Friday, January 23, 2015

2 | P a g e President Obama’s India Visit by Edelman India - Public Affairs

India-US Trade Insights T S Vishwanath, Senior Advisor - Public Affairs

The Modi-Obama dialogue in New

Delhi on 26th of January 2015 and

the other discussions on the

sidelines between officials and

industry from both sides is expected

to focus a lot on bilateral trade and

investment issues. In fact, a bilateral investment

agreement has been billed as a big-ticket item for the

US President to take up with India.

The two sides have bilateral trade of around US$100

billion at present and have set a target of US$ 500

billion for the next two years. To achieve US$ 500

billion of trade a lot will have to change between the

two sides. And it is specifically the details that the two

sides are expected to address in the forthcoming

meeting.

A bilateral investment treaty (BIT) with India will remain

a top agenda for both the government and business in

the US in the forthcoming meetings. US business has

been clear that for investments to grow to India there is

a need for a BIT. The Indian government, however,

wants to make some changes to investor-state

disputes section in the model BIT before negotiating

with the US. The last round of discussions between the

two sides happened in 2011.

The other issues for the US include issues related to

high levels of duty on products like wine and spirits and

India’s stand on patents regarding pharmaceutical

products, and clinical trials as also piracy besides

others like the current Indian government view on e-

commerce. These issues are also expected to figure

at the India-US CEO Forum, which will also meet on

January 26.

The USITC is of the view that if tariff and investment

restrictions were fully eliminated and standards of

intellectual property protection in India are “made

comparable to US and Western European levels” then

US exports to India would rise by two-thirds, and US

investment in India would roughly double.

From the Indian side the main issues relate to a

Totalisation Agreement, which will be beneficial for

Indian companies that are based on the US and

employ Indian nationals. The Totalisation Agreement

would ensure that the Social Security contributions by

Indian nationals are refunded to people when they

return to India after short stints in the US.

The biggest thrust from the Indian side is expected to

be the “Make in India” initiative where it will seek US

investments into India. Total US investments into India

since the year 2000 are around US$ 14 billion and New

Delhi is of the view that this can jump significantly in

the coming years. While both sides realise that it would

be too early to start any discussions for a possible free

trade agreement what they would look for are areas

where there can be harmonisation of standards and

procedures to ease investment and trade flows. The

biggest challenge for India would be to convince US

businesses and government that investments would be

safe in the country.

Both New Delhi and Washington do not seem to be

moving towards any big-ticket announcement on trade

during President Obama’s visit. But what is expected

to change is the level and frequency of dialogue. After

a long impasse there has been a spurt in the interaction

between the two sides since Prime Minister Modi’s visit

to the US. This visit is expected to further boost that

process. The dialogue process could then help in

developing greater business involvement in the coming

months.

3 | P a g e President Obama’s India Visit by Edelman India - Public Affairs

Areas of discussion

While trade between India and the US has grown over

the past decade - from $24 billion in 2003 to over $90 billion in 2013 - there are significant opportunities to

deepen the relations between the two countries. The visit’s primary discussion focus is likely to be on

furthering trade between the two countries. In this regard a revival of the Bilateral Investment Treaty (BIT)

is likely to be broached by the US.

India may also push for securing early passage of the Generalised System of Preferences scheme, the trade

enhancing regime that has long facilitated India’s exports to the US.

Intellectual Property Rights (IPR)

In December 2014, the US Trade Representative (USTR) issued a statement on a review of India's IPR

system. The USTR listed India as one of the countries with the "most significant concerns" regarding weak

IPR laws. The US is likely to begin its review in February with a report due in April, which makes the

discussion on the issue during this visit a very important one. The talks are likely to focus on India's

new IPR policy and ironing out differences between the two countries. The discussions are likely to broadly

cover areas such as copyright, traditional medicine, trademarks, patents and access to healthcare Bilateral agreement on Tax

India is likely to discuss a bilateral tax agreement with

the United States to aid foreign investment in the country. The pact, which industry executives say would

specifically target the prickly issue of transfer pricing, is part of the Indian government’s broader push for

bilateral tax deals with top trading partners including Britain. Under the discussion the Indian government is

likely to decide pricing agreements, which set the tax liability of the transfer pricing value.

Manufacturing

The talks on manufacturing are likely to focus on steps taken under the ‘Make in India’ campaign banner. The

working groups are likely to discuss issues related to labour laws and environmental clearances. This

follows the decision taken by Commerce and Industry

Minister Nirmala Sitharaman and US Trade Representative Michael Froman at the recent Trade

Policy Forum (TPF) meeting to exchange information on stakeholder participation in framing of trade and

investment policies and procedures. At the meeting, the US had highlighted the importance of providing a

transparent and predictable policy environment to help attract investments in manufacturing. The US is likely

to seek more clarity on land acquisition and taxation processes. Infrastructure development and

participation of states in manufacturing are also likely to be discussed.

Foreign Direct Investment The Modi government is likely to discuss two big-ticket reforms that the US has been pushing for – FDI in

multi-brand retail and further increasing the FDI limit in defence to 100 percent which the Modi government

had recently raised from 26 percent to 49 percent. Discussions are also likely to take place on the

liberalisation of current FDI restrictions in the e-commerce sector

Insurance and Financial Services

The US sees India’s insurance sector as a challenge as the opening up of the insurance sector through

legislation has not progressed in the Indian Parliament. The Ordinance clearing 49% FDI in the insurance

sector may still not attract investors due to its temporary nature. This is likely to become one of the

important talking points of the visit. Immigration

India is likely to discuss with President Obama his

administration’s policy on high-tech immigration and

other issues like social security totalisation. According

to recent research by the Peterson Institute of

International Economics, the economic value of Indian

migrants in America is close to $50 billion per annum.

The ‘totalisation agreement’ is essentially for migrants

who spend their working lives across the two countries

by protecting their benefits and removing legal

obstacles from receiving them in another country

Energy

Discussions are likely to focus on cooperation on the

energy challenges in India. India has a huge demand-

supply gap in the availability of energy which is

4 | P a g e President Obama’s India Visit by Edelman India - Public Affairs

resulting in recourse to expensive diesel-based back-

up generator systems and an increasing reliance on

import of fuels. For India’s energy security there is an

urgent call for enhancing investments in energy

production and generation and in maximising the use

of domestically available energy resource.

The US and India have a shared interest in the

development and use of clean energy

technologies. Therefore, renewable energy is likely to

be high on the agenda, with the PM’s endorsement for

an expansion of the role of renewable energy in India’s

energy economy. For its focus on Solar, the Indian

government is likely to initiate a discussion on

accessing technology and developing manufacturing

capabilities

An outstanding topic for the two leaders is the civil

nuclear initiative. This includes addressing the issue of

nuclear liability that has prevented American

companies from participating in India’s atomic power

programme. The discussions are also likely to address

India’s concerns about administrative arrangements for

monitoring the sensitive parts of India’s civilian nuclear

cycle and facilitating India’s early membership of global

non-proliferation regimes such as the Nuclear

Suppliers Group.

Climate Change

There is a likelihood of detailed discussions on the

possible commitments by both countries towards

reducing greenhouse gas emissions. An agreement

between the US and China was announced last

November and an upcoming landmark climate change

meeting in Paris at the end of 2015 appears to have

made matters urgent.

Defence and Security

India's arms purchases of $400 million in 2001-2004

has expanded to $5.7 billion between 2009 to 2013.

Over the next two years, India could buy another $8.3

billion worth of US arms. With Mr. Modi’s Make in India

campaign New Delhi is likely to reinforce its preference

for co-manufacturing and co-developing weaponry.

The India-US Defence Trade and Technology Initiative

(DTTI) is likely to discuss these primary objectives of

promoting collaboration in defence technology and

enabling co-production and co-development of critical

and modern defence systems.

A highlight of the visit could be the signing of a New 10-

year Framework Defence Agreement between the two

countries. The focus of the framework is expected to

be on strengthening of intelligence systems and

electronic defence systems for defence modernisation

in which US is the pre-eminent leader.

Furthermore, Indian and US officials may discuss the

issue of sharing defence information and intelligence

cooperation. Common platforms of co-operation during

crisis situations are also expected to be on the agenda.

International Strategy

China is likely to be a topic of discussion with focus on

more strategic co-operation between India and the US.

Given China’s soaring defence budget, nations around

the region are investing more to even out the balance

of power. Experts believe it is in the US’s interest that

there be a strong India — an India that is prosperous

and contributing to a stable Asia and Indian Ocean.

India and the US are also preoccupied with

Afghanistan’s future. The two leaders are likely to

discuss further efforts to stabilise Afghanistan after the

withdrawal of most NATO forces. Co-operation on

military field hospitals and personnel to help the Afghan

Army and Air Force are likely areas of discussion.

The discussion on Pakistan is likely to focus on

concerns around rising terrorism in the country. The

US and Pakistan have close ties and India is likely to

pursue talks about a no-tolerance policy towards

terrorism and cross-border action. India is likely to push

for a strong statement against Pakistan’s support of

terrorism as Secretary of State John Kerry had made

during his visit recently

Experts believe the use of military to contain terrorism

can be counterproductive and to deal with terror, the

two countries are likely to push for political,

intelligence, religious messaging, and police

cooperation strategies. Prime Minister Modi and

President Obama are likely to give US-Indian

cooperation in counter terror the highest priority.

5 | P a g e President Obama’s India Visit by Edelman India - Public Affairs

Itinerary of President Obama

Date Programme

January 25th US President Barack Obama arrives at 10am

Ceremonial welcome ceremony at Rashtrapati Bhavan

President Obama to lay wreath and pay homage at Mahatma Gandhi memorial at Rajghat

Bilateral discussions at Hyderabad House: PM Modi and President Obama to first have a

restricted meeting, followed by delegation-level talks over lunch

PM Modi to host lunch for President Obama

Meeting and dinner hosted by President Pranab Mukherjee

January 26th President Obama to be chief guest at Republic Day function

Will attend At-home reception of President Pranab Mukherjee

President Obama and PM Modi will address events with business leaders during the afternoon.

January 27th Address by President Obama on 'India and America: The Future We Can Build Together' at

the Siri Fort Auditorium.

Visit Agra with family to see the Taj Mahal

Townhall event with the Prime Minister

Departure

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