John Neuffer photo
India Pauses on Problematic Trade Policy

There’s good news from New Delhi today as the Government of India (GOI) has opted to take a closer look at its highly controversial policy designed to compel foreign companies to manufacture electronic products in India if they want to sell there. After a meeting of India’s key economic and security policy advisors, the Prime Minister’s Office announced its decision today to revisit and review the entire scheme, known as the Preferential Market Access (PMA) policy. Importantly, included in the announcement was a commitment to put in abeyance implementation of the policy as it pertains to the private sector.

Since it was first proposed last year, ITI and numerous business associations around the world have expressed strong reservations over the PMA. The global tech sector -- along with governments in Washington, Tokyo, Brussels, Seoul, and other capitals -- has urged the Indian government to hold firm to the open, competitive policies that have given rise to India’s economic strength. Turning away from that market-driven philosophy and toward a forced-localization approach would threaten to turn back the clock on India’s 20+ years of business- and job-creating success. It also would threaten to break down the interconnected trading system that underpins our global economy.

How so? Given India’s international influence, the broader ramifications of such forced localization include a contagion effect, inducing other countries to take similar actions. And that leaves us in a race to the bottom.

Since implementing major reforms in 1991, India has jumped forward in the software and services sectors. This success is proof positive that market-oriented approaches are the better way and that creeping protectionist schemes don’t work. Isolation ignores innovation, freezes opportunity, and drives a stake through the heart of economic growth.

That’s why we welcome the GOI’s decision to revisit and review the entire policy, including to hold in abeyance the application of its PMA policy to private-sector procurements. We believe the kind of market-based incentives that gave rise to India’s global leaders in software and services should be the foundation of its effort to build an ICT manufacturing sector. This open approach would help to drive lasting economic strength.

We support India’s desire to build robust ICT and ICT-enabled manufacturing sectors. In fact, India’s commitment to advance its economy, build a stronger manufacturing base, and grow its middle class will create numerous opportunities for increased trade for U.S.-based industries, including the tech sector. We stand ready to constructively engage with the U.S. and Indian governments on ways to expand those opportunities. And we are hopeful the four-week review of the PMA will lead the GOI to adopt global approaches to its procurement policies.

Public Policy Tags: Trade & Investment, Forced Localization