[April 09, 2012]

New Indian Procurement Rules Stand to Harm Indian Economy

Global technology and business groups are warning India that its new restrictive regulations on government-purchased technology could have spillover effects on the country's broader economy and, depending on their application, would be at odds with the nation's World Trade Organization (WTO) obligations.

In a letter to Prime Minister Manmohan Singh, the groups urged the Indian government to reconsider its new preferential market access (PMA) rules that would tip the scales strongly in favor of domestically manufactured electronic goods for government purchase. The groups also noted the potential application of these rules to private entities, including "telecom licensee" and "managed service provider," which would contravene the WTO.

"India has exemplified the benefits of competition and regulatory reform as demonstrated by the tremendous growth in the telecommunications and IT services sector over the past fifteen years. We urge India to remain, and push forward, on this path. India's economic growth and ability to continue to be competitive in the global ICT sector depend on it," the letter said.

"Indian industry has demonstrated its capacity to compete on a global scale through its growing participation and influence in global markets. India should avoid policies that would unnecessarily restrict competition at home which could also spark reciprocation by other countries that enact similar regulations. Such a result could negatively affect the ability of Indian ICT companies to export their products and services. It would be ironic if the rule intended to help Indian industry ultimately hurt its exports abroad," the letter stated.

The Information Technology Industry Council (ITI), Telecommunications Industry Association (TIA (News - Alert)), U.S.-India Business Council (USIBC), and 32 other associations from the United States, Europe, Japan, Canada, Australia, Hong Kong, and Korea sent the letter to PM Singh.

The PMA rules culminate a series of similar Indian policy proposals during the past year that have proposed discriminatory government procurement policies as a means to stimulate domestic manufacturing of electronics and telecommunications equipment at the expense of foreign companies.

The groups urge India to rescind the PMA and initiate a consultation process with the private sector and other stakeholders to develop policy approaches that will promote ICT sector growth without creating market-distorting policies.

"India's discriminatory preference policies work to undermine what has been a mutually beneficial relationship between India and the global tech sector. That country's economic strength and technical sophistication have led all of the world's major tech companies to invest there and deliver products and services that positively impact how its citizens work, play and participate in its democracy," Dean Garfield, ITI President and CEO, stated. "There is no debating the importance of the Indian market, but India's indigenous innovation policies are off course and cannot be accepted. Left unchecked, these policies carry with them the very real potential for a contagion effect, encouraging the Indian government to issue similar policies affecting other sectors and providing rationale for other countries to mirror this unfortunate behavior."

TIA President Grant Seiffert (News - Alert) noted, "In recent years, India's telecommunications market has exploded, connecting hundreds of millions of Indian citizens who previously never had access to telecommunications and spawning a world class Indian IT services industry. India's PMA threatens the ability of India's telecommunications service providers to cost effectively build out their networks and serve India's enterprise and individual consumers in a cost competitive basis." Seiffert further warned that "India's PMA threatens to kill the proverbial goose that laid the golden egg of India's successful ICT services industry."

U.S.-India Business Council President Ron Somers said, "If the discriminatory mandate applies to private sector procurement it will not only restrain direct foreign investment in India but violate the nation's WTO obligations. A more realistic approach to create a domestic manufacturing base for electronic goods would promote infrastructure improvements, incentives for capital formation, and appropriate worker training."

Joining ITI, TIA, and USIBC in signing the letter to Prime Minister Singh are: AMCHAM India; Australian Services Roundtable; Australian Services Roundtable; Business Software Alliance; Business Europe; Canada-India Business Council; Canadian Services Coalition; Consumer Electronics Association; Communications and Information Network Association of Japan; Computing Technology Industry Association; Coalition of Service Industries; Digital Europe; European-American Business Council; Emergency Committee for American Trade; European Services Forum; The Federation of Korean Information Industries; Global VSAT Forum; Hong Kong Coalition of Service Industries; Information Technology Association of Canada; Korea Information Technology Service Industry Association; Korea Software Enterprise Association; Japan Business Machine and Information System Industries Association; Japan Electronics and Information Technology Industries Association; Japan Information Technology Service Industry Association; Korean Software Industry Association; National Foreign Trade Council; Semiconductor Equipment and Materials International; Semiconductor Industry Association; Software and Information Industry Association; Taipei Computer Association; TechAmerica; and the United States Council for International Business.

About ITI

The Information Technology Industry Council (ITI) is the premier voice, advocate, and thought leader for the information and communications technology (ICT) industry. ITI is widely recognized as the tech industry's most effective advocacy organization in Washington D.C., and in capitals around the world. Learn more at www.itic.org.

About USIBC

The U.S.-India Business Council (USIBC) was formed in 1975 at the request of the United States and Indian governments to advance two-way trade and deepen commercial ties. Today, USIBC is the premier business advocacy association comprised of nearly 400 of America's and India's top companies dedicated to enhancing the U.S.-India commercial relationship. Visit www.usibc.com.

About TIA

The Telecommunications Industry Association (News - Alert) (TIA) represents the manufacturers and suppliers of global information and communications technology (ICT) networks through standards development, policy and advocacy, business opportunities, market intelligence, and events and networking. Since 1924, TIA has been enhancing the business environment for broadband, mobile wireless, information technology, networks, cable, satellite and unified communications. Members' products and services empower communications in every industry and market, including healthcare, education, security, public safety, transportation, government, the military, the environment, and entertainment. Visit tiaonline.org.

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