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Obama’s trade and tax wish list may impact India

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While India found no mention in U.S. President Barack Obama’s annual State of the Union (SOTU) address, certain policy proposals that he made to both houses of Congress on Tuesday evening, including increased trade authority and a tax clampdown on businesses, could have a ripple effect on economic ties with economic partner-nations.

On the subject of international trade deals, which in all likelihood concerned the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership, Mr. Obama said that although past trade deals had not lived up to the “hype,” this is the reason Washington had “gone after countries that break the rules at our expense.”

To facilitate this crackdown in the trade arena, Mr. Obama said, he was “asking both parties to give me trade promotion authority to protect American workers, with strong new trade deals from Asia to Europe that aren’t just free, but fair.”

His remarks on this count acquire significance in the light of his visit to India this weekend, where his engagement with the administration of Indian Prime Minister Narendra Modi hinges principally on increasing business and economic opportunities.

Ahead of the President’s historic trip to join India’s Republic Day celebration as Chief Guest, officials here have made clear that certain obstacles remain in this area, including “philosophical” differences that India appeared to have with the U.S. regarding intellectual property rights protection, and protectionist trends implied by India’s local content requirements, relevant to sectors such as pharmaceuticals, solar panels, digital media and telecommunications.

Further, The Hindu earlier reported that there was some concern from the American side regarding the Modi government’s “Make in India” campaign, and Mr. Obama’s SOTU remarks may be a veiled hint that Washington would not be satisfied with anything less than trade that was unconditionally free.

A second policy proposal outlined by Mr. Obama to his audience on Capitol Hill related to tax code reform, focusing on shutting out tax loopholes that benefited the wealthiest citizens and corporations.

“Let’s close loopholes so we stop rewarding companies that keep profits abroad, and reward those that invest in America,” the President said, adding, “Let’s close the loopholes that lead to inequality by allowing the top one per cent to avoid paying taxes on their accumulated wealth… We need a tax code that truly helps working Americans…”

If Congress were to grant the President his wish by enacting tax code reforms towards these ends it may result in U.S. investors pulling back funds destined for Indian shores, particularly much-needed Foreign Direct Investment for India’s critical infrastructure needs.

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