Ahead of President Barack Obama and Prime Minister Narendra Modi’s two crucial back-to-back meets on Monday with top CEOs from India and the US, Ajay Banga, chairman of the US India Business Council and president and chief executive officer MasterCard spoke to HT on a range of issues including India’s image as an investment destination and key areas of concern. Excerpts:
What does President Barack Obama’s visit to India mean for US investors?
The symbolism is huge. The fact that a sitting president is coming (to India) for the second time, the fact that he is coming for Republic Day and the fact the he is coming shortly after Prime Minister Narendra Modi’s visit to the US in September. The Prime Minister, apart from the rapturous welcome he got in the US from the non-resident Indian community, the reception he got from the US government as well as from American investors was very positive. To me, that is the catalyst of difference.
How would you rate the performance of the first eight months of the Modi government?
I would say probably better than I expected in terms of pace of willingness to take on hard decisions. For instance, the decision to allow 100% foreign direct investment (FDI) in railways, requires a degree of confidence and a degree of open acknowledgement of the challenges. That tells you that they are willing to take hard decisions and think outside the box.
Is there still a lot of anxiety among investors about the retrospective tax law? Do you expect the government to roll it back?
I think you do have a lot of investors concerned. There are a very large number of past cases, in very high dollar values, with a very high level of noticeability. You cannot hope that the tide will move on and people will forget about it in the long term. It’s not just about the roll-back. It is also about the disposal of the cases. The government should speed up resolution of these cases. I would love to see it rolled back because I believe retroactive taxation is an illogical step.
What about India’s image as an investment destination?
India’s image as an investment destination has improved dramatically over the past few months. The traditional manufacturing companies are busy reassessing their strategy to see how India could fit in and what’s needed for India to fit in. They will have issues and concerns. But they are relooking at their strategies after initiatives like ‘Make in India’. This is a government that is willing to engage in a discussion with you and openly tell you whether they agree or do not agree. That’s pretty cool.
Which are the main areas of concern for investors?
The first is on taxation. There is also issue of intellectual property (IP). If India wants to be the real originator of innovation, which it has every capability of becoming, then you need strong IP laws.
Do you expect any specific private sector deals to be announced during President Obama’s visit?
I don’t expect. The US system does not work in the form of the government making the private sector to come together to make some announcements. What you are going to have dialogues and discussions on concrete steps.
Do you think US rating agencies could eventually upgrade India’s sovereign ratings?
I think they have already indicated that. But you will eventually get an upgrade not just for perception, but also for delivery. If you keep getting improvements in the fiscal budget quality and the steps that are being taken on subsidies and the steps that are being taken on manufacturing, you will get an upgrade anyway. That will be a well-deserved upgrade.