In recent years, the commercial relationship between the US and India has matured significantly. Over the past decade, two-way merchandise trade has grown from $44 billion to $74 billion.

However, for a point of comparison, look for a moment at the US-China trading relationship. It’s on another level, with bilateral merchandise trade topping $635 billion last year. A decade ago, US-India trade was 10 per cent the size of US-China trade. We’re closing the gap: US-India trade is now 11 per cent as large.

Obviously, we should aim much higher. We’re leaving money on the table, as the saying goes. We are leaving opportunities for mutually beneficial growth and job creation untapped.

Pushing the envelope

As the world’s largest and oldest democracies — bound together by shared values — why have we not been able to accelerate our two-way trade? It behoves us to "put a strategic lens on the commercial relationship", to use Secretary of State Rex Tillerson’s phrase. From the business community’s perspective, this demands that both the US and India steer away from protectionist measures to truly live up to the values of free and fair trade.

The US-India relationship has the opportunity of a century to reset the regional dynamics in the Indo-Pacific. And there is every reason to be positive about India’s growth story. On the back of its very strong and far-reaching reform agenda, India is now witnessing enhancements in global benchmarks — whether it is in the World Bank’s ease of doing business index, Moody’s rating, the global innovation index, or the global competitiveness index. In fact, the Center for Strategic and International Studies, a bipartisan policy research group that tracks India’s reform agenda, calculates that nine out of 30 big-bang reforms have been completed in the three years of Prime Minister Narendra Modi’s government.

At a time when foreign direct investment is lower globally, India recorded the highest inflow of FDI in 2016 at $60.1 billion. The Government has fast-tracked 200 infrastructure projects worth $140 billion, backed by technology-driven and e-governance initiatives. Indeed, as the Economic Survey 2017-18 pointed out, India’s projected economic growth is between 7 per cent and 7.5 per cent for this year and next year, inflation is down, a bankruptcy code is helping resolve stressed assets issues, and the goods and services tax (GST) has resulted in widening the indirect tax base.

In short, India has emerged as a strong geo-economic player. Global companies today cannot afford to miss the India opportunity. More than 600 US companies invest in India. Indian companies too are a force to reckon with. There are signs of India transitioning into an innovation-led economy, with more than 20,000 startups. If the US-India story is to succeed, protectionism on either side cannot be the friction that slows this growth.

Abjure protectionism

Modi’s clarion call in Davos was "India Means Business". Yet, if the recently announced budget is a case in point, there are worrying signals for the business community. Certain investor concerns are still left unaddressed and these headwinds need to be addressed. Instances such as blunt imposition of price controls, unpredictable tariffs on agriculture or electronics products, preferential market access for domestic companies, and a challenging environment that does not consistently protect intellectual property can deter further foreign investment. Between 2016 and 2017, investment in the life sciences sector declined by almost 59 per cent from previous years. The Government’s decision to continue the price control policy portends a continued downward trend in this critical sector despite other positive moves such as boosting healthcare spending and health insurance coverage.

India has made tremendous strides in creating greater tax certainty, predictability, and transparency as the Government integrates GST into the economy. A significant positive step toward improving the investment climate would be to further reduce tax uncertainty for multinational companies and institutional investors, especially in areas such as resolving transfer pricing disputes, updating the US-India bilateral tax treaty, and overhauling tax litigation and administrative processes, among others.

Financial maturity needed

India’s financial markets can compete with the world’s best, but they must continue to mature and deepen to support the economic growth Modi has promised and that Indian and foreign investors are now expecting. Bond market development remains a prime area for reform if companies and investors are to have deeper resources for capital and the investment diversification they need to grow.

On the US side, recent proposals to restrict legal immigration and calls to unilaterally impose tariffs have the potential to disrupt a mature trading relationship that the US enjoys with its partners. This disruption must be avoided.

Ambassador Ken Juster remarked with great optimism that "India can seize the strategic opportunity — through trade and investment — to become an alternative hub for US business in the Indo-Pacific." The urgency to do this now could not be greater. China’s strategic and economic reach will only continue to rise. To rise to its full potential, India will require a renewed focus on reforms and a more open trade architecture.

The writer is president of the US-India Business Council and former assistant secretary of state for South and Central Asia