India should focus on creating an environment which will foster its position in the global supply chain, the United States has said.

Observing that the ongoing pandemic may give rise to self-reliance and self-sufficiency sentiments among struggling economies, Joseph Semsar, Deputy Under Secretary of Commerce for International Trade, said that India with its ‘Atmanirbhar Bharat’ mission has initiated a programme that puts a question mark on the notion of self-reliance.

“Our thought is that isolationist policies can also cause a decrease in exchange between businesses and economies, less technology and best practice sharing, fewer joint research and development projects and stifled innovation,” Semsar said at the third India-US Leadership Summit organised virtually by the US-India Strategic Partnership Forum (USISPF).

“We urge the government of India to focus on creating an environment, fostering an environment that will enhance India’s position in the global supply chain,” he added.

“India has improved its ease of doing business index, but challenges remain on the market access front. There are concerning issues regarding data localisation, intellectual property rights, high tariffs, duplicative safety and security testing, price controls, and FDI restrictions in sectors such as insurance. These are the challenges that India and the United States have to work together to resolve,” Semsar continued.

Despite having an improved overall ease of doing business — that ranking is down to 63, out of 190 economies, which is incredible progress — India still ranks at 136 for starting a business, 154 for registering a property and 163 for enforcing contracts. “This ultimately hurts FDI in India, but has even more harmful impact on the creation of indigenous Indian firms particularly those that might be competitive, internationally,” he said.

“India should avoid the bait and switch tactic of attracting companies by implementing good policies only to later change course by adopting regulations that are inhibiting and costly to business,” Semsar noted.

Talking about the urgent need to diversify supply chains for both economic and national security of the US, he informed that business leaders are finally realising that they cannot rely on unsuitable sources for their production.

On this front, Semsar said, India has the potential to become a global supply chain leader in the Indo-Pacific region and beyond.

Being overly bureaucratic with firms that operate globally and know the intricacies of running a business in different countries will immediately reduce a country’s chance of attracting and retaining investment. Companies are extremely sensitive to regulatory oversight and bureaucratic controls, Semsar said, adding that they compare notes between countries and they are able to add up the cost down to the penny.

The time involved in dealing with burdensome government controls is an important cost that is very easily tracked.

According to Semsar, when it comes to supply chains, the industry recognises three things: diversification, resilience,, and reliability. Supply chain needs to be diversified, infrastructure needs to be resilient and reliable, and policies in the business environment also need to be reliable.

“Also, foreign investors look for the ability to have majority ownership and control and their business ventures to help strategically manage and deploy resources. US companies are extremely alert to market opportunities, no matter where they exist in the world,” Semsar said.

“However, in our minds, India to a certain degree can make strides and levelling the playing field by abandoning discriminatory policies, enhancing transparency and predictability and its policies and lowering the cost of doing business,” Semsar expressed.

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