US exporters continue to face significant barriers in India

According to the Biden administration, US exporters continue to face significant tariff and non-tariff barriers that impede imports of their products into India.

The US Trade Representative (USTR) stated on Wednesday in its annual 2021 National Trade Estimate Report on Foreign Trade Barriers that while the Indian government pursued ongoing economic reform efforts, it also proceeded to promote programs like ‘Make in India,’ which favor domestic production over importation.

“Additionally, in May 2020, Prime Minister Narendra Modi announced the “Self-Reliant India” (Atmanirbhar Bharat) initiative to increase self-sufficiency by promoting domestic industry and reducing reliance on foreign suppliers,” the USTR declared in the India section of the voluminous report, which runs to over 570 pages.

“The United States has actively sought bilateral and multilateral opportunities to expand access to India’s market,” the statement said. “However, US exporters continue to face significant tariff and non-tariff barriers that impede US product imports into India.”

“Additionally, in May 2020, Prime Minister Narendra Modi announced the “Self-Reliant India” (Atmanirbhar Bharat) initiative to increase self-sufficiency by promoting domestic industry and reducing reliance on foreign suppliers,” the USTR declared in the India section of the voluminous report, which runs to over 570 pages.

“The United States has actively sought bilateral and multilateral opportunities to expand access to India’s market,” the statement said. “However, US exporters continue to face significant tariff and non-tariff barriers that impede US product imports into India.”

According to the report, the US goods trade deficit with India was USD 23.8 billion last year, a 1.7 percent (USD 389 million) increase over 2019. Goods exports to India totaled USD 27.4 billion, a decrease of 20.1% (USD 6.9 billion) from the previous year. India’s imports equaled USD 51.2 billion, an 11.3 percent decrease. In 2020, India was the US’s 12th largest goods export market.

In 2019, service exports to India were estimated to be USD 24.3 billion, while imports were estimated to be USD 29.7 billion. According to the report, sales of services in India by majority US-owned affiliates were USD 33.1 billion in 2018, while sales of services in the US by the majority of India-owned firms were USD 18.3 billion.

“US foreign direct investment in India (stock) was USD 45.9 billion in 2019, an 8.1 percent increase from 2018,” it said, adding that professional, scientific, and technical services, manufacturing, and wholesale trade were the leading sectors for the country’s direct investment in India. The annual report includes a detailed list of significant foreign barriers to US goods and services exports, investment, and e-commerce.

According to the Biden Administration’s first report, the Indian government has promoted the “Make in India” campaign since 2014, a drive to build the country’s manufacturing capacity in part by lowering barriers to foreign investment and instituting regulatory reforms.

India has raised duties on two broad groups of products as part of its campaign to encourage domestic production: labor-intensive products and electronics and communication devices such as mobile phones, televisions, and associated parts and components, it said.

According to the report, India’s tariff regime was also distinguished by large disparities between World Trade Organization-bound rates and most-favored-nation-applied rates. In 2019, India’s WTO-bound tariff rate averaged 50.8 percent, while its MFN tariff rate averaged 17.6 percent.

“India’s bound tariff rates on agricultural products are among the world’s highest, averaging 113.1 percent and ranging as high as 300 percent. Agricultural tariff rates are also high, averaging 38.8 percent,” the report said. “While India’s tariff rates for certain agricultural products are lower, the rates remain a significant barrier to trade in agricultural goods and processed foods” (e.g., poultry, potatoes, citrus, almonds, apples, grapes, canned peaches, chocolate, cookies, frozen French fries and other prepared foods used in quick-service restaurants).

“Moreover, while India has bound all agricultural tariff lines in the WTO, nearly 30% of India’s non-agricultural tariffs remain unbound,” according to the report.

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