Barack Obama's India visit: Economic issues to get top priority

NEW DELHI: The first time Prime Minister Narendra Modi and US president Barack Obama met in November they salvaged a global trade deal.

On Sunday, when they meet to draw up a roadmap to strengthen ties, trade and economic issues will get top billing. There are two areas where US companies want predictability — taxes and intellectual property rights. Both are expected to see some movement. The joint declaration is likely to have a mention of progress made on IPR since Modi and Obama met in Washington. It's expected to signal "predictability" in Indian policy.

India is ready to commit to the signing of an advance pricing arrangement with US companies, which will be modelled on the one recently signed with a Japanese firm. The idea is to make the transfer-pricing regime transparent and hassle free for multinationals.

India and US are also expected to signal finalizing a Bilateral Investment Treaty to protect investor interests. India is close to finalizing the model agreement, which will be the basis for negotiations, sources said. The US is likely to press for a more liberal FDI regime, a reform the Modi government isn't averse to, barring in sectors such as retail and e-commerce.

These steps are expected to smoothen the road for Modi's pet "Make in India" project and ensure that India emerges as a major manufacturing hub. There are areas where roadblocks are unlikely to be removed soon. These include India's long-pending demand for a Totalization Agreement which would pave the way for IT professionals and other temporary workers to get a refund on their social security payments in the US. "India perversely provides about $3 billion foreign aid to the US.

Indian workers pay the US government by way of social security contributions that you can never recover... The Indian aid programme is involuntary. We want this changed and one major issue that must be addressed is a totalization agreement that'll allow Indian workers recover the $3 billion aid they provide every year to the US," Arvind Subramanian, chief economic advisor, said last weekend.

Another irritant is the demand for more visas for India's IT professionals. The mood in the US has swung against outsourcing which is a key business for India's IT sector. Modi is expected to raise the demand again. Apart from these two issues Indian CEOs are keen that US makes FATCA (Foreign Account Tax Compliance Act) rules easier for smoother remittances. India is due to sign the pact by month-end.

Although there's no move to sign a trade deal, Indian businesses are looking at hurdles to be removed for a trade pact. The issue of smart cities and some import curbs such as those on pomegranates and mangoes are expected to figure in the trade and investment dialogue.