This week, Indian Prime Minister Manmohan Singh travels to Washington for meetings with President Obama and top Administration officials. Their primary topic: economic growth. But several key policies being pursued by the Indian government would work to restrict the import of innovative products and services into India, setting back that nation’s economy with ripple effects globally.
We’ve written and spoken extensively about the forced localization component in the proposed Preferential Market Access (PMA) policy under review by the Government of India (GoI). While the Prime Minister put the forced localization proposal in abeyance -- a decision that is good for both the Indian economy and economies around the world -- there’s no word on when or whether the GoI will take forced localization in the PMA context completely off the table. An official announcement to that effect would be a welcome announcement during the Prime Minister’s visit.
Another issue drawing concerns from the global tech sector is a little more technical, but carries similar potential market-access repercussions. Last year, India’s Department of Electronics and Information Technology (DEITY) issued a “Compulsory Registration Order” that would require new electronics equipment that is imported into or sold in India to be tested by domestic labs, registered with the Bureau of Indian Standards, and then be specially labeled prior to going on the market. This costly and burdensome requirement is slated to go into effect on October 3, 2013, despite several assurances from senior-level GoI officials that a delay would be announced (see the related letter from ITI, CEA, and TIA on this issue to the U.S. government).
This isn’t a minor technical issue only affecting a few products. Rather, it’s a major regulatory change that impacts a wide range of goods from televisions and DVD players, to notebook computers and multimillion dollar servers and storage products. This policy forces manufacturers to submit their products for Indian-based testing, even if they were already tested to the same standard internationally. The GoI requirements were developed with limited industry consultations, are unworkable, and veer markedly from global norms. Given India’s admitted lack of testing capacity and infrastructure, as well as the extremely burdensome administrative and product labeling requirements, it will be impossible for global companies to import most of these products by the October 3 deadline. U.S. companies are not alone in their concern, as both our European and Japanese counterparts have communicated the same message to the GoI.
This practice of pursuing protectionist economic policies under the guise of “good government” is becoming all too common in numerous markets, and carries with it the real-world implication of cutting off market access for global companies in order to promote local manufacture of these products. It is a surprising and wrong-headed policy for a country such as India, which has developed highly successful entrepreneurial and innovation-driven industries in software and services through an open, market-based economic model. Restrictive proposals that would force localized testing and manufacturing put India’s past and current successes at serious risk.
We have joined with other leading business organizations to urge the Indian government to delay the October 3 compulsory registration requirement, and to consider approaches that are consistent with international standards and practices. We also have urged leading U.S. government officials to make a similar request to their Indian counterparts. Doing so is in the mutual interest of both governments and both economies.
We hope that, during his visit, the Prime Minister will gain a greater understanding of these concerns and work to develop approaches that drive progress for all sides, and don’t jeopardize his country’s current and future successes in the global economy.