Protectionist policies, high tariffs hurting India: US Commerce Secretary

India must recognise that its protectionist policies and tariff rules are hurting its companies and are a big impediment to attracting foreign direct investment, US Commerce Secretary Wilbur Ross said on Thursday. In a blunt message for the second time in a month—to the Indian government, Ross said that the recent decisions that has impacted American companies like Amazon and Walmart have created an atmosphere of unpredictability and has hit the confidence of other companies to invest in India.

He was referring to India’s FDI rules in e-commerce.

Ross said that a recognition by India that some of tariff rules, regulations, and protectionist policies “are actually hurting” their companies on an international basis would be useful.

He exuded confidence that Prime Minister Narendra Modi would take necessary steps to remove obstacles that constrain businesses and the manufacturing sector.

The recent decision by India relating to Walmart and Amazon can pose a lot of concerns on the part of all those companies that otherwise were looking at investment in India, he said.

“The Walmart is going to continue to invest in India. I don’t mean to suggest that they’re not. That’s not what they told me. That caused concern on the part of other companies because of this one thing that they really need to know if they are going into a country that they will be stability of regulation, that there will be transparency and an opportunity to comment on new pending regulations,” Ross said.

Uncertainties like that make it very difficult for businesses to make their major and long-term capital decisions, said the US Commerce Secretary in a fire side chat at the Second Leadership Summit of US India Strategic and Partnership Forum (USISPF).

So, India needs to start to reconvince the outside world that there will be stability, there will be transparency and provide a level playing field to companies. Such a move would bring in huge foreign direct investment in India, he said, adding that this will help propel the country in development and economy. 

Reiterating that India is a highly protectionist tariff, Ross said that a large number of goods that come to the US from India have very high tariff that stifle the growth of the Indian companies.

To some degree, tariff structure is a problem to their own industries, companies and people, as he cited tariff strictures in auto, motorcycle and alcohol. 

Praising India for implementing the Goods and Services Tax, he said that this is not enough on its own as he called for reforms in key sectors like labour.

Recognizing that some of the self-imposed ruled are hurting their own companies would be helpful, he said.

Indian industries as a result of these high tariffs are unable to compete effectively in the international market, he said.

Ross exuded confidence that the Modi Government will take steps to address these concerns.

The Modi Government is in position better than they have been earlier to do something and also that the prime minister is determined to improve the economy, he said.              

According to the Commerce Secretary, Prime Minister, in his second term, will address the issue of high tariffs, carry out the reforms in particular in the labour sector and other kind of protectionist rules that were designed to help Indian industry, but are actually counterproductive because they make it relatively harder for large businesses to function.