India's Decision to Reevaluate PMA Rules a Step in the Right Direction

July 9, 2013

"The announcement by the Indian Prime Minister's office that the government will be conducting a four-week review and reevaluation of the PMA and its potential impact on manufacturing and foreign direct investment in India is good news for the international economy and ultimately the people of India. As originally designed, the PMA mandate dictated that specified percentages of certain computer, telecommunications, and electronic goods "with security implications" sold in India would have to be manufactured locally, a requirement that could have eventually affected as much as half of the $50 billion spent annually on ICT products and services in India.
ITIF praises the Indian government for rethinking the PMA-and hopes that the four-week review of the mandate turns into a full abandonment of the policy. But ITIF also calls on India to reevaluate its more recent broader embrace of "innovation mercantilist" policies that have sought to favor local producers at the expense of open global competition. Examples include India's local content requirements for wind turbine and solar cell manufacturers, lax intellectual property protections for software and pharmaceutical developers, and the exclusion of foreign ICT vendors from participating in India's $4 billion national fiber optic network project.
These policies are particularly concerning because they threaten to disrupt the strong trade relationship that exists between India and the United States. The United States represents India's second largest export market (and the market with which it runs the greatest trade surplus), with goods and services traded between the two nations reaching $86 billion in 2011. Furthermore, these policies stymie domestic innovation while risking the introduction of similar mercantilist policies by other nations that could ultimately limit Indian exports and future economic growth.
It is ITIF's hope that this announcement regarding the PMA is the beginning of a policy shift for India that focuses on promoting domestic innovation and business development through investments in education, infrastructure, and R&D. This will lead to the development of strong national industries that can successfully compete in the global market place while not unduly hampering global competition. This shift in philosophy is in the best interest of the global economy, the United States, and the people of India."

WASHINGTON (July 09, 2013) - ITIF Senior Analyst Stephen Ezell reacts to the announcement that India will be pausing and reassessing its Preferential Market Access (PMA) program:

"The announcement by the Indian Prime Minister's office that the government will be conducting a four-week review and reevaluation of the PMA and its potential impact on manufacturing and foreign direct investment in India is good news for the international economy and ultimately the people of India. As originally designed, the PMA mandate dictated that specified percentages of certain computer, telecommunications, and electronic goods "with security implications" sold in India would have to be manufactured locally, a requirement that could have eventually affected as much as half of the $50 billion spent annually on ICT products and services in India.

ITIF praises the Indian government for rethinking the PMA-and hopes that the four-week review of the mandate turns into a full abandonment of the policy. But ITIF also calls on India to reevaluate its more recent broader embrace of "innovation mercantilist" policies that have sought to favor local producers at the expense of open global competition. Examples include India's local content requirements for wind turbine and solar cell manufacturers, lax intellectual property protections for software and pharmaceutical developers, and the exclusion of foreign ICT vendors from participating in India's $4 billion national fiber optic network project.

These policies are particularly concerning because they threaten to disrupt the strong trade relationship that exists between India and the United States. The United States represents India's second largest export market (and the market with which it runs the greatest trade surplus), with goods and services traded between the two nations reaching $86 billion in 2011. Furthermore, these policies stymie domestic innovation while risking the introduction of similar mercantilist policies by other nations that could ultimately limit Indian exports and future economic growth.

It is ITIF's hope that this announcement regarding the PMA is the beginning of a policy shift for India that focuses on promoting domestic innovation and business development through investments in education, infrastructure, and R&D. This will lead to the development of strong national industries that can successfully compete in the global market place while not unduly hampering global competition. This shift in philosophy is in the best interest of the global economy, the United States, and the people of India."

 

 

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The Information Technology and Innovation Foundation (ITIF) is a non-profit, non-partisan think tank whose mission is to formulate and promote public policies to advance technological innovation and productivity internationally, in Washington, and in the states. Recognizing the vital role of technology in ensuring prosperity, ITIF focuses on innovation, productivity, and digital economy issues. Learn more at www.itif.org.

Contact: Samantha Greene
Email: sgreene@itif.org
Phone: (202) 626 5744