WORLD  TRADE  
ORGANIZATION  RESTRICTED 
WT/TPR/S/249 
10 August 2011  
 
(11-3950) 
Trade Policy Review Body  
   
 
  
 
TRADE POLICY REVIEW 
 
Report by the Secretariat 
 
INDIA 
 
  
 
This report, prepared for the fifth Trade Policy Review of India, has been drawn 
up by the WTO Secretariat on its own responsibility.  The Secretariat has, as 
required by the Agreement establishing  the Trade Policy Review Mechanism 
(Annex 3 of the Marrakesh Agreement Establishing the World Trade 
Organization), sought clarification from India on its trade policies and practices. 
 
Any technical questions arising from this report may be addressed to 
Mrs. Eugenia Lizano (tel:  022/ 739 6578) and Mr. Angelo Silvy 
(tel:  022/739 5249). 
 
Document WT/TPR/G/249 contains the policy statement submitted by India. 
 
 
 
Note: This report is subject to restricted circ ulation and press embargo until the end of the first 
session of the meeting of the Trade Policy Review Body on India. India WT/TPR/S/249 
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CONTENTS 
    Page 
SUMMARY   ix 
(1) E CONOMIC ENVIRONMENT  ix 
(2) T RADE AND INVESTMENT POLICY FRAMEWORK  x 
(3) T RADE POLICY BY MEASURE  xi 
(4) T RADE POLICIES BY SECTOR  xiii 
I. ECONOMIC ENVIRONMENT 1 
(1)  OVERVIEW  1  
(2)  RECENT ECONOMIC DEVELOPMENTS  1  
(3)  FISCAL POLICY  6  
(4)  MONETARY AND EXCHANGE RATE POLICY  10  
(5)  BALANCE OF PAYMENTS  12  
(6)  DEVELOPMENTS IN TRADE  14  
(i) Composition of trade in goods 14 
(ii) Direction of trade in goods 16 (iii) Trade in services 16 
(7)  D
EVELOPMENTS IN FOREIGN DIRECT INVESTMENT  18 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 20 
(1)  OVERVIEW  20  
(2)  TRADE POLICY FORMULATION AND IMPLEMENTATION  20  
(i) Institutional and legal framework 20 
(ii) Trade policy formulation, implementation, and objectives 23 
(3)  TRADE AGREEMENTS AND ARRANGEMENTS  26  
(i) World Trade Organization 26 
(ii) Regional trade agreements 27 
(4)  INVESTMENT REGIME  28  
(i) Business environment 28 
(ii) Foreign investment regime 31 
III. TRADE POLICIES AND PRACTICES BY MEASURE 35 
(1)  INTRODUCTION  35  
(2)  MEASURES DIRECTLY AFFECTING IMPORTS  36  
(i)  Customs procedures 36  
(ii)  Customs valuation and clearance 39  
(iii)  Rules of origin 42  
(iv)  Tariffs 43  
(v)  Other charges affecting imports 50  
(vi)  Import prohibitions, restrictions, and licensing 53  
(vii) State trading 58  
(viii) Contingency measures 60  WT/TPR/S/249 Trade Policy Review 
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    Page 
(ix)  Technical regulations and standards 67  
(x)  Sanitary and phytosanitary measures (SPS) 71 
(3)  M
EASURES DIRECTLY AFFECTING EXPORTS  74  
(i)  Procedures 74  
(ii)  Quality control and preshipment inspection 75  
(iii)  Export taxes, charges, and levies 76  
(iv)  Minimum export prices 77  
(v)  Export prohibitions, restrictions, and licensing 78 
(vi)  State trading 79  
(vii) Export support 81  
(viii) Export promotion and marketing assistance 88  
(ix)  Export finance and insurance 89  
(4)  MEASURES AFFECTING PRODUCTION AND TRADE  91  
(i)  Incentives 91  
(ii)  Role of state-owned enterprises (other  than state-trading companies), and 
disinvestment 96  
(iii)  Competition policy 98  
(iv)  Price controls 102  
(v)  Government procurement 106  
(vi)  Intellectual property rights 112 
IV. TRADE POLICIES BY SELECTED SECTOR 125 
 (1)   OVERVIEW  125  
 (2)   AGRICULTURE  126  
 (i)   General overview 126  
 (ii)   Agricultural policy objectives 128  
 (3)   SERVICES  138  
 (i)   Overview 138  
 (ii)   Financial services 140  
 (iii)   Telecommunications 157  
 (iv)   Transport 162  
 (v)   Tourism 174  
REFERENCES   179 APPENDIX TABLES  187  India WT/TPR/S/249 
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CHARTS 
    P a g e  
I. ECONOMIC ENVIRONMENT  
I.1 Product composition of merchandise trade, 2006/07 and 2009/10 15 
I.2 Direction of merchandise trade, 2006/07 and 2009/10  17 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
III.1 Distribution of MFN applied tariff rates, 2010/11 45 
III.2 Average applied MFN and bound tariff rates, by HS section, 2010/11 47 
III.3 Import licensing, by HS section, 2010/11 55 
III.4 Anti-dumping measures, January 2006-December 2010 64 III.5 Loans by the Export-Import Bank of India, by sector, 2006/07 and 2009/10 90 
III.6 Explicit subsidies, 2006/07 and 2010/11 92 
IV. TRADE POLICIES BY SELECTED SECTOR  IV.1 Trade in services, 2006/07 and 2009/10 139 
TABLES 
I. ECONOMIC ENVIRONMENT  
I.1 Selected macroeconomi c indicators, 2006-11 2 
I.2 Basic economic and soci al indicators, 2006-11 4 
I.3 Central Government's tax revenue, 2006-11 7 
I.4 Balance of payments, 2006-11 12 
I.5 Foreign direct investment inflows/outflows, by economic activity, 2006-11 18 I.6 Foreign direct investment inflows/outflows, by origin, 2006-11 18 
II. TRADE AND INVESTMENT REGIMES  
II.1 Enforcement of legislation:  the case of the Competition Act 2002 22 
II.2 Hierarchy of legal and regulatory instruments, 2011 22 
II.3 Main institutions involved in trade policy formulation and implementation, 2011 23 
II.4 Changes in export policy:  the case of cotton and onions, August 2009-March 2011 25 II.5 WTO dispute settlement cases involving India, 2007-11 26 
II.6 Setting up a business, 2011 29 
II.7 Industries for which industrial  licensing is compulsory, 2011 30 
II.8 Sectors where FDI is prohibited, 2011 33 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
III.1 Metallic waste and scrap subject to preshipment inspection, 2011 39 
III.2 Tariff values (refer ence prices), 2006-11 41 
III.3 Rules of origin under preferential trade agreements, 2011 42 
III.4 Tariff structure, 2006/07 and 2010/11 44 III.5 Summary analysis of the tariff, 2006/07 and 2010/11 46 
III.6 Products subject to tariff-rate quotas, 2006-11 48 
III.7 Summary analysis of the preferential tariff, 2010/11 49 
III.8 Summary analysis of India's imports charges, 2010/11 51 WT/TPR/S/249 Trade Policy Review 
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III.9 Import prohibitions, 2011 53 
III.10 Items whose import is free, subject to minimum import price, 2010/11 57 
III.11 Value of imports subject to state trading, 2007-11 59 III.12 Standards, 2007-10 68 
III.13 Sanitary and phytosanitary legislation, 2011 72 
III.14 Plant quarantine, 2011 74 III.15 Export taxes, 2011 77 
III.16 Export cess, 2011  77 
III.17 Exports subject to state trading, 2007-11 80 III.18 Incentives granted to SEZ units, 2011 83 
III.19 Exports from SEZs, 2007-10 83 
III.20 Incentives granted to EOUs, 2011 85 III.21 Exports from EOUs, 2007-10 85 
III.22 Tax incentives phased out, 2006-10 91 
III.23 Preferential interest ra tes to exporters, 2007-11 93 
III.24 Targets for lending to priority sectors, 2011 94 
III.25 Products reserved for MSEs, 2011 95 
III.26 Overview of disinvestment, 2007-11 97 
III.27 Government procurement methods, 2011 108 
III.28 Capital defence procurement, 2011 112 III.29 Intellectual property legislation, 2011 113 
IV. TRADE POLICIES BY SELECTED SECTOR  
IV.1 Selected indicators for agriculture, 2006-10 126 
IV.2 Institutions involved in formulating and implementing agricultural policy, 2010 128 
IV.3 Agriculture sector schemes/programmes, 2011 133 
IV.4 Subsidies in agriculture inputs, 2006-10 136 IV.5 Trends in the banking sector's gross loans and deposits and prudential indicators, 2006-10 142 
IV.6 Insurance and reinsurance market, end-December 2010 150 
IV.7 Insurance set asides for social and rural sectors, 2011 152 IV.8 Securities market, 2008-11 154 
IV.9  Market-access and national-treatment co nditions for foreign investment in the  
 securities market, 2011 156 IV.10 Selected telecom indicators, 2007-10 158 
IV.11 Road concession  contracts, 2011 170 
IV.12 Selected incentives to road concessionaires, 2011 171 IV.13 Selected support schemes for tourism, 2011 175 
APPENDIX TABLES 
I. ECONOMIC ENVIRONMENT  
AI.1 Merchandise exports, by group of products, 2006-10 189 
AI.2 Merchandise imports, by group of products, 2006-10 190 AI.3 Merchandise exports, by destination, 2006-10 191 
AI.4 Merchandise imports, by origin, 2006-10 192 
II. TRADE AND INVESTMENT REGIMES  AII.1 Jurisdiction between central and state legislatures, 2011 193 
AII.2 Notifications to the WTO, 1 January 2007-30 June 2011 195 India WT/TPR/S/249 
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    P a g e  
AII.3 Overview of India's prefer ential trade agreements, 2011 197 
AII.4 Policy on foreign direct investment, 2011 203 
III. TRADE POLICIES AND PRACTICES BY MEASURE AIII.1 IEC exemptions for imports and exports, 2011 207 
AIII.2 Cesses and surcharges levied by the Central Government, 2011 208 
AIII.3 Safeguard investigations, 2008-11 210 AIII.4 Other institutions responsible for standards formulation and enforcement, 2011 212 
AIII.5 Export prohibitions, 2011 214 
AIII.6 Export incentives schemes, 2007-11 216 AIII.7 Amount forgone/disbursed on imports under export promotion schemes, 2007-10 219 
AIII.8 Revenue forgone under the Income Tax Act 1961, 2006-10 220 
AIII.9 Selected incentive schemes/programmes for MSMEs, 2011 222 AIII.10 Central public sector enterprises, 2011 225 
IV. TRADE POLICIES BY SELECTED SECTOR  
AIV.1 India's banking system, 2007 and 2010 231 
AIV.2 Telecom licensing regimes, 2011 234 
AIV.3 Auctioning of 3G and BWA spectrums, 2010 235 
 India WT/TPR/S/249 
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SUMMARY  
1. During the period under review, India 
has continued to reap benefits from the process of trade liberalization and structural reform 
initiated in the early 1990s.  This contributed 
to the high GDP growth rates achieved, the resilience of the Indian economy to the global financial crisis, and the expansion of both 
exports and imports.  India responded to the 
global crisis by implementing an important 
stimulus package consisting of increased spending, lower excise and customs duties, and support measures.  Reflecting India's shift towards lower tariffs, the simple average MFN tariff rate declined to 12% in 2010/11, from 
15.1% in 2006/07. 
2. India uses trade policy actively, 
sometimes as an instrument to attain its long-term goals, such as promoting overall economic growth, or fostering 
industrialization, development, or 
self-sufficiency.  India aims at providing a stable trade policy environment to attain these goals.  In certain circumstances, however, India also makes use of trade policy instruments to attain short-term objectives, 
such as containing inflation, which may 
detract somewhat from the stability sought, as this requires constant fine tuning of policies, rendering the trade regime more complex and creating additional costs. 
(1) E
CONOMIC ENVIRONMENT  
3. The Indian economy continued to 
expand at a fast pace during the review period, despite the mild slowdown caused by the global financial crisis in 2008/09.  Annual real 
GDP growth averaged over 8.4% between 
2006/07 and 2010/11, supported primarily by strong domestic demand.  Growth was particularly strong in 2006/07 and 2007/08, exceeding 9%, driven mainly by private investment and consumption.  In the wake of 
the global financial crisis, growth was driven 
by government spending.  In this respect, to face the financial crisis, the Government conducted a very proactive policy, introducing a large stimulus package consisting of increased spending, lower excise and customs 
duties, and subsidies.  However, as inflation started to accelerate a nd growth strengthened, 
the Government reversed some of these 
stimulus measures.  GDP growth at 2004/05 
market prices reached 10.1% at an annual rate in April-December 2010.  Growth has been led by services and manufacturing, with agriculture growing much more slowly.  
India's growth prospects remain strong, as 
potential GDP growth has been estimated at between 8% and 8.5%.  However, sustained non-inflationary growth will require addressing bottlenecks and investing in infrastructure and education.  It will also need 
the simplification of the business environment 
by eliminating overregulation, and defining more transparent trade and investment regimes. 
4. India's process of fiscal consolidation, 
which began in 2004, has not resulted yet in 
the intended decrease in the fiscal deficit.  Throughout the review period, India continued to post sizeable public sector deficits.  Its public finances deteriorated partly as a result of lower revenue and the impact on spending 
of the stimulus package in the wake of the 
global financial crisis.  Hence the consolidated fiscal deficit reached 9.5% of GDP in 2009/10.  More recently, the focus of fiscal policy has been shifted back to achieving fiscal 
consolidation and tax ra tionalization.  As a 
result, a gradual reform of the tax structure was implemented, to reduce customs and excise duties and rely more on direct taxes, particularly corporate income tax and on 
service tax revenues.  However, indirect taxes, 
including taxes that fall solely or mainly on imports, continue to be an important source of revenue, and changes in their levels are a much used policy tool.  For some time, India has intended to introduce a goods and services 
tax (GST) and consolidate several pieces of 
legislation regarding taxation.  A new tax Code has been drafted to simplify the tax regime and increase reliance on direct rather than indirect taxes. 
5. Merchandise trade as a percentage of 
GDP continues to increase despite the adverse WT/TPR/S/249 Trade Policy Review 
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 effects of the global financial crisis, 
illustrating India's increasing participation in the global economy.  Imports continued to grow faster than exports, leading to a widening 
of the trade deficit.  India posts a structural 
trade deficit, partly explained by its large population and development needs.  Strong domestic demand and rising oil prices have contributed to the widening of the trade 
deficit, leading to a current account deficit 
throughout the review period.  The deficit has been financed through large capital inflows, both foreign direct and portfolio investment, attracted by expanding domestic demand and the good prospects of the economy.  Capital 
inflows have been somewhat volatile;  this 
volatility has been largely accommodated by letting the exchange rate adjust.  Although the floating exchange rate regime has served India well in accommodating short-term capital 
inflows, policies need to be designed to attract 
more medium- and long-term capital, particularly given India's infrastructure and general investment needs.  The Government's recent decision to increase investor limits in the corporate and government bond markets is 
a step in this direction. 
(2) T
RADE AND INVESTMENT POLICY 
FRAMEWORK  
6. India is an original Member of the 
WTO and provides at least MFN treatment to 
all Members and other trading partners.  India 
accepted the Fourth and Fifth Protocols and is a Member of the Information Technology Agreement.  India is a strong advocate of the multilateral trading system and has historically 
been party to few regional agreements.  
However, despite India's reservations, regionalism has increasingly become an element of its overall trade policy objective of enhanced market access for exports.  This is evidenced by the seven preferential 
agreements it signed during the period under 
review and the negotiation of other agreements. 
7. India's trade policy objectives are 
stipulated in its Foreign Trade Policy (FTP), which is issued every five years, but revised 
periodically, through the issuance of notifications, to take into account internal and external factors.  In its 2004-09 FTP, India 
highlighted the need to expand trade, setting 
two objectives:  to double India's share of global merchandise trade within five years;  and to use trade expansion as a policy to promote economic growth and employment 
generation.  In the context of the global crisis, 
India has sought to arrest and reverse the declining trend of exports and to provide additional support especially to the sectors hit badly by the global recession, as asserted in the 2009-14 FTP.  India's short-term objective, 
in accordance with the latest FTP, is to achieve 
annual export growth of 15%;  the long-term objective is to accelerate export growth to 25% per annum and double India's share in global trade by 2020.  In order to meet these 
objectives, India implements a mix of policies 
including tax incentives, export promotion, and credit facilitation schemes, to "neutralize" the cost of imported inputs used in exports;  however, such schemes may contribute to the complexity of India's trade regime.  In its 
attempt to increase exports, the Government is 
also aiming to improve infrastructure.  In the latest Budget, the authorities have further expressed the need to promote market and product diversification. 
8. Measures to attract foreign direct 
investment (FDI) have included gradually increasing the number of sectors in which FDI is permitted and reducing sectoral restrictions.  Therefore, most sectors are currently at least 
partially open to FDI, subject to a cap and 
specific conditions.  However, FDI is prohibited in a number of sectors/activities, such as retail trading, some real estate activities, manufacture of tobacco and tobacco substitute, and some agriculture activities.  A 
recent consolidation of a ll prior regulations on 
FDI is aimed at clarifying India's FDI policy and provides for better understanding and predictability of the foreign investment rules among foreign investors and sectoral 
regulators. India WT/TPR/S/249 
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(3) TRADE POLICY BY MEASURE  
9. India has continued to streamline 
customs procedures and implement trade facilitation measures.  An electronic system 
for customs clearance has been introduced and 
a risk management system is in place to selectively screen high- and medium-risk cargo for customs examination.  Despite the implementation of these measures, India's 
import regime remains complex, especially its 
licensing and permit system, and its tariff structure, which has multiple exemptions, with rates varying according to product, user or specific export promotion programme. 
10. India's tariff is announced in the 
annual Budget;  however, individual tariff 
rates may be changed during the year.  In addition to the standard  tariff rate, importers 
are required to pay an additional duty ("countervailing duty") and a special 
additional duty instead of local taxes.  To 
determine the "effective" applied tariff rate (i.e. basic duties and other customs duty) on a particular product, separate customs and excise tax schedules must be consulted, which adds to the complexity of the tariff.  India's 
tariff comprises mainly ad valorem  rates 
(some 94% of tariff lines), levied on the c.i.f. value of imports, and some alternate or specific duties (6.1% of all tariff lines). 
11. In general, the value of imports is 
based on the transaction value.  A landing 
charge (for loading, unloading, and handling) of 1% is added to the c.i.f. value, to calculate the transaction value (earlier known as "assessable value").  India uses "tariff 
values"(reference prices), to calculate customs 
duty levied on imports of, inter alia , certain 
palm oils, as well as crude soybean oil, poppy seeds, and brass scrap.  These "tariff values" must in principle be revised every two weeks and adjusted to align them with international 
market prices.  In practice, however, some of 
the "tariff values" applied by India have remained unchanged since 2006. 
12. The simple average MFN tariff rate 
declined to 12% in 2010/11, from 15.1% in 2006/07.  This is reflected in a decrease in 
both agricultural and industrial average tariffs, due to India's shift towards lower tariffs.  The average for WTO non-agricultural products 
(8.9%) is considerably lower than the average 
for WTO agricultural products, which is 33.3%.  In 2010/11, tariffs ranged from zero to 150%.  The largest proportion of lines (71% or 8,042) was subject to a tariff rate of between 
5% and 10%, while 12.8% of total lines were 
subject to a tariff rate greater than zero but lower than 5%.  This is a major change from 2006/07, when 65% of all tariff lines were within the 10-15% range, followed by 10.4% of lines at 25-30%.  The percentage of 
duty-free lines has increased slightly, from 
2.7% to 3.2% of the total. 
13. Non- ad valorem  rates apply to 690 
tariff lines of which 5 are specific rates, while 685 are alternate rates affecting textiles and 
clothing.  The simple average applied MFN 
tariff including AVEs was 13.4% (12% without AVEs) in 2010/11.  The inclusion of AVEs in the tariff analysis affects only industrial average tariffs, which, when including AVEs, increase from 8.6% to 10.3% 
(or 10.6% for WTO non-agriculture).  In 
particular, the estimation of AVEs raises average tariff rates applied on textiles and clothing, which increase to 16.2% and 25.7%, respectively, from of 9.6% and 10% if AVEs 
are not included.  The use of specific rates 
considerably increases protection for certain products, in some cases to around and above 600%. 
14. India's WTO bound tariff levels are 
much higher than the applied rates, especially 
for many agricultural products.  These gaps allow the Indian Government to modify tariff rates in response to domestic and international market conditions. 
15. Imports may also be subject to 
non-tariff barriers including prohibitions, 
licences, and restrictions, as well as packaging, quality, and sanitary requirements.  Import restrictions may be imposed on grounds of, inter alia , health, safety, moral and security 
reasons, and for self-sufficiency and WT/TPR/S/249 Trade Policy Review 
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 balance-of-payments reasons.  On occasion, 
India links the use of trade policy instruments to domestic policy considerations.  For instance, import restrictions and licensing 
requirements are relaxed when imports are 
necessary to alleviate inflation or supply shortages.  State trading is also used as a policy tool to ensure, inter alia , a "fair" return 
to farmers, food security, the supply of 
fertilizer to farmers, and the functioning of the 
domestic price support system. 
16. 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.  India did not take any countervailing actions during this period.  Since its last Review in 2007, India has also imposed several safeguard measures.  As a result of an amendment of the legislation, 
since 2010 safeguard measures may also take 
the form of quantitative restrictions. 
17. SPS matters continue to be governed 
and enforced through a number of laws and agencies.  In 2006, India passed the Food 
Safety and Standards Act to consolidate 
separate laws, and to establish an institution to deal with SPS issues.  However, the rules and regulations to operationa lize this Act have not 
been notified yet and the Act is therefore not 
in force. 
18. As in the case of imports, export 
prohibitions and restrictions are mainly in place to ensure domestic supply of specific goods and thus may be removed and applied 
as the circumstances require.  In order to 
reduce the anti-export bias inherent in India's 
import and indirect tax regimes, a number of duty remission and exemption schemes are in place to facilitate exports.  Tax holidays are also available to investors through export 
processing zones and export-oriented units. 
19. India grants direct and indirect 
assistance to various sectors.  Most central 
government subsidies are destined for 
agriculture.  Other key subsidies include those for diesel and fertilizers.  The states also provide additional subsidies, especially for basic services such as education and health, 
electricity, and water.  Price controls, which 
apply to some commodities, are aimed at providing subsidies to farmers and a population under the poverty line, and to ensure "reasonable price" of quality drugs. 
20. Since its last Review in 2007, India 
has made several amendments to its 
competition policy legislation, and the Competition Commission of India, created under the Competition Act 2002, started operations in 2009.  In addition, some aspects 
of the law affecting mergers and acquisitions 
recently entered into force.  India became an observer to the WTO Agreement on Government Procurement in February 2010.  Its procurement system continues to be decentralized, comprising a multiplicity of 
entities at different levels of Government 
(including numerous central public-sector enterprises), and no common legislation governing procurement.  Public procurement is considered an important government policy 
instrument and is used to obtain certain 
socio-economic objectives.  As a result, the Central Government maintains reservations and price preferences as part of the procurement system.  However, competition 
from foreign suppliers is ordinarily allowed. 
21. Given the importance that an effective 
intellectual property system has on economic and social development, and the impact that intellectual property has on public policy issues (e.g. public health, the environment and 
food security), India, since its last review, has 
taken several initiatives to modernize its IPR administration and continue its efforts to enforce IPRs.  However, enforcement, except at the international borders, remains under the India WT/TPR/S/249 
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purview of the state governments rendering it 
difficult to collect data on the application of IPRs. 
(4) T
RADE POLICIES BY SECTOR  
22. The structure of India's economy has 
not changed significantly since 2007.  The services sector, which was the most dynamic sector during the review period, continues to be the largest contributor to GDP and has 
exhibited resilience to the negative effects of 
the global crisis.  The share of the manufacturing sector in GDP has declined slightly, and so has agriculture. 
23. Agriculture has been characterized by 
low productivity and modest growth rates.  Its 
contribution to GDP declined from 18.1% to 
16.6% in 2006/07-2009/10.  However, despite this decline in its rela tive share, agriculture 
continues to be the mainstay of the majority of the population, occupying some 52% of the 
total workforce (including non-organized 
labour);  the sector is also critical for achieving the Government's objectives of food security and price stability.  Due to its strategic importance, India considers it necessary to maintain protection and offers this sector 
greater tariff protection than to others.  
Average tariff protection for agriculture (33.2%) remains, therefore, substantially higher than for manufactured goods (8.9%).  India has also retained the price support 
system for basic commodities and implements 
other agricultural support programmes at the central and state level. 
24. During the period under review, 
growth in manufacturing has been erratic.  The 
sector showed robust growth over 2006/07 and 
2007/08, but was subsequently affected by the economic crisis, which led to a decline in foreign demand, particularly in areas including textiles and clothing.  In 2009/10, there was a resurgence of growth in the sector, mainly 
triggered by stronger domestic demand, 
particularly for consumer durables, capital goods, and industrial inputs.  In general, India's tariffs are higher for processed goods 
than for semi-manufactures.  In order to encourage investment in the manufacturing sector, India also offers a wide range of tax 
incentives, concessionary credit, and other 
types of assistance. 
25. The services sector, which accounts 
for 56% of GDP, is the main driver of economic growth, expanding by an average 
10% between 2006/07 and 2009/10.  Growth 
in services continued to be led by the financial services subsector, and the trade, hotel, transport and communications subsectors.  The importance of tourism, even though it is not apparent from GDP figures, is considerable.  
Tourism has good growth potential and the 
capacity to stimulate growth through its backward and forward linkages and cross-sectoral synergies.  FDI up to 100% is allowed for most services activities, except for 
financial services, where limits apply to 
foreign ownership.  However, specific market-access conditions or permits may apply, which in some cases may be more restrictive than an explicit investment cap. 
26. Inadequate infrastructure has become 
a critical constraint to India's economic 
development.  To address this concern, the 11
th 
Five-Year Plan outlined a comprehensive strategy to improve both rural and urban infrastructure, including electric power, roads, 
railways, ports, airports, telecommunications, 
irrigation, drinking water, sanitation, storage, and warehousing.  Howeve r, public investment 
alone would probably be insufficient to address India's infrastructure needs, 
particularly considering India's quest for fiscal 
consolidation.  Hence, an increase in private investment in infrastructure would be necessary to attain India's goal.  Further private sector investment, including foreign investment, may play an important role not 
only in developing infrastructure but also in 
providing an opportunity for foreign investors.  This would result in more stable, less volatile, capital inflows.