India has decided to block investigations by the United States into its trade policies and patent laws and prepare for a battle at the World Trade Organization (WTO), a move that could escalate already-strained tension between the two countries.
New Delhi is furious about a threat of trade sanctions made by the U.S. Trade Representative's (USTR) office over its protection of intellectual property rights (IPR), preference for domestic producers and non-trade barriers.
Ahead of a general election, Prime Minister Manmohan Singh's government does not want to be seen as bowing to U.S. pressure, amid lingering tension over the recent arrest and strip search of a female diplomat, Devyani Khobragade, in New York suspected of visa fraud.
On Wednesday, the National Association of Manufacturers (NAM) - which represents about 50 U.S. business groups - asked the USTR to designate India a Priority Foreign Country in its 2014 report.
"This designation appropriately would rank India among the very worst violators of intellectual property rights and establish a process leading to concrete solutions," NAM said in a letter to U.S. Trade Representative Michael Froman.
The USTR is holding public hearings for its annual report due in April. The report will provide details on nations denying protection of IP rights or fair market access to U.S. firms.
India is widely perceived in Washington as a serial trade offender, with U.S. firms unhappy about imports of everything from shrimp to steel pipes they say threaten jobs, as well as a lack of fair access to the Indian market for its goods.
This month, Washington said it was filing its second case at the WTO over domestic content requirements in India's solar programme, which aims to ease energy shortages in Asia's third-largest economy.
There are 14 past or current WTO cases between India and the United States, whose bilateral trade in goods measured $63.7 billion last year, not including the latest case.
India has since hardened its stance, instructing officials not to entertain any request from the United States International Trade Commission (USITC) - a quasi-judicial federal agency - to examine its trade practices.
India's trade ministry has also "advised" U.S Deputy Trade Representative Wendy