World Trade Organization Organisation Mondiale du Commerce Organización Mundial del Comercio

Reply: At present Foreign Law Firms are not allowed to practice in India and, under the Indian Advocates Act, 1961 they are prohibited from giving any legal advice that could constitute practicing Indian Law. Currently this sector is governed by self regulatory professional body (Bar Council of India). The consultation paper hosted on the website of the Department of Commerce has initiated a debate on the subject at large and especially amongst the stake holders.

US 95:

Report by the Secretariat (WT/TPR/S/249): IV. TRADE POLICIES BY SELECTED SECTOR: (2) Agriculture: (ii) Agricultural policy objectives: Page 129, paragraph 18:

The Secretariat report provides a brief description of India's tariff rate quota (TRQ) system and its implementation. The paragraph also states that "Imports under TRQs are allowed only through eligible entities or designated agencies." How does India determine and designate these eligible entities or agencies (identified on page 48, paragraph 37)?

Reply: Para 2.59 of the Handbook of Procedures Volume 1 gives the details of the agencies and the same is available at http://dgft.gov.in. Handling the TRQ requires a higher skill and thus the agencies notified are usually STEs from the respective sectors.

US 96:

Report by the Secretariat (WT/TPR/S/249): IV. TRADE POLICIES BY SELECTED SECTOR: (2) Agriculture: (ii) Agricultural policy objectives: Page 133, paragraph 32:

According to the Secretariat, "India's latest notification to the WTO on domestic support commitments in 2011, covered 1998/99 to 2003/04.[2]" When will India bring its notifications up to date?

Reply: India's notification to the WTO, G/AG/N/IND/7 dated 9 June 2011, covered the backlog for the period 1998 99 to 2003 04. Work is underway on India's notifications for the subsequent years.

US 97:

Report by the Secretariat (WT/TPR/S/249): IV. TRADE POLICIES BY SELECTED SECTOR: (2) Agriculture: (ii) Agricultural policy objectives: Page 134, paragraph 36:

The Secretariat Report states that India has a Market Intervention Scheme (MIS) that covers perishables not under the minimum support prices (MSPs). These perishables are purchased at a market intervention price (MIP). Please identify the perishables that are covered by the MIS and identify which perishables in fact received intervention in the few circumstances that it did occur? Please identify how the MIPs are determined as compared to the MSPs.

Reply: All perishables, which include fruits, vegetables, oil palm, areca nut etc. are covered by the MIS. MIS operations are, however, taken up exceptionally, only to prevent distress sale by farmers.

The Market intervention price (MIP) is fixed taking into consideration estimated cost of production; whereas minimum support prices (MSP) for crops under Price Support Scheme (PSS) are announced before the crop season and are fixed after a detailed analysis of cost and other relevant factors by the Commission for Agricultural Costs and Prices (CACP).

MIP operations have been carried out in case of apples in Himachal Pradesh, potatoes in West Bengal and some other States for other vegetables/fruits in the recent past.

US 98:

Report by the Secretariat (WT/TPR/S/249): IV. TRADE POLICIES BY SELECTED SECTOR: (3) Services: (ii) Financial services: Page 141, Paragraph 61:

The Secretariat notes that "Foreign investment participation [in India] is allowed in both public and private sector banks, up to a threshold of 74% for all forms of foreign investment (i.e. FDI and FII) in private banks, and of 20% in public banks." On August 11 2010, however, the RBI released the "Discussion Paper on Entry of New Banks in the Private Sector," seeking feedback from all stakeholders and the general public with respect to new private bank licenses. This discussion paper states that: "Since the objective is to create strong domestic banking entities and a diversified banking sector which includes public sector banks, domestically owned private banks and foreign owned banks, aggregate non resident investment including FDI, NRI and FII in these banks could be capped at a suitable level below 50 per cent and locked at that level for the initial 10 years…this [capping foreign investment to below 50% for the initial 10 years] would be in contrast to the present FDI policy which allows 74 per cent foreign equity in private sector banking." When does India intend to release final guidelines, and will the new bank licenses cap foreign investment below the current 74% threshold?

Reply: Reserve Bank of India has released the Draft Guidelines for Licensing of New Banks in the Private Sector on August 29, 2011 on its website for public comments and feedback and has given time up to 31 October 2011. The draft guidelines cap the aggregate foreign investment in the new private sector banks at 49% for the first five years from the date of licensing of the bank. After the expiry of five years from the date of licensing of the bank, the permissible foreign shareholding would be as per the extant policy, which is presently at 74%. The lower foreign investment cap in the initial 5 years for a new private sector bank is stipulated with an objective to create strong domestic banking entities.

US 99:

Report by the Secretariat (WT/TPR/S/249): IV. TRADE POLICIES BY SELECTED SECTOR: (3) Services: (ii) Financial services: Page 141, Paragraph 62:

The Secretariat's Report describes mandatory priority sector lending requirements for banks, and notes that the requirements reduce capital available to profitable sectors of the economy, increase intermediation costs, and increase overall interest costs to the economy. Is India considering revisiting the priority sector lending requirements, in light of their negative impacts on capital availability and cost?

Reply: The priority sector includes sectors, viz., agriculture, micro and small enterprises, education, housing and micro credit. The activities are wide and varied and as such there is no risk of credit concentration. At present, there is no interest rate ceiling stipulation on these loans. Bank lending to priority sector needs is to be viewed as a viable and profitable business proposition. Further, this facilitates inclusive and equitable growth. The policy has proved its efficiency over the years in channelizing credit to desired directions.

US 100:

Report by the Secretariat (WT/TPR/S/249): IV. TRADE POLICIES BY SELECTED SECTOR: (3) Services: (ii) Financial services: Page 141, Paragraph 65:

The Secretariat's Report notes that a government priority is to foster financial inclusion and overcome still low levels of financial penetration in India. At the same time, the Report notes that financial services is one of the few sectors still subject to foreign investment restrictions, is dominated by state owned companies, and is one in which GATS limitations have been imposed on the number of available licenses. Is India considering steps to further liberalize its financial services sector and achieve greater private sector participation, in light of its goals of deepening financial penetration and attracting investment, including for infrastructure development?

Reply: The average population per branch office has come down from 15,500 (as on 30 June 2005) to 13,400 (as on 30 June 2010) over the last five years due to expansion of branches by the commercial banks. However, in order to achieve greater geographical penetration and to promote financial inclusion, Reserve Bank envisages issuing licence to a few more new banks in the Private Sector. For the purpose, Reserve Bank had studied the international practices and considered the Indian experience and placed a discussion paper on entry of new banks in the private sector on 11 August 2010. The draft guidelines on licensing of new banks have also been released on 29 August 2011 for comments. On examination of the feedback and after certain vital amendments to the Banking Regulation Act, 1949 are carried out, final guidelines would be issued and the process for granting licences to new bank in the private sector would be initiated.

US 101:

Report by the Secretariat (WT/TPR/S/249): IV. TRADE POLICIES BY SELECTED SECTOR: (3) Services: (ii) Financial services: Page 145, Paragraph 77:

The Secretariat notes that "In January 2011, the RBI released the Discussion Paper on Presence of Foreign Banks in India Reserve Bank of India (2011a), seeking feedback from all stakeholders and the general public with respect to the most convenient form of foreign bank presence in India." This discussion paper states that: "From financial stability perspective there would be a need to mandate at entry level itself subsidiary form of presence (i.e. wholly owned subsidiary WOS) under certain conditions and thresholds. It would likewise be mandatory for those fresh entrants who establish as branches to convert to WOS once they meet the conditions and thresholds referred to above or which become systemically important over a period by virtue of their balance sheet size." Although the paper continues that "India's commitments to WTO will have to be kept in mind" the paper certainly raises the prospect that existing bank branches may be required to convert to subsidiaries. Since India has a GATS obligation to provide bank entry via branching, does India intend to enter into negotiations under GATS Article XXI to modify its schedule? Also, we understand that one of the reasons that, to date, foreign banks have not established wholly owned subsidiaries in India is that there has been considerable uncertainty with regard to the potential for forced divestiture (e.g., to comply with a previous 74% equity ownership limitation.) In order to provide better certainty and to reduce this risk, does India intend to schedule a commitment to allow 100% foreign ownership of banks? If so, when? If not, why not?

Reply: The Press Release of 21 January 2011 is merely a Discussion Paper inviting comments/suggestions from all stakeholders; a policy view in the matter is yet to be taken. Therefore, it will be premature to comment on the outcome of the same at this stage.

US 102:

Report by the Secretariat (WT/TPR/S/249): IV. TRADE POLICIES BY SELECTED SECTOR: (3) Services: (ii) Financial services: Pages 149 150, paragraph 95:

The Secretariat's Report notes that competition in the insurance sector is constrained by high entry barriers, including a 26% cap on foreign investment. The Secretariat's Report from India's previous Trade Policy Review, in 2007, noted that an amendment was under consideration by the government at that time to increase the foreign equity cap in the insurance sector to 49%. What is the status of this amendment? Does India plan to include provisions for health insurance in any current legislation under consideration? If so, how would this be implemented and would foreign health insurance companies be constrained by any remaining equity caps?

Reply: The Government had introduced the Insurance Laws (Amendment) Bill, 2008 in the Parliament (Rajya Sabha) on 22.12.2008. At present, the Bill is before the Parliamentary Standing Committee on Finance for its consideration.

The Insurance Amendment Bill also proposes to define health insurance as a separate class of insurance business. However these health insurers are also proposed to be subject to the FDI equity cap of 49%.

US 103:

Report by the Secretariat (WT/TPR/S/249): IV. TRADE POLICIES BY SELECTED SECTOR: (3) Services: (iii) Telecommunications: Page 157, paragraph 119:

In April 2011 The Telecommunications Regulatory Agency of India (TRAI) issued recommendations to promote domestic telecom equipment manufacturing. These recommendations called for, inter alia, a requirement to be imposed on telecom service providers to ensure that a certain percentage of equipment purchased was manufactured in India. What is the status of these recommendations, and what steps would need to be taken for the policies recommended to have the force of law and be required to be followed by service providers? How will India ensure that they do not conflict with trade obligations?

Reply: TRAI has given certain recommendations for taking measures to enhance telecom equipment manufacturing in India. These recommendations are under the consideration of the Central Government. It is thus premature to comment on any possible conflict with trade obligations of India.

US 104:

Report by the Secretariat (WT/TPR/S/249): IV. TRADE POLICIES BY SELECTED SECTOR: (3) Services: (iii) Telecommunications: Page 157, paragraph 119:

The United States notes that India issued significantly revised telecom licensing amendments in May 2011 that require, inter alia, that the certification of certain telecom equipment take place only in India. Please explain how this requirement furthers India's security objectives that underlay these amendments more than testing that takes place outside India. Who will be responsible for establishing and operating the certification labs in India?

Reply: Security testing of telecom equipment is different than conformance and performance testing. Each country has its own security standards and India would also like to have its own standard. Government will establish the test standards, procedures as tools for security testing and accreditation of test labs.

US 105:

Report by the Secretariat (WT/TPR/S/249): IV. TRADE POLICIES BY SELECTED SECTOR: (3) Services: (iii) Telecommunications: Page 158, paragraph 122:

TRAI has identified problems telecommunications companies have had obtaining competitive access to cable landing stations located in India, which limits their ability to provide telecommunications services. What is the status of TRAI's efforts to institute rules for such access?

Reply: TRAI regulation for cable landing station is already in place.

US 106:

Report by the Secretariat (WT/TPR/S/249): IV. TRADE POLICIES BY SELECTED SECTOR: (3) Services: (iii) Telecommunications: Page 158, paragraph 122:

Foreign telecommunications operators in India are precluded from selling direct to home satellite capacity to customers. Instead, they must sell capacity to the Indian Space Research Organization, which then resells it to customers. What is the purpose of this policy? Does India have plans to address this barrier to supply of satellite services in India?

Reply: This is governed by SATCOM Policy of India. The SATCOM policy provides for users to avail of transponder capacity from both domestic/foreign satellites. However, the same has to be in consultation with the Department of Space.

__________

1 In English only./En anglais seulement./En inglés solamente.

1 In International Standard for Phytosanitary Measures (2009) 15.

2 These objectives should be viewed in the context of the significant challenges faced by India including: a history of food shortages, a large segment of the population dependent on the agriculture sector for its livelihood, and hundreds of millions of poor Indians who spend most of their incomes on food. More than one third of the population, mostly rural Indians, still lives on less than US$1 per day. Indian farmers are a politically powerful voting bloc that has a major influence on Indian domestic and international trade policies.

3 Department of Commerce, Trade Notice No. 1/2010 of 17 May 2010 introduced clarification regarding the initiation of mid term reviews in terms of Rule 23 of the Anti dumping Rules (Identification, Assessment and Collection of Anti Dumping Duty on Dumped Articles and for Determination of Injury).

4 This question also applies to paragraph 16 of the Summary, which states the following: "India is one of the most active users of anti dumping measures among WTO Members. It initiated 209 anti dumping investigations against 34 trading partners during the review period, compared with 176 in the period covered in its last Review, and it imposed 207 anti dumping measures, compared with 177. The products involved included chemicals and products thereof, plastics and rubber and products thereof, base metals, and textiles and clothing".

5 Freight Subsidy (For Far flung Areas) Scheme 2002.

6 IAF is the International Accreditation Forum.

7 ILAC is the International Laboratory Accreditation Co operation.

8 APLAC is the Asia Pacific Laboratory Accreditation Cooperation, the regional body within ILAC.

9 Under the Agreement on Subsidies and Countervailing Measures (SCM Agreement), developing countries receive special and differential treatment with respect to certain subsidy disciplines under Article 27. For developing countries listed in Annex VII of the SCM Agreement (including India) the SCM prohibition on export subsidies does not apply until (1) per capita GNP reaches a designated threshold or (2) eight years after the country achieves "export competitiveness" for a particular product. Article 27.6 of the SCM Agreement defines export competitiveness as the point when an exported product reaches a share of 3.25% of world trade for two consecutive calendar years. Export competitiveness is determined to exist either via notification by the developing country or on the basis of a computation undertaken by the WTO Subsidies Committee Secretariat at the request of any Member.