"In spite of the opportunities that exist and the impact, the positive impact that open markets have had on the ground in India, the government of India seems to be doing a stutter- step on open markets and setting up a steeplechase of barriers to the success of foreign companies, especially American entities," Dean Garfield, President and CEO of the Information Technology Industry Council, said yesterday.
Testifying before a Congressional Committee, Garfield said examples are wide-ranging, from random new regulations to new testing and certification regimes to have access to the market at all.
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India is one of the partners and participants in the Information Technology Agreement (ITA) that was signed in 1996, but the world has changed tremendously since 1996, he added.
"None of us are carrying around mobile devices that we held back then, and yet and still, India seems resistant to updating that agreement and moving forward with a new ITA," Garfield said.
He said the most problematic of these is the preferential market access regime that's now in place in India, which essentially boils down to if it's not manufactured in India, then it cannot be merchandised there, which has the potential to foreclose that market to foreign players, including the US.
"As a result, over the last few years, we've started to see a decline in foreign-direct investment in India and is leading a lot of companies to question their ability to fully access the market, particularly since it's not just limited to government procurement, but includes private sector arrangements and deals between private entities," he said.
"India has suggested that the concern there is really focused on information security and protecting the security of the country, which we can empathise with, but the security of their products is not related to where it's made, it's related to how it's made and there are reasonable ways for addressing those security concerns that I think industry is well-prepared to address," Garfield said.
Though these issues are important for US relationship with India, they're, in fact, quite significant because of the potential contagion effect, he said.
Subramanian said the sectoral and the micro should not obscure the broad macro developments.
He told the lawmakers, "Despite India's transitional turbulence that's happening now -- slower growth, mounting macro vulnerabilities -- the predominant trend has been towards opening," he said, adding that in the last two-three years, few countries have opened up to FDI and foreign capital across the board -- stock markets, equities, debt instruments, among others -- like India has.
"That's because it reflects a deep and fundamental bipartisan consensus within India that the way forward is greater openness and globalisation."
Responding to questions from lawmakers, Subramanian argued in favour of removing India from GSP (generalised system of preferences).
Even though this would not effect India much, but New Delhi would see such a US move as retaliatory.
"I would be highly doubtful whether actions like that, you know, would really change the regulatory environment in a way that we all want to see change," he said in response to a question from Congressman Devin Nun, chairman of the Trade Subcommittee of the House Ways and Means Committee at the hearing on India-US trade.
"My sense is that the loss of GSP, in quantitative terms, will not be huge for India, you know. India, basically exports a lot of high tech, you know, more advanced goods and, apart from a few things here and there, I think the quantitative impact will not be great," he said.
"So it doesn't make for a very strong lever vis-a-vis India. But I think you're going to incur the diplomatic cost because this can be symbolically seen as a kind of, you know, retaliatory reaction or so. That's why I think on the balance of costs and benefits, I would be a little hesitant about using that," Subramanian said in response to another question from Congressman Ron Kind.
GSP, which expires in July, would come up before the Congress for re-authorisation.
GSP is a programme designed to promote economic growth in the developing world by providing preferential duty-free entry for up to 5,000 products, when imported from one of the 127 designated beneficiary countries and territories.