Print PDF

India Sees Progress on Some Trade and Investment Barriers While Others Worsen, ITC Report Finds

Monday, October 26, 2015
Sandler, Travis & Rosenberg Trade Report

A new International Trade Commission report finds that since Narendra Modi became prime minister in May 2014 India has made progress in addressing some barriers to trade and investment but has struggled with others. The ITC found significant new or revised policies in the areas of foreign direct investment, tariffs and customs procedures, local content and localization requirements, and standards and technical regulations. However, legislative challenges have hindered other policy reforms such as changes in land acquisition laws, taxation policies and other measures affecting the overall business climate.

The ITC report includes the following table highlighting the measures India has taken with respect to barriers identified previously by the ITC.

Industry, product or policy type

Identified barriers to U.S. trade and investment

Changes and new policies and practices

Agricultural products

High tariffs, customs delays, and certain sanitary and phytosanitary restrictions that reportedly are not scientifically warranted and inconsistent with international standards

Indian government undertook efforts in late 2014 to reduce customs delays and speed up customs clearance for agricultural products.

Certain new standards introduced in 2015 could create new barriers to U.S. meat and poultry exports.

Alcoholic beverages

High tariffs, high excise taxes on inputs, price controls, and India-unique mandatory standards and labeling requirements.

New labeling requirements could create challenges for certain U.S. exports.

Civil nuclear energy

A lack of clear regulations, uncertain legal liabilities, and a burdensome operating environment that reportedly deter foreign firms from participating in this sector.

In early 2015 India effectively limited the legal liability of foreign suppliers, potentially boosting FDI in this sector.

Clinical trials for new drugs

Lack of clear regulations, uncertain legal liabilities, and a burdensome operating environment.

December 2014 provision gives more clarity on compensation for clinical trial participants; June 2015 rule clarifies the definition of a study-related injury.


Open to FDI only for projects that exceed a certain size.

New policies in late 2014 allow FDI in smaller projects.

Cosmetics and personal care products

Presence of counterfeit goods and uncertainties in product registration process.

Imports of animal-tested cosmetics banned in late 2014. In 2015 the government introduced new test rules to detect trace heavy metals, proposed new in-country testing requirements and made changes to product approval procedures.

Customs procedures

Customs clearance delays, complicated procedures and agriculture-specific procedures.

In late 2014 customs officials were made available 24/7 at major seaports and air ports and customs clearance facilitation committees were established at major seaports and airports.

Defense and civil aerospace

26 percent FDI equity limit. Offset provisions requiring foreign firms to use locally sourced equipment or agree to other similar arrangements in order to be awarded contracts by the Indian government further discourage foreign participation in this sector.

In August 2014 the FDI equity limit was raised to 49 percent and could be higher on a case-by-case basis. U.S. companies report that India’s 2015 draft new procedures for offsets reflect the government’s efforts to build in more transparency and accessibility for foreign partners.

FDI approval process

An approval process that can cause delays and lead some time-sensitive deals to fall through.

In May 2015 the government announced that approval is no longer required in cases of mergers and acquisitions for new operations and facilities in certain industries. In June 2015 the government raised the threshold for investment projects requiring cabinet approval.

Food products

High tariffs, India-unique mandatory standards and technical regulations (particularly on packaging, labeling and product approval) that create uncertainty, delays and additional costs.

New testing and labeling requirements were introduced in 2015 that could hinder certain U.S. exports. New measures in late 2014 and 2015 that aim to streamline product approval processes and harmonize standards with international ones could facilitate some U.S. exports.

ICT and electronic products

Variable and opaque tariffs and taxation. Local content policies that encourage indigenous manufacturing and establish preferences for certain domestically manufactured products.

Rules under Preferential Market Access policy and Compulsory Registration Order policy that require foreign firms to purchase Indian inputs, perform a share of business in India, perform certain activities in India, or submit to India-specific testing or registration.

Amendments to telecom rules proposed under the previous government would require testing of imported equipment in Indian laboratories, require vendors to allow inspection of manufacturing facilities and impose liability when vendor has taken inadequate precautionary security measures.

In 2015 duty reductions were announced for 22 ICT-related products. Additional products were made subject to PMA and CRO in late 2014, which could restrict some U.S. ICT exports.

In December 2014 Indian government directed all ministries to give preference to domestically manufactured electronic products in government procurement as part of the Make in India initiative.

The Digital India initiative sets a goal of net zero ICT imports by 2020.

The May 2015 National Telecom Roadmap proposes new policy guidelines that could restrict some U.S. ICT exports and services, including preference for servers and data centers to be located in India, restrictions on the use of foreign SIM cards, plans to make Internet-connected devices subject to the PMA policy, and mandatory certification and registration policies.

In April 2015 the Modi government delayed implementation of telecom amendments, reportedly due to the lack of adequate testing facilities in India.


26 percent DI equity limit.

March 2015 legislation increased FDI equity limit to 49 percent.


Barriers in the areas of trade secrets and regulatory test data, patents, trademarks, and copyrights.

No new IPR laws have been enacted. The December 2014 draft IPR policy acknowledges that some new laws and other improvements may be needed.

Medical devices

High tariffs on inputs/components, additional duties on base tariff rates, and price controls. FDI subject to prior approval. An unclear regulatory environment in which medical devices and pharmaceuticals are regulated under the same standards further discourages foreign participation in this sector.

In 2015 duties were reduced on some medical device components and some finished products. In February 2015 the government approved 100 percent foreign equity in medical device firms without prior authorization.

The December 2014 draft National Health Policy and January 2015 draft Drugs and Cosmetics Bill proposed treating medical devices as distinct from pharmaceuticals.

The June 2015 draft National Medical Device Policy and other government measures placed additional products within scope of price controls.

Mining—coal (merchant mining, i.e., for-profit sales in open market)

Government monopoly—all private investment prohibited.

March 2015 legislation allows private investment including FDI up to 100 percent equity.


Lack of regulatory transparency, making FDI difficult.

New measures beginning in 2015 give more transparency to investors.


Price controls on various pharmaceuticals (and medical devices) make it difficult for exports to penetrate Indian market.

New measures in 2014 may place additional products under price controls.

Railway infrastructure

Government monopoly—all private investment prohibited.

Certain rail infrastructure segments were opened to private investment, including FDI, in late 2014.

Solar energy products

Local content requirements require foreign firms bidding on certain solar energy-related projects to purchase Indian inputs.

No significant policy changes were identified; local content policies continue to be applied in 2015.

View Document(s):

To get news like this in your inbox daily, subscribe to the Sandler, Travis & Rosenberg Trade Report.

Customs & International Headlines