(Bloomberg) -- A senior U.S. diplomat has criticized Indian Prime Minister Narendra Modi’s trade policies, saying growing restrictions on market access and limits on the free flow of data are standing in the way of the South Asian nation becoming an alternative to Chinese supply lines.
India will need to take more policy action if it wants to become a new destination for manufacturing investments in the Indo-Pacific region in the post-Covid era, outgoing U.S. ambassador Kenneth Juster said in New Delhi Tuesday.
Juster warned about “growing restrictions on market access to certain U.S. goods and services, increasing tariffs, new limitations on free flow of data and a less than predictable regulatory environment for investors.”
The Modi administration is keen to attract U.S. companies looking at setting up manufacturing facilities out of China but has had little success mainly due to differences on market access. These include India’s proposed policy for e-commerce, its data protection bill and U.S. companies MasterCard and Visa being treated at par with government-backed RuPay.
It remains to be seen whether the government’s “self-reliant India” policy will lead to higher tariff and no-tariff barriers to trade limiting capacity to integrate into global value chains, the ambassador said.
“Our experience is that excessively managed markets tend to create inefficiencies leading to slower growth,” Juster said. “On the other hand trade openness historically produced positive results for the Indian economy, its job market and its consumers.”
The self-reliance campaign spearheaded by Prime Minister Modi did not mean that the country was turning protectionist, India’s Foreign Minister Subrahmanyam Jaishankar said at the Bloomberg India Economic Forum last year.
Friction between the two nations on trade and investments led to a stalled trade deal with the outgoing Trump administration, Juster said.
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