They hoped the move would help in putting behind the recent acrimonious trade and business relationship between the two countries, especially in the area of intellectual property rights (IPR) and the pharma sector.
"I think it is a good constructive signal from the US that it wants to start with the new government without the baggage (or with as little baggage as possible) from the past," eminent Indian economist Arvind Subramanian said after the US Trade Representative announced its decision not to put India under the Priority Foreign Country as was demanded by a section of influential American industry.
India and the US need to move forward to resolve IPR issues and create a positive narrative about trade rather than the current negative one, Subramanian said. The Report announced further evaluation of India's intellectual property regime during an "out-of-cycle" review.
"This is a sensible outcome," Ron Somers, CEO and founder of the just-launched India First Group said. As president of the US India Business Council early this year, Somers had urged the US Trade Representative not to put India under the Priority Foreign Country, that too just ahead of the formation of a new government.
"A 301 downgrade would have been no way to greet a new Prime Minister. I said this in my 301 filing, and stand by this today," said Somers, who recently resigned from USIBC to form his own India centric consultancy group.
In a statement, the US India Business Council called for constructive dialogue on the issue of IPR between industry and the Governments of the United States and India.
"Do we have concerns regarding IPR in India Yes. Going forward, is acrimony the answer Absolutely not," said USIBC acting president, Diane Farrell.
"It is time to open up the lines of communication and address the challenges directly. USIBC looks forward to working with both the US Government and the Government of India to facilitate a constructive and mutually beneficial dialogue," she said.
The US Chamber of Commerce Global Intellectual Property Center (GIPC), which had launched a massive campaign to declare India as a Priority Foreign Country, in a change of stance, welcomed the USTR decision.
"We are encouraged that USTR recognises the growing concerns with India's deteriorating IP environment, and support the decision to initiate an 'out-of-cycle' review of India. We hope that this step will generate much needed dialogue for the US and Indian governments to address the concerns identified in the Report," said GIPC executive vice president Mark Elliot.
The Alliance for Fair Trade with India (AFTI) welcomed the USTR 2014 Special 301 Report.
"AFTI members view the planned 'out of cycle' review of India's intellectual property system as an opportunity to address concerns identified in the Special 301 Report and to find constructive and lasting solutions," it said in a statement.
AFTI will continue to advocate for measures to encourage India to abandon the industrial policies that are harming US workers and businesses, it said.
Noting that the 2014 Special 301 Report contains strong language acknowledging the serious and growing challenges to the protection of ideas, brands and inventions in the Indian market, AFTI said this reflects the combined efforts of over 200 Members of Congress and 15 Governors who have called attention to the deteriorating innovation environment in India over the last year.
Peter Maybarduk, director, Public Citizen Global Access to Medicines Programme, alleged that the 301 Report is a morally repugnant and unnecessary US government practice, which annually bullies countries for implementing polices that promote access to lifesaving medicines despite serious questions about the legality of such unilateral threats under international law.
The 301 watch list should be discontinued in its entirety, he demanded.
"The US Chamber of Commerce, Big Pharma and other big business groups have mounted a misleading campaign to push the US government to name India a "Priority Foreign Country," Maybarduk said.
"Today, the Chamber campaign has missed its target. The US has declined to designate India a Priority Foreign Country. Big Pharma overreached, trying to accomplish with lobbying power and bully tactics what it could not with evidence," he said.
In a statement, Pharmaceutical Research and Manufacturers of America (PhRMA) president and CEO John Castellani, maintained its argument that the systemic pattern of undermining patented medicines in India warrant its elevation to Priority Foreign Country status.
At the same time, it welcomed the announcement that USTR will initiate an Out-of-Cycle Review of India this fall.
"Such a review provides a needed avenue for constructive engagement with the incoming Indian government on how to resolve the deteriorating IP environment in India," he said.
In another statement, Mdecins Sans Frontires (MSF) said that India is playing by the rules, and USTR knows it.
"India's policies have saved lives. It's an example that should be followed, not criticised," it said.