Pranab Mukherjee to take up protectionism with Hillary Clinton

Finance minister Pranab Mukherjee will use his meeting with secretary of state Hillary Clinton to express India’s concerns at the rising tide of protectionism in the United States.

He will remind the US state department that the free quotient in free trade apparently fluctuates with US self-interest while protesting against the cost of an H-1B visa for Indian workers, the Ohio ban on outsourcing of government contracts and other Congressionally-mandated “Buy American” provisions.

“Protectionist policies are not acceptable,” Mukherjee said on the sidelines of the two-day India investment forum in New York on Wednesday. “We shall have to keep in view that if the world economy is to come out of the present crisis then protectionism is not the answer.”

The Barack Obama government is increasing the cost of an H-1B visa for Indian workers by $2,000, adding a roughly $250 million annual bill to the Indian IT industry.

Mukherjee said the financial crisis would only ease if there was a “free, uninterrupted flow of goods, services and capital” around the world. The minister will also fire a zinger at rising trade protectionism at this week’s IMF annual meeting in Washington, where G20 finance ministers will also gather informally.

India’s trade deficit rose to $56.6 billion in the April to August period. The existing deficit threatens to widen as the Indian economy continues to expand at 8.8% while the lukewarm recovery in the US, turns India’s second-largest trading partner protectionist. Indian exporters could find the US a harder market to crack open, as they come up against a wall of anti-import measures.

Mukherjee warned that “if there was no robust demand for exports from the developed countries then India’s exports may suffer. It may affect our trade balance in the course of time.”

Adopting a protectionist stance, the US House of Representatives recently passed two different bills — the “Made in America Act” and the Berry Amendment Extension Act — that stipulates that the Congress and the Department of Homeland Security buy only goods and services made in the US.

American CEOs and trade officials thronged the two-day India investment forum on Wednesday and Mukherjee’s job of selling India was made easy as the International Monetary Fund raised its 2010 economic growth forecast for India, citing strengthening local consumer demand. India’s economy will expand 9.7% this year, the Washington-based lender said in its World Economic Outlook, more than the 9.4% the IMF estimated in July.

“Our aim is to get the GDP for 2010-11 currently at 8.8% to revert to the high-growth path of an average of 9 % plus and to cross the double digit barrier in a year or two,” Mukherjee told the forum.

When a US business leader raised a question about India’s oil and gas sector, Mukherjee said India had abolished the administrated pricing policy to encourage foreign investment.

“We are making the prices internationally competitive so that the returns are assured for investors,” said Mukherjee. 

India allows 100% FDI in private refineries via the automatic route and up to 26% in government-owned ones, while 100% FDI is also granted in cases of petroleum products, gas pipelines, exploration, and marketing or retail via the automatic route.

India plans to sign an accord with the US on shale gas technology when President Barack Obama visits in November as India prepares to offer exploration areas for the first time next year.

“We are hopeful that we will get into collaboration,” S Sundareshan, India’s oil secretary, told 'Bloomberg' in New York. “The policy framework for shale gas is being formulated and the first round of auction will be before the end of 2011.”

India will need to change exploration laws to allow for the production of shale gas as current exploration licenses don’t include such so-called unconventional sources, Sundareshan said.