UPDATE 2-India to review preferential policy for locally made electronic goods

Last Updated: Mon, Jul 08, 2013 20:00 hrs

By Manoj Kumar

NEW DELHI, July 8 (Reuters) - India will review a policy that gave preference to locally made electronics goods in government and private sector procurement, the government said on Monday after protests by trade groups representing global companies such as Apple Inc.

Indian Finance Minister P. Chidambaram and Commerce Minister Anand Sharma will be in Washington this week for meetings with U.S. Treasury Secretary Jack Lew and Trade Representative Michael Froman.

India's federal cabinet last year approved the policy, known as preferential market access (PMA), citing national security.

Last week, U.S.-based trade group the Information Technology Industry Council (ITI) said a plan to include private sector purchases in the policy was inconsistent with World Trade Organization rules and suggested it was designed to protect local manufacturing.

The ITI represents 52 companies, including Apple Inc, Microsoft Corp, IBM and Intel Corp.

India has also drawn fire from other U.S. business groups and members of Congress, who say some of the country's policies put U.S. intellectual property at risk and block U.S. access to India's market.

India has excelled in information technology services but imports the bulk of its electronics requirements.

"Concerns have been raised in many quarters on different aspects of the PMA Policy, particularly policy relating to procurement by the private sector for electronic products with security implications," the Prime Minister's office said in a statement.

The entire policy on providing preference to locally manufactured goods will be "revisited and reviewed" and submitted to the cabinet again, the statement said.

India's electronics demand is expected to reach $400 billion by 2020 and policymakers have said the import bill for the sector could surpass that of oil due to lack of major local manufacturing.

The prime minister's office said on Monday there were no international commitments affecting government procurement, but private sector procurement polices were covered by India's obligations in the WTO.

The Information Technology Industry Council welcomed India's decision to put the policy on hold for now.

"We believe the kind of market-based incentives that gave rise to India's global leaders in software and services should be the foundation of its effort to build an ICT (information and communications technology) manufacturing sector," ITI's senior vice president John Neuffer said in a blog.

"This open approach would help to drive lasting economic strength," he said.

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