Over the years, and following the general elections in 2019, the partnership between the United States and India has gone from strength to strength. U.S.-India bilateral trade surged to more than $142 billion in 2018, up 12.7 percent from $126 billion in 2017, according to a report from the U.S.-India Strategic Partnership Forum (USISPF). In a significant development, India became the 37th country to be accorded the Strategic Trade Authorization-1 (STA-1) status by the United States. This has paved the way for greater collaboration and high-technology product sales to New Delhi, particularly in the civil space and defense sectors.
The manufacturing sector has also received a boost through governmental initiatives such as Make in India, Skill India and Digital India. Reforms on the distribution front of the power sector have been implemented but need to accelerate to meaningfully turn around that sector. Most recently, August 2019 featured reforms aimed to make India a more attractive destination for foreign direct investment, including across the coal, contract manufacturing, retail (including online retail), and digital media sectors.
To consider India’s economic outlook, Pepper Hamilton and USISPF hosted an event with Dharmakirti Joshi, chief economist of CRISIL – An S&P Global Company, in November 2018. Moderated by Soumya Sharma, the discussion focused on business topics pertaining to sectors experiencing and expecting growth. Mr. Joshi presented an optimistic outlook due to strong manufacturing, construction and infrastructure markets, despite challenges to India’s economy overall, such as nonperforming assets and depreciation of the Indian rupee. Recent implementation of the Goods and Services Tax (GST) and the Insolvency and Bankruptcy Code (IBC) will be game changers over the next few years. The GST regime is helping create a common national market, and improving logistics efficiencies and formalization of the economy. And the IBC is speeding up resolution of bad loans, which should improve the corporate credit culture. A key variable for India’s economic stability over the upcoming months, given both these domestic reforms and broader global trends toward protectionism, lies with oil prices.
In June 2019, the firm hosted Cyril Shroff, managing partner at Cyril Amarchand Mangaldas, for an interactive discussion chaired by Soumya Sharma and Matthew Adler, chair of Pepper’s International and Domestic Arbitration Practice Group. The discussion centered around India’s new data protection and data localization laws and regulatory proposals, as well as concerns emanating from India’s deeply burdened debt market. In 2018, there were many changes in the legal and regulatory landscape of India, including the IBC and changes in insurance regulation. A landmark in India’s regulatory landscape was the Supreme Court’s order striking down a circular by India’s central bank, RBI, requiring all defaults to be submitted to insolvency proceedings. Although the Court recognized the power of RBI to issue these directions, it ruled against a straightjacket approach.
An ever-evolving area of Indian law is arbitration, with 2018 being a particularly active year given India’s hope to become a global hub for arbitration in the future. On the legislative side, the Arbitration and Conciliation (Amendment) Bill was introduced in the Indian Parliament in July 2018. In this issue, attorneys from Pepper’s international and cross-border practices offer an overview of recent Indian judgments and legislation in the field of arbitration.
Business and legal reforms in 2018 helped India rise in global rankings for ease of doing business, making foreign investment more attractive. Total imports to the United States from India grew 11.9 percent to $54.4 billion in 2018, up from $5.8 billion in 2017, and up 111.7 percent from 2008. At the same time, the expanding Indian middle class is yielding increased domestic consumption of consumer goods and products. U.S. exports of goods, services and agricultural products to India rose to $60.4 billion in 2018 from $48.8 billion in 2017 — a massive increase since 2000, when the United States exported only $4.6 billion to India. The Indian government recently noted that, according to provisional figures, 2018 to 2019 has the highest total foreign direct investment ever received in India. Here at Pepper, we look forward to continued growth in 2019 — with the potential to reach $210 billion in bilateral trade by 2021. Pepper is devoted to serving U.S. clients investing and operating in India, and Indian clients investing or doing business in the United States.
The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship.