Business

Wilbur Ross says recent regulations could hurt investment in India

Posted May 8, 2019 6:57 a.m. EDT

— A senior US official has a warning for India: Regulations introduced by Prime Minister Narendra Modi's government could scare American companies away.

"US businesses face significant market access barriers in India," US Commerce Secretary Wilbur Ross said in a speech in New Delhi this week, citing "multiple practices and regulations that disadvantage foreign companies."

Ross, who is in India for trade talks, expanded on those remarks in an interview with local media.

"There's a fundamental philosophy of favoring Indian business versus foreign. We hope that will gradually change over time," he told Indian TV channel CNBC-TV18. "There's a limit to how far the discriminatory behavior can go," he added.

The warning from one of President Donald Trump's top economic advisers comes as India votes in its massive general election. Modi is bidding to win a second term as prime minister, after promises to boost business and economic development helped earn him a landslide victory five years ago.

Foreign investment has shot up since then, with much of the money coming from the United States. Companies such as Walmart and Amazon have committed tens of billions of dollars, looking to cash in on India's massive market of more than 1.3 billion people.

But the pace of growth in investment slowed markedly in the lead-up to the election, as Modi tried to appease thousands of small retailers that form a significant part of his political base.

Amazon, Walmart, Facebook and Mastercard have recently faced new restrictions in areas such as e-commerce and digital payments.

Ross cited Walmart's $16 billion purchase of Indian e-commerce leader Flipkart last year, saying the restrictions imposed on it earlier this year could dissuade others from pouring money into the country.

"Walmart is the largest single foreign direct investor India has ever had and they suddenly got that kind of negative impact from the new rule," he told CNBC-TV18. "It makes people worried about making investments."

The US-India trading relationship — worth about $125 billion a year — has become strained as Trump's "Buy American, Hire American" strategy clashes with Modi's "Make in India" campaign.

India has threatened tariffs on US goods worth over $200 million, in retaliation for Trump's tariffs on Indian steel and aluminum exports imposed last year. And Washington announced two months ago that it would remove India from a preferential trade program that grants it tariff exemptions on exports to the United States worth $5.6 billion.

"As President Trump has said, trade relationships should be based on fairness and reciprocity," Ross said in his speech. "Our goal is to eliminate barriers to US companies operating here," he added.