Though India had as part of economic reform "taken steps towards a more open and transparent trade regime, leading to a significant increase in Indo-US trade and investment", trade between the two countries could become quite significant with substantial additional liberalisation, USTR said in its annual national trade estimate report on foreign trade barriers issued here yesterday.

India's import licensing restrictions on approximately one-quarter of its imports and high tariffs remain serious impediments to US exports, especially agricultural and consumer items, the report said.

In 1998, USTR said, the US Trade deficit with India was $ 4.7 billion, an increase of $ 975 million from the trade deficit of $ 3.7 billion in 1997.

The stock of US Foreign Direct Investment (FDI) in India in 1997 was $ 1.7billion an increase of 24.5 per cent from the level of US FDI in 1995.

US FDI in India is concentrated largely in the banking, manufacturing and financial service sectors, but a substantial portion of new investment approvals were in infrastructure sectors.

The $ 1.7 billion level of FDI in India in 1997 compares with $ 3.2 billion of actual foreign direct investment and $ 5.1 billion of contractual foreign direct investment in China in 1998, matching 1997 levels.

In its chapter on India, USTR said despite reforms, Indian tariffs were still among the highest in the world, especially for goods that could be produced domestically.

Most agricultural products faced trade barriers, which severely restrict, or, in the case of processed foods, prohibit their import, it said adding that many consumer goods were similarly restricted.

Progress made thus far in tariff reduction had helped US producers but further reductions of basic tariff rates and elimination of additional duties would benefit a wide rangeof US exports.

The US Continues to assert that India'S Balance of Payments justification for restrictive import licensing were clearly world trade Organisation (WTO) inconsistent and not justifiable on balance of payments grounds.

The opening of India's trade regime had reduced tariff levels but it did not ease some of the worst aspects of customs procedures, USTR added.

Moreover, India's sanitary and phytosanitary restrictions were seen as a major hindrance to agricultural exports. India's export subsidies also caused concern for US industries, particularly the agro-chemical sector.

India had remained on the "priority watch list" since 1995 for lack of adequate intellectual property protection, the USTR report said, adding that the country's Patent protection was weak and had especially adverse effects on US Pharmaceutical and chemical firms.

US pharmaceutical multinationals estimate current annual losses in India due to the lack of patent protection at approximately $ 500 million.

India hadtaken partial steps towards introducing private investment and competition in the supply of basic telecommunications services. However, its weak multilateral commitments in basic telecom and the strong influence of the government-owned service provider limited the value of the liberalising steps taken so far, the USTR said.

The proposed legislation on broadcasting would have a negative impact on the commercial development of India's Satellite and cable industries and the ability of foreign companies to access the Indian market, it added.

Foreign firms report that increases in foreign equity, especially to 100 per cent foreign ownership, had become more difficult to obtain since 1994.

Industries also expressed concern over the government's stringent and non-transparent regulations and procedures governing local share-holding. This practice, they said, made India an expensive, complicated and frustrating environment to do business.

Though not an investment barrier per se, India's import restrictions andhigh tariffs had constrained investors from importing competitive inputs.