Indians forced to drink second-rate liquor due to govt policies: US

US authorities said on Tuesday that the Indian government's policies are acting as barriers to American exports and investments in India.

In its report to a Senate committee, the US International Trade Commission (USITC), a quasi-judicial federal agency that probes trade issues, has identified several industries, ranging from wine and spirits to e-commerce, pharmaceuticals and information and communication, where it believes there are barriers to trade and investment.

The report said the proportion of US companies adversely affected by restrictive Indian policies rose from 18.8 per cent to 26.1 per cent between 2007 and 2013, the drop for individual sectors in 2013 ranging from 7.7 per cent to 44.1 per cent.

As a result, 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.

The Indian government did not react to the report. In the past, it has said that USITC reports were a unilateral action driven by lobby groups. In fact, Indian officials were specifically asked by the government not to meet a team from USITC earlier this year, and the government had said that all concerns should be discussed bilaterally.

From the extreme position, both India and the US have softened their stance in recent months with an agreement to prepare a clear work programme to improve trade and investment to improve relations.

Within the overall policy environment, key areas of concern were tariffs and customs procedures, taxes, and financial regulations. "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 (intellectual property) protection were made comparable to US and West European levels, (USIT) Commission model results indicate that US exports to India would rise by two-third, and US investment in India would roughly double," the report said.

In case of wine and spirits for instance, it has cited outrageous duties, while the patent regime in India has been blamed for impacting American pharma companies. Similarly, it has said that the rule mandating local sourcing for ICT (information, communication and technology) is hurting US players, pointing out multilevel marketing firm Amway and e-retailer Amazon's experiences in India.

Based on a survey, USITC has listed seven key concerns related to foreign direct investment in India - getting approvals and licences for investment, the limits on FDI, export commitments, minimum capitalisation requirement, and area restrictions such as telecom licences.