Why India’s PMA Will Harm the Indian and Global Economies

March 17, 2014
India’s Preferential Market Access policy is poised to damage the Indian and broader global economy.

Despite contentions that India’s Preferential Market Access (PMA) policy—which enacts local content requirements in public procurement of electronics and information and communications technology (ICT) products in India—is a temporary, limited, and non-distortionary measure designed to give a slight and momentary boost to domestic electronics and ICT hardware manufacturers, the reality is that the PMA is a highly distortive policy which threatens to damage both on India’s and the broader global economy. India’s PMA:

 1. Is trade-distortionary, entailing at least a de facto price and/or quality preference which will have significant negative effects on Indian citizens;

2. Far from making ICT products in India more secure, is actually likely to make them less secure; 

3. Will damage global trade and contribute to spillover and contagion effects reducing global trade and economic integration;

4. Is distinct and more severe than many other countries’ preferences for domestic production in government procurement activity;

5. Is unlikely to have any significant long-term effectiveness as an instrument to bolster domestic manufacturing, while in fact distracting Indian policymakers from enacting the kinds of policies they really should be undertaking to enhance the competitiveness of India’s economy and manufacturing industries.