New Indian procurement rules stand to harm the economy

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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 Organisation (WTO) obligations, according to a report by GNT.

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.

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“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), US-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.

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