The report comes amid lingering disagreements between the two countries on many trade issues.

The US Trade Representative’s annual Special 301 report, that identifies trade barriers to U.S. companies and products due to a foreign government’s intellectual property regime, has placed India on the Priority Watch List, the same as last year.

The report identified many measures taken by the government as encouraging in terms of providing a better IP protection regime, but raised multiple concerns, particularly related to the potential erosion in IP standards due to its push for promoting domestic manufacturing.

The report comes amid lingering disagreements between the two countries on many trade issues, in the context of India’s efforts to promote local manufacture. “The U.S remains concerned about actions and policies in India that appear to favour local manufacturing or Indian IPR owners,” according to the report.

“From movies and music to green technology and pharmaceuticals, U.S. creators and innovators have a significant competitive advantage in the area of intellectual property. We can’t afford to let countries on the Priority Watch List or Watch List write the rules for intellectual property – rules that are often discriminatory or that discourage creativity and innovation,” said U.S. Trade Representative Michael Froman.

The government of India does not engage with the process as it considers it an infringement on the country’s sovereignty.

Indian official sources pointed out that the categorisation is arbitrary and mostly a political decision, in order to reward or punish a target country.

“India has taken positive steps to address or avoid further erosions of the IPR regime. India’s courts retain their reputation for providing fair and deliberate treatment of both foreign and domestic litigants. However, at the same time, India has not taken the opportunity to address long-standing and systemic deficiencies in its IPR regime and has endorsed problematic policies,” according to the report. The report said India’s domestic policy goals of increasing investment and stimulating innovation must be “through, not at the expense of, IPR protection and enforcement.”

Welcoming the efforts undertaken by the government to promote IPR within India, the report said initiatives such as “Make in India” and “Start-up India” have linked the realization of development goals to IPR creation and protection. The report pegged losses from piracy of music and movies in India at approximately $4 billion per year and the commercial value of unlicensed software at $3 billion

“The U.S urges India to reject policies and practices that amount to barriers that adversely affect not only U.S. companies, but Indian companies as well.”

The USTR report said the U.S continues to monitor India’s application of its compulsory licensing law. “The United States requests clarity from the Government of India regarding the compulsory license decision-making process, as it affects U.S. stakeholders,” it said. It said India was the source of a lot of pirated and counterfeit goods reaching the U.S shores.