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  October 27th, 2015 | Written by

India Made Significant Changes to Some Trade and Investment Barriers

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  • A new USITC report describes changes to India’s trade and investment policies since Narendra Modi took office.
  • India has raised FDI equity caps in insurance and defense, helping to improve India’s investment regime.
  • India has reduced tariffs on some ICT products, but also increased tariffs on some telecoms products.

India has made significant changes to some of its policies that discriminate against U.S. trade and investment since Narendra Modi became Prime Minister on May 26, 2014 according a report released last week by the U.S. International Trade Commission (USITC).

The USITC prepared the report at the request of the U.S. House of Representatives Ways and Means Committee and the U.S. Senate Finance Committee.

The USITC report describes significant changes to India’s trade and investment policies by the government of Narendra Modi since it took office in May 2014 in four areas: foreign direct investment, tariffs and customs procedures, local-content and localization requirements, and standards and technical regulations.

Since May 2014 India has raised foreign direct investment (FDI) equity caps in the insurance and defense industries, removed the requirement for pre-investment authorizations in several industries and permitted FDI in certain segments of the railway industry.  These changes have helped to improve India’s overall investment regime, according to the USITC.

India has also made a small number changes in its tariffs and customs procedures.  It has reduced tariffs on some information, communications, and telecommunications (ICT)-related products, but also increased tariffs on several telecommunications products. Some changes have improved U.S. access to the Indian market.

India has made changes to policies and practices regarding local-content requirements and localization measures. The changes expand or propose to expand several local-content and localization requirements affecting certain ICT, electronics, and defense and civil aerospace products.  The changes affect measures that require foreign firms to purchase Indian inputs, conduct a share of business in India, conduct certain business activities in India, or submit to India-specific testing or registration.

The Modi government has expressed a commitment to harmonize India’s standards with international standards and to increase engagement with the United States on standards. Nevertheless, U.S. industry and government representatives report that the Modi government has created new mandatory standards and technical requirements unique to India that increase costs, delay time to market, and operate to exclude certain U.S. products from the Indian market.

The Modi government also pursued several broad policy changes to enhance India’s business climate during May 2014 to July 2015, according to the report.  Changes could positively affect India’s trade and investment climate by improving India’s economic infrastructure, improving the ease of doing business, creating greater bureaucratic transparency and accountability, changing taxation policy, and encouraging state-level policy changes in India.