Even as US President Barack Obama visits India later this month, as the chief guest for the Republic Day celebrations, a recent US International Trade Commission (USITC) report on India’s trade, investment and industrial policies raises concerns on India’s customs and tariff barriers, intellectual property rights and FDI policies.
The report points out that between 2000 and 2013, US exports of goods to India grew at an average annual rate of 15.8% and the export of services grew at an average annual rate of 12.2%. Growth slowed significantly after 2007, when the average annual growth rate of US exports of goods dropped to 7.1%.
Nearly 18% of the US firms engaged with India reported tariffs and customs procedures as a big hurdle. Sector-wise, such hurdles reported by companies are highest in agriculture and food, followed by chemicals and textiles. As a result, some sectors, such as agriculture and retail and wholesale services, have very low shares of companies engaged in India.
In fact, high-duty regime will hurt India’s overall competitiveness and the government’s ambitious Make-in-India programme. Similarly, taxes and financial regulations are listed by 16.3% of US firms in India as the next biggest hurdle, followed by intellectual property and local-content requirements policies. The most burdensome barriers are the uncertain/inconsistent implementation of Indian regulations, and the lack of clarity on legal liability. India will have to quickly address these issues to attract investment by US firms.
