Despite trade growth, India poses barriers: US report

Washington: Substantial growth in India-US bilateral trade and recent economic reforms unleashed by New Delhi notwithstanding, US companies face a series of trade and tariff barriers, an official report said here.

In its latest report '2013 National Trade Estimate: Foreign Trade Barriers' the US Trade Representative (USTR) has listed out a whole range of difficulties US companies face in India, which according to officials prevent them from realising the full potential of India-US economic relationship.

"While the United States has actively sought bilateral and multilateral opportunities to open India's market, US exporters continue to encounter tariff and non-tariff barriers that impede imports of US products, despite the government of India's ongoing economic reform efforts," the report said.

According to the report released yesterday, the US goods trade deficit with India was USD 18.2 billion in 2012, up USD 3.5 billion from 2011.

US goods exports in 2012 were USD 22.3 billion, up 3.9 per cent from the previous year. Corresponding US imports from India were USD 40.5 billion, up 12.1 per cent.

India is currently the 18th largest export market for US goods, the USTR report said.

US exports of private commercial services (i.e., excluding military and government) to India stood at USD 11.0 billion in 2011 (according to latest data available), and US imports were USD 16.9 billion.

Sales of services in India by majority US-owned affiliates were USD 14.2 billion in 2010 (latest data available), while sales of services in the US by majority India-owned firms were USD 7.3 billion.

"The stock of US foreign direct investment (FDI) in India was USD 24.7 billion in 2011 (latest data available), down from USD 24.8 billion in 2010. US FDI in India is largely in the professional, scientific, and technical services, finance/insurance services, and the information services sectors," it said.

USTR said the structure of India's customs tariff and fees system is complex and characterised by a lack of transparency in determining net effective rates of customs tariffs, excise duties, and other duties and charges.

US exporters have alleged that India's customs valuation methodologies do not reflect actual transaction values and raise the cost of exporting to India beyond applied tariff rates.

US companies have also faced extensive investigations related to their use of certain valuation methodologies when importing computer equipment. Companies have reported being subjected to excessive searches and seizures, it alleged.

The USTR held that India "lacks an overarching government procurement policy", and as a result, its government procurement practices and procedures vary at the state and central levels and by ministry.

"Foreign firms are disadvantaged when competing for Indian government contracts due to the preference afforded to Indian state-owned enterprises and the prevalence of such enterprises," it said.

The report also refers to India's export subsidy programmes, including exemptions from taxes for certain export-oriented enterprises and exporters in Special Economic Zones and duty drawback programmes that "appear to allow for drawback in excess of duties levied on imported inputs".

USTR said the Indian government had a strong ownership presence in major services industries such as banking and insurance, while private firms play a preponderant to exclusive role in some of the fastest growing areas of the services sector, such as information technology and business consulting.

It also referred to the "Indian policy that foreign satellite capacity must in practice be provided through the Indian Space Research Organisation (ISRO), effectively requiring foreign operators to sell capacity to a direct competitor."

The report said the US companies have noted that this requirement creates additional costs, allows ISRO to negotiate contract terms with the goal of moving the service to one of its satellites once capacity is available, and puts ISRO in a position of being able to determine the market growth rate.

The USTR report has also expressed its displeasure over the conditions imposed by India on entry of FDI in multi-brand retailing.

"The September 2012 retail policy announcements also explicitly prohibit FDI in single-brand and multi-brand retail by means of electronic commerce," it said.

Foreign providers of higher education services interested in establishing a presence in India face a number of barriers, it said.

This included a requirement that representatives of Indian states sit on university governing boards, quotas limiting enrolment, caps on tuition and fees, policies that create the potential for double-taxation, and difficulties repatriating salaries and income from research, it said.