Restrictive Indian trade policies have delayed American export and investment to India, a USITC report has said with the US lawmakers asking the Narendra Modi government to address these significant areas of concern as both countries work to strengthen economic relations.
“US exports to and investment in India would be significantly higher if not for Indian policy barriers,” the US International Trade Commission (USITC) said in its report “Trade, Investment, and Industrial Policies in India: Effects on the US Economy.”
Prepared at the request of lawmakers, the report provides information on the effects of a wide range of Indian policies that limit US exports to and investment in India.
These policy measures include tariffs and customs procedures, foreign direct investment restrictions, local-content requirements, treatment of intellectual property, taxes and financial regulations, regulatory uncertainty, and other non tariff measures, such as unclear legal liability, price controls, and sanitary and phytosanitary standards.
“We remain concerned about systemic and continuing market access barriers identified in the ITC’s report that undermine a market-based path to development for India and diminish opportunities for US workers and businesses,” said the House Ways and Means Committee Chairman Dave Camp, Ranking Member Sander Levin (D-MI), and Senate Finance Committee Chairman Ron Wyden and Ranking Member Orrin Hatch in a joint statement.
“We urge the Indian government to address these significant areas of concern as the United States and India work to strengthen our economic relationship,” the four American lawmakers said.
We are at a pivotal moment for the US-India relationship.
Prime Minister Narendra Modi, who recently took the helm of the Indian government, has spoken of a pro-growth vision for India. We are hopeful that we may see a deepening expansion of our long-term trade and investment relationship, which has already risen to nearly USD100 billion,” the joint statement said.
In an effort to obtain the most comprehensive and up-to-date information possible, in light of India’s national elections, the four lawmakers requested in September that the Commission conduct a second investigation of India’s trade and investment practices, scheduled to be delivered to Congress on September 24, 2015.
The purpose of this second investigation is to seek information concerning India’s policies since the first investigation, they said.
The report released yesterday features the results of a USITC survey of US firms in selected industries that are currently doing business in India, a quantitative analysis (using economic modeling) of the effects of Indian policy measures on US workers and the US economy, and qualitative research into these effects.
It also includes case studies and examples illustrating ways that the policies affect particular companies or industries.
According to the report, the share of US companies substantially adversely affected by restrictive Indian policies rose from 18.8 per cent to 26.1 per cent between 2007 and 2013.
Shares for individual sectors in 2013 ranged from 7.7 per cent to 44.1 per cent. Over 60 per cent of the affected companies have made strategic changes in response to these barriers, most often directing fewer resources to the Indian market, it said.
Policies in two areas tariffs and customs procedures, and taxes and financial regulations have the heaviest effects on US companies, USITC said adding that other issues, including investment and intellectual property policies, have large negative effects on specific industries.
If tariff and investment restrictions were fully eliminated and standards of IP protection were made comparable to US and Western European levels, Commission model results indicate that US exports to India would rise by two-thirds, and US investment in India would roughly double, the report said.