India Should Embrace Modern Economy Path: U.S. Think Tank

"But while such policies may seem beneficial in the short-term, they will ultimately prove counterproductive, by hampering domestic productivity, lessening India's attractiveness to foreign direct investment, and potentially leading to retaliatory measures by other nations that would imperil the global trading system," the report said. ITIF comes up with a series of recommendations in its report designed to create a comprehensive, pro-productivity strategy that can strengthen Indian innovation and spur the development of new industries and high-tech sectors that can generate sustainable growth.

This includes improving the process of Indian inter-agency communication and coordination in the development and promulgation of administrative and agency rule-making. ITIF urges the Indian Government to bring increased clarity and certainty to India's regulatory environment across national, state, and regional levels and appoint a National Productivity Commission based on Australian model.

Urging India to join international negotiations seeking to expand product coverage of the Information Technology Agreement, it calls for repealing Preferential Market Access rules. "Complete a U.S.-India Bilateral Trade and Investment Agreement to promote foreign direct investment in India," ITIF recommends. While the recent global economic downturn has played a part, a major factor in India's economic slowdown has been the loss of momentum for continued economic and trade liberalizing reforms it said.

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