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PRESS RELEASE
PRESS/TPRB/71
1 April 1998 India
should keep up with its trade reforms to ensure strong economic growth Back to top
India's economic reforms and
trade liberalization policies contributed to a dramatic increase in its economic growth in
the mid-1990's. Larger flows of inward foreign investment and increased international
trade helped India achieve annual average growth rates of 7 percent from 1993 to 1996.
Economic growth slowed, however, in 1997 and, according to a new WTO Secretariat report on
India's trade policies and practices, India should continue liberalizing its trade and
investment regime to ensure strong and stable economic growth.
The WTO Secretariat report
and a policy statement prepared by the Government of India, will provide the basis for a
review of India's trade policies and practices on 16 and 17 April, 1998. The focus of the
WTO's report is on India's policy and trade measures affecting imports, exports and
production. The report notes that India recognizes the need to continue economic reform,
with an increased emphasis on improving its industrial infrastructure. The latter has
proved to be a constraint on expanding economic activity and stimulating exports. Other
measures under consideration are reductions in tariffs and non-tariff measures, reforming
the subsidies structure (estimated to account for 14 per cent of GDP), and restructuring
public sector enterprises.
The Indian Government
initiated a major programme of economic reform and liberalization in 1991. Reforms in the
manufacturing sector have been widespread, including reductions in average tariff rates,
import licensing restrictions for industrial inputs and capital goods and compulsory
industrial licensing; the agricultural sector and consumer goods trade have, as yet, been
relatively untouched by government reform efforts. While there has been some
liberalization, there has been no change in the structure of agricultural incentives and
subsidies.
India's financial services
are gradually being liberalized while significant headway has already been made in
liberalizing telecommunications. Other services, such as shipping, roads, ports and air,
are beginning to open up, but, the report states, foreign participation remains relatively
low and significant administrative barriers remain. India amended its Copyright Law in
1994 to comply with its obligations under the Trade-Related Intellectual Property Rights
(TRIPS) Agreement. As a developing country, India has until the year 2000 for most
products, but until 2005 for some goods, to comply with the TRIPS Agreement but is
currently required to provide means for receiving product patent application in certain
areas. On this issue, a decision by a WTO dispute settlement panel and the Appellate Body
has stated that India was in violation of its obligation.
Tariffs have been reduced
from an average of 71 per cent in 1993 to a current average of 35 per cent. The report
notes, however, that the tariff structure remains complex and that escalation remains high
in several industries, notably paper and paper products, printing and publishing, wood and
wood products, and food, beverages and tobacco. In general, bound tariffs remain
substantially higher than applied rates, especially on agricultural products.
The report observes that
import licensing remains India's main non-tariff barrier, although reforms to the system
of restrictive import licensing have moved ahead steadily. The number of goods subject to
import licensing has been gradually reduced - albeit with an emphasis on industrial and
capital goods, rather than consumer products. The report notes that last year India
presented a phase-out programme for the remaining restrictions to its trading partners.
Agreement was reached with all major partners except the United States, with which India
is currently in dispute settlement proceedings over its remaining restrictions.
The report observes that
reforms in tariffs and non-tariff barriers have not been accompanied by similar reforms on
export subsidies and incentives. India continues to maintain a large number of incentive
programmes for exports. These include income tax exemptions, subsidized credit, export
insurances and guarantees. The overall scope of such incentives has been enhanced,
resulting in more explicit export-oriented policies, which have increased the possibility
of resource misallocation.
The report notes that India
has simplified its foreign investment regime and opened up a number of sectors to foreign
direct investment. This is the case in manufacturing where foreign participation of up to
51 or 74 per cent can take place automatically in a number of sectors. Production in the
food manufacturing sector has grown rapidly following increased foreign investment. In
this sector, up to 50 and 100 per cent of participation is allowed automatically for
foreigners and non-resident Indians. In the automobile sector, 51 per cent foreign equity
participation is granted automatically and up to 100 per cent foreign equity participation
is also allowed if approved by government authorities. This has triggered a high rate of
foreign investment, mostly through joint ventures with Indian manufacturers. Major policy
changes since 1993 have also included automatic permission for foreign equity
participation of up to 50 per cent in some mining activities. This also applies to oil
exploration where the government seeks to reduce its dependence on imports and now offers
investors incentives such as tax holidays.
The report concludes that
India's increased openness and integration with the world economy are important factors in
explaining the healthy economic growth recorded in the mid-1990s. However, the recent
economic slowdown demonstrates the need for continued and even accelerated reform. Greater
transparency in decision-making, for example, could complement India's ongoing trade
liberalization process in promoting a more efficient and productive economic structure.
Such reforms, notes the report, should lower the anti-export bias that is still inherent
in both the trade and industrial support structures and allow the government to lower
export incentives and move towards a more outward, rather than export-oriented policy
framework. Such steps would not only help to further India's integration into the world's
economy but provide it with a firm basis for future sustained growth.
Notes to Editors
The WTO's Secretariat's
report, together with a report prepared by India will be discussed by the WTO Trade Policy
Review Body (TPRB) on 16 and 17 April 1998. The WTO's TPRB conducts a collective
evaluation of the full range of trade policies and practices of each WTO member at regular
periodic intervals and monitors significant trends and developments which may have an
impact on the global trading system. The two reports, together with a report of the TPRB's
discussion and of the Chairman's summing up, will be published in due course as the
complete Trade Policy Review of India and will be available from the WTO Secretariat,
Centre William Rappard, 154 rue de Lausanne, 1211 Geneva 21.
The reports cover the
development of all aspects of India's trade policies, including domestic laws and
regulations, the institutional framework, trade policies by measure and by sector. Since
the WTO came into force, the "new areas" of services trade and trade-related
aspects of intellectual property rights are also covered. Attached are the summary
observations from the Secretariat and government reports. Full reports will be available
for journalists from the WTO Secretariat on request.
Since December 1989, the
following reports have been completed: Argentina
(1992), Australia (1989 & 1994), Austria (1992), Bangladesh (1992), Benin (1997),
Bolivia (1993), Brazil (1992 & 1996), Cameroon (1995), Canada (1990, 1992, 1994 &
1996), Chile (1991 & 1997), Colombia (1990 & 1996), Costa Rica (1995), Côte
d'Ivoire (1995), Cyprus (1997), the Czech Republic (1996), the Dominican Republic (1996),
Egypt (1992), El Salvador (1996), the European Communities (1991, 1993, 1995 & 1997),
Fiji (1997), Finland (1992), Ghana (1992), Hong Kong (1990 & 1994), Hungary (1991),
Iceland (1994), India (1993), Indonesia (1991 and 1994), Israel (1994), Japan (1990, 1992,
1995 & 1998), Kenya (1993), Korea, Rep. of (1992 & 1996), Macau (1994), Malaysia
(1993 & 1997), Mauritius (1995), Mexico (1993 & 1997), Morocco (1989 & 1996),
New Zealand (1990 & 1996), Nigeria (1991), Norway (1991 & 1996), Pakistan (1995),
Paraguay (1997), Peru (1994), the Philippines (1993), Poland (1993), Romania (1992),
Senegal (1994), Singapore (1992 & 1996), Slovak Republic (1995), South Africa (1993),
Sri Lanka (1995), Sweden (1990 & 1994), Switzerland (1991 & 1996), Thailand (1991
& 1995), Tunisia (1994), Turkey (1994), the United States (1989, 1992, 1994 &
1996), Uganda (1995), Uruguay (1992), Venezuela (1996), Zambia (1996) and Zimbabwe (1994).
The
Secretariats report: summary Back to top
TRADE POLICY REVIEW BODY: INDIA
Report by the Secretariat Summary Observations
Introduction
The Indian Government
initiated a major programme of economic reform and liberalization in 1991, reversing a
policy direction followed for decades. Since then, successive Governments have
progressively reduced tariff protection and relaxed and simplified India's restrictive
import licensing regime. Internal reforms have included reduced control over locational
and industrial licensing controls, in addition to some loosening of controls on
administered prices in some sectors. In this process, however, the policy focus was
principally on liberalization of capital goods and inputs for industry, to encourage
domestic and export-oriented growth: by and large, imports of consumer goods remained
regulated.
These reforms contributed to
a dramatic increase in growth in the 1990s, accompanied by larger flows of inward foreign
investment and increased international trade. The balance of payments situation also
improved greatly. To build on this success, India has recognized the need to continue the
economic reform process, with an increased emphasis now on improving infrastructure, which
appears to be a major constraint on the growth of industrial activity and exports; further
liberalizing trade through reductions in tariffs and non-tariff measures; reforming the
subsidy structure, which is estimated to cost around 14 per cent of GDP; and restructuring
public sector enterprises, which continue to be a fiscal drain. These reforms, if fully
implemented, should lower the anti-export bias that is still inherent in both the trade
and industrial support structures. This would also permit India to lower export
incentives, thus moving towards a more outward, rather than export, oriented policy
framework, further integrating India into the multilateral system and providing a firm
basis for future sustained growth.
The Economic Environment
Since its previous Review in
1993, India has continued liberalizing its economy, albeit at a somewhat slower pace.
Economic reforms initiated in 1991 have produced strongly positive results, most notably
annual real growth rates averaging 7 per cent between 1993/94 and 1996/97, led by strong
industrial recovery. Over the same period, merchandise exports grew at an annual rate of
some 20 per cent in current US dollar terms. In 1996/97, however, some economic
slowdown occurred and export growth fell to 8 per cent, partly as a result of
infrastructural bottlenecks and indicative of the need for continued structural reform.
In the area of trade reform,
a tariff reduction programme has continued and is to progress further. Average rates have
consequently declined. The number of goods subject to import licensing restrictions has
been gradually reduced albeit with an emphasis on industrial and capital, rather than
consumer goods until recently. The foreign investment regime has also been simplified with
a number of sectors being opened up to foreign direct investment.
Further structural reform
needs the support of continued macroeconomic stability. An important issue is the
reduction of the public sector deficit, estimated at 8.5 per cent of GDP in 1996/97.
The Central Government deficit fell to 5 per cent in 1996/97, but adjustments to
reduce State deficits have not been as forthcoming and shoring up parts of the public
sector, prior to planned reform and disinvestment, has been expensive. With the cost of
supporting important sectors such as agriculture and related transfer programmes, it is
unclear how far the public sector deficit may crowd out investment. Overall, subsidies
remain a drain on Government revenue and lead to a misallocation of resources.
Trade Policy Features - Type and Incidence of
Trade Measures
Since 1993, tariff reform
has brought the simple average of all rates down to 35 per cent in 1997/98, from 71
per cent in 1993/94; the process of tariff reform and reduction is ongoing. However, the
structure of the tariff remains complex, with a large number of bands; in several
industries, notably paper and paper products, printing and publishing, wood and wood
products and food, beverages and tobacco, tariff escalation remains high.
Reforms to the system of
restrictive import licensing have moved ahead steadily, but further steps remain to be
taken and are encouraged. In general, products are first moved to a Special Import Licence
(SIL) list, with producers being exposed to limited foreign competition, before the
product is moved to the list of freely importable goods. The list of freely importable
goods currently covers some 68 per cent of tariff lines: remaining restrictions
cover mainly consumer goods, and India has proposed a six year phase-out programme for
these restrictions. India is currently in dispute settlement proceedings with the United
States regarding its remaining restrictions. Approximately 10 per cent of all tariff lines
are presently subject to the SIL list, increasing SIL coverage by around one-third from
1995/96. India also continues to use state trading monopolies to retain some control over
exports and imports of certain products (canalization). Since the previous Review, the
product coverage of imports through such canalization has increased slightly; however,
private operators can also trade in some of these canalized products and the share of such
products in total imports has declined to 19 per cent, compared to 27 per
cent at the turn of the decade.
The reforms in tariff and
non-tariff barriers have not been accompanied by similar reforms to export subsidies and
incentives. India continues to maintain a large number of incentive programmes for
exports, incentives which, according to the authorities, are intended to compensate for
import restrictions. These include income tax exemptions, subsidized credit, export
insurance and guarantees, export promotion and marketing assistance schemes and access to
some imports that are normally subject to restrictive licensing. The overall scope of such
incentives has been enhanced, turning India's overall policy stance more explicitly
export-oriented and increasing the possibility of resource misallocation.
Sectoral Policy Developments
Agricultural products
The agricultural sector has
thus far remained relatively untouched by the reform programme. Nevertheless, agriculture
has benefited from the price realignments resulting from manufacturing sector trade
reforms. Some progress has also been made in the removal of state controls on the
inter-state movement of certain grains and of administered prices; however, controls on
the export and import of certain products through licensing policies remain.
During the Uruguay Round,
India bound its agricultural tariffs at ceiling rates ranging from 0 to 300 per cent. In
reality, applied rates for 1997/98 are considerably lower, averaging 26 per cent for the
sector, with a peak of 45 per cent. This is however likely to change as India
tariffies its present licensing restrictions; in this context, India is currently
renegotiating its tariff bindings on some zero-or low-duty products. Progress in changing
the structure of agricultural incentives and subsidies is likely to remain constrained by
the Government's policy of providing support prices to farmers and ensuring low cost
supplies to the population through the public distribution system.
Food processing
Although tariff reforms have
resulted in average duties in the food sector being halved since 1993 (currently
around 29 per cent for food products and 134 per cent for beverages), industrial and
import licensing restrictions continue to be maintained for a number of industries. In
addition, a number of products are reserved for production by the small scale sector.
Production by the food manufacturing sector has grown rapidly, especially following
increased foreign investment where up to 51 and 100 per cent of participation is
allowed automatically for foreigners and non-resident Indians, except for products
reserved for the small scale sector.
Mining and petroleum
Major policy changes since
1993 include automatic permission for foreign equity participation of up to 50 per cent in
the mining of 13 minerals; foreign equity above this share must be approved by the Foreign
Investment Promotion Board (FIPB). In an attempt to increase exploration, liberalization
has also taken place in licenses granted for exploration. Trade reforms include a
reduction in tariff rates to averages of around 10 per cent (from 46 per cent in 1993/94)
for non-ferrous and iron ores and to 13 per cent (from 65 per cent in 1993/94) for coal.
India depends on imports of
petroleum. Prices, until recently, continued to be administered although some effort has
been made since 1993 to raise these prices periodically to reduce the fiscal burden of the
"oil-pool". Despite this, the growing subsidy for petroleum products prompted
the Government in 1997 to declare a phase out of most administered prices in the sector.
The Government has recently also placed an emphasis on increased oil exploration
domestically to reduce import dependence, through the New Exploration Licensing Policy
which offers companies investment incentives such as tax holidays to invest in India.
Manufacturing
Reforms have been most
widespread in the manufacturing sector, including reductions in average tariff rates,
import licensing restrictions, compulsory industrial licensing, and a liberalization of
foreign investment policies. The sector has responded positively to the reforms, although
some slowdown in growth has occurred in 1996/97 due, in part, to infrastructure
constraints.
Since India's previous
Review, the average tariff on imports of manufactures (ISIC3) has been lowered from 73 to
around 36 per cent in 1997/98. Despite this, tariff escalation in some areas remains
high, since the largest reductions in tariff rates have taken place for capital goods and
intermediate inputs. Tariff escalation is important in sectors such as paper and paper
products and to some extent in textiles and clothing, where India has traditionally
maintained, and still has, high levels of protection. In certain sectors, such as
automobiles, tariff reform has had little impact on imports of fully assembled items,
because the liberalization of foreign direct investment without accompanying reform of
import licensing restrictions has promoted local investment in manufacturing.
Approximately 1,977 tariff lines, at the HS eight-digit level, in the manufacturing and
mining sectors, continue to be subject to import licensing restrictions. As noted, the
authorities have proposed a phase out of these restrictions over a six year period.
Foreign investment has also
been considerably simplified, with an enlarged list of industries, including the
automobile sector, where foreign equity participation of up to 51 or 74 per cent can take
place automatically. Compulsory industrial licensing is now limited to nine industries,
compared to 18 during India's previous Review; some reduction in the list of items
reserved for production by the small-scale sector has also occurred.
Services
Services contribute more
than 40 per cent to India's GDP. Their overall growth has been underpinned
by rapid expansion of activities in the area of finance, and, to a lesser
extent, commerce and tourism.
Significant headway has been
made in liberalizing telecommunications. While the government-controlled corporation VSNL
operates as the exclusive provider of international long-distance services and the
monopoly Department of Telecommunications for the domestic long-distance services, private
investors in joint ventures are allowed to provide intra-voice telephone services in
various States and metro areas. Many value added services - including voice mail, radio
paging and cellular mobile telephone - are now open to 49 per cent foreign equity
participation. In the area of financial services, the banking sector remains fairly closed
to foreign participation, while the insurance sector is still monopolized by the
Government. Under the Financial Services Agreement, the Government has offered to remove
reciprocity requirements in the banking sector and also raised the annual limit on new
banking licenses from eight to 12. Other services areas - such as shipping, roads,
ports and air - are beginning to open up, but foreign participation remains relatively low
and significant administrative barriers remain.
India in the Multilateral Trading System
India was, from the start,
an active member of the GATT and a founding member of the WTO. As a result of the Uruguay
Round, India bound 67 per cent of its tariff lines; lines remaining unbound include
those on certain industrial items and many consumer products. Under the General Agreement
on Trade in Services (GATS), India has made commitments in 33 activities (compared
with an average of 23 for developing countries) out of a total of 161. In addition, India
also took part in the Information Technology Agreement - covering computers,
telecommunication equipment, semiconductors, semiconductor manufacturing equipment,
software, and scientific instruments. India's anti-dumping and countervailing legislations
have been amended in line with relevant WTO Agreements. With respect to intellectual
property rights, India's Copyright Law was amended in 1994 in accordance with its
obligations under the TRIPS Agreement. India plans to make use of the transition
period available to developing member countries of the WTO to implement other changes
to its intellectual property rights; however, in a dispute with the United States over
"pipeline" patent protection and exclusive marketing rights, the
WTO's Dispute Settlement Body has found that India is obliged to implement the
necessary measures. India is currently in two WTO disputes: one as a defendant with
the United States, as noted above, and the other as a complainant with Hungary,
relating to restrictions on textiles and clothing.
In terms of WTO tariff
commitments, India has bound 67 per cent of its tariffs in manufacturing and
100 per cent in agriculture in consequence of its Uruguay Round commitments;
however, most of these bindings are at ceiling levels, ranging up to 300 per cent in
agriculture. The bound simple average tariff to be implemented by the year 2005 is
54 per cent, compared with the present applied rate of 35 per cent, itself set
to decline further. In the services area, the initial commitments made under GATS are such
that the existing policy framework is either more liberal, or equivalent to the bound
measures. In both areas, thus, India, like most other developing countries, has put a
ceiling on its protective structure, rather than binding it at effective levels, while
pursuing unilateral liberalization.
India maintains several
plurilateral agreements with countries in the region: the Bangkok Agreement, the
South Asian Preferential Trading Agreement (SAPTA), and the Global System of Trade
Preferences (GSTP). Further concessions to some of these countries are also
provided within the framework of bilateral trade agreements. However,
the impact of these agreements on India's trade seems to have
been minimal. India' merchandise imports resulting from the eighth Bangkok
Agreement and SAPTA member countries accounted for only 3 per cent of total
merchandise imports and about 7 per cent of its merchandise exports
in 1995/96.
Outlook
India's increased openness
and integration with the world economy have been important factors in explaining the
healthy economic growth recorded in the 1990s. The recent economic slowdown demonstrates
the need for continued and even accelerated reform. Transparency in decision-making,
especially with regard to foreign investment, should also be increased if India is to
reach its foreign investment targets. Continued opening of the trade regime and
liberalization of the foreign investment regime are likely to be translated into even
higher growth rates than have been experienced so far.
Other factors constraining
economic growth may include the fiscal deficit, which may, for example, contribute to high
interest rates. There is also concern with regard to the large share of subsidies in
government expenditures: while many of these are aimed at assisting the very poor, it is
not clear that this target is being reached. Second, the poor quality and coverage of
certain infrastructure facilities - notably power and transportation services - which are
all essential for the development of both domestic and export markets, needs to be
addressed. Third, reform efforts in industrial restructuring, need to be accelerated,
especially to enable the closure of unviable units in order to release resources for use
in more productive areas. Internal deregulation could therefore complement India's ongoing
trade liberalization process in promoting a more efficient and productive economic
structure.
Government
report Back to top
TRADE POLICY REVIEW BODY: INDIA
Report by the Government
Introduction
India has taken important
policy initiatives since July 1991 to emerge as a significant player in an increasingly
inter-dependent world economy. The policy reforms provided a free and conducive
environment for trade and include various measures which helped to achieve the high export
growth rates in some recent years. The Eighth Plan recognized that for India it was not a
choice between market mechanism and planning, but that the challenge was to effectively
dovetail the two, so that they are complementary to each other. The Government introduced
major reforms to provide greater competitive stimulus to Indian trade and industry.
India's active participation in the WTO continued and the general direction of her trade
and investment reforms initiated in 1991 and highlighted in the last Trade Policy Review
in December 1993, have been maintained by successive governments.
The following presentation
is divided into four sections. The first deals with liberalization of trade and other
economic reforms, which are mutually supportive. The second deals with India's
inter-action with the WTO. The third focuses on Regional Trade Arrangements. The final
section contains conclusions.
Key developments in trade and economic policy
since the last review
Objectives of Trade Policy
In 1991, India initiated a
wide-ranging programme of trade liberalization and economic deregulation, with the
objective of integrating the Indian economy more closely with the world economy. The
principal objective of India's trade policy defined in the Export-Import Policy for 1997
to 2002 are:
(i) to
accelerate the country's transition to a globally-oriented, vibrant economy, with a view
to deriving maximum benefits from expanding global market opportunities;
(ii) to
stimulate sustained economic growth by providing access to essential raw materials,
intermediates, components, consumer goods and capital goods required for augmenting
production;
(iii) to
enhance the technological strength and efficiency of Indian agriculture, industry and
services thereby improving their competitive strength, while generating new employment
opportunities, and to encourage the attainment of internationally accepted standards of
quality;
(iv) to
provide consumers with good quality products at reasonable prices.
Moreover, the Eight Five
Year Plan (1992-97), called for the movement of India's trade policy regime "towards
greater openness and to reap the full benefits of international trade". This has been
sought to be achieved through (i) a reduction of the "negative" list of imports
and exports, (ii) a gradual reduction in the level of tariff rates, and (iii) other
trade policy reforms.
Significant Trade Policy Reforms
With increased
liberalization and globalization of trade, India's focus is on areas of her strength and
advantage to meet global competition, as also areas having trade potential.
This is the rationale which
has given the impetus for shortening of the Negative List of Imports considerably and for
expanding the freely importable list. Currently, approximately 6,647 items are freely
importable; 58 items are prohibited, 168 items are canalized, and as notified by India to
the WTO (Notification No. WT/BOP/N/24, dated 22 May 1997) certain products included in
2,714 tariff lines at the eight-digit level of the Indian tariff classification are
restricted for balance-of-payments reasons as per Article XVIII:B of GATT, and certain
products included in some 600 tariff lines are restricted under Articles XX and/or XXI of
GATT, the two categories being non-additive. Compared to 1.4.96, when the percentage of
restricted items came to 37%, the figure for 1.4.1997 is only 32%. There is a decrease of
5% in the restricted items, whereas there is increase of 488 items in the free list. Out
of the restricted items, 1,051 are importable against Special Import Licences (SILs),
which are freely tradeable and transferable. Among the items importable under freely
transferables SILs are a number of consumer durables. An agreement on time schedules for
removal of quantitative restrictions (QRs) maintained for balance-of-payment reasons has
been reached by India with its major trading partners other than the United States.
Many of the canalized items
(equivalent to 47 items out of 176 in total) are also under the SIL regime, and imports of
canalized items have fallen from 27% of merchandise imports in 1988-89 to 19% in
1996-97, with all canalizing agencies amongst the PSUs being required to follow commercial
principles in carrying out their operations.
Several stages of reforms
have lifted all licensing restrictions on imports of capital goods, liberalized partially
imports of consumer goods and reduced maximum tariffs from over 300% to 45% (including a
surcharge of 5%). Collection rates, which are a better indicator of protection than
declared rates, came down from the level of 47% in 1990-91 to 29% in 1995-96.
Exchange Market Reforms
The Eight Plan had envisaged
exchange rate reforms as part of the general trade policy reforms, and in March 1993 the
exchange rates were unified and transactions on the trade account were freed from foreign
exchange control. Further measures taken to simplify procedures related to the purchase of
foreign exchange so as to enhance current account convertibility. These included
permission to Exchange Earner's Foreign Currency (EEFC) account holders to use these funds
for business-related current account transactions. Authorized dealers were allowed to
export surplus currency to private money changers abroad, in addition to their own
branches and correspondents. They were empowered to allow Indian resident families to
remit US$5,000 per year to close relatives abroad,without reference to the RBI. Monetary
ceilings on remittances for a wide range of purposes were also removed.
Reforms in the Foreign Investment Regime
Since export growth depends
on the existence of a strong production base in thrust sectors, which could expand to meet
further growth needs, the stimulus in such thrust areas has been provided by streamlining
the procedures for foreign investment. The Foreign Investment Promotion Board (FIPB) has
been revamped to make the rules and regulations pertaining to foreign investment more
transparent. The first-ever guidelines for approving FDI by the FIPB have been announced
to expedite approval of foreign investment in areas not covered under automatic approval.
Priority areas for allowing 100% foreign equity have been spelt out. An expanded list of
46 industries eligible for automatic approval up to 51% foreign equity, three industries
relating to mining activity eligible for automatic approval up to 50% foreign equity and
another set of nine industries eligible for 74% foreign equity have been announced by the
Government. The limit on holdings by individual foreign institutional investors (FIIs) in
a company has been raised from 5% to 10% of the company's shares, while the aggregate
limit has been increased from 24% to 30%. FIIs have also recently been allowed to invest
in non-listed companies. It is no longer necessary for automatic approvals by the Reserve
Bank of India (RBI) that the amount of foreign equity should cover the foreign exchange
requirements for import of capital goods needed for the project. To impart flexibility in
sourcing of technology imports, technology transfer has been delinked from equity
investment.
Reforms in the Infrastructure Sector
Removing infrastructural
bottlenecks has been another key component of the trade reforms package. In the
telecommunications sector, significant progress has been made in involving the private
sector in value-added services, such as cellular, mobile and paging services. A Telecom
Regulatory Authority was established in March 1997, which will separate the regulatory
functions from policy formulation and operational functions. New guidelines allow private
participation in ports, investments being on B.O.T. basis, and already approval for a
private container terminal valued at Rs 70 billion has been awarded. Similarly,
fresh guidelines for private investment in the highway sector have been announced,
procedures have been simplified and environmental clearance and equity participation made
easier. Approval has been given for a rail-based mass rapid transit system (MRTS) in
Delhi, and the cities of Bangalore, Hyderabad, Mumbai and Calcutta have proposed major
improvements in their public transport system through the introduction/augmentation of
rail-based transit systems. A new policy for private investment in civil aviation has been
announced, and this includes allowing 40% equity in domestic airlines.
Domestic Tax Reforms
Several new measures for
streamlining and rationalizing the tax structure have been initiated. The MODVAT scheme
has been extended to the textile sector by rationalization of rate structure to modernize
and revive the textile industry. The direct tax regime has been strengthened by measures
like moving towards a "presumptive" tax system, greater reliance on "pay as
you earn" and self assessment schemes, restricting "scrutiny assessment" to
a limited number of cases, broadening of the tax base through the "four economic
criteria" scheme and the introduction of the Minimum Alternate Tax (MAT) for the
corporate sector (with the exception of companies engaged in power and infrastructure
sectors) and measures such as progressive computerization. The rates of corporate tax have
also been progressively reduced to 35% for assessment year 1998-99 and the corporate
surcharge has been eliminated.
Other Key Economic Reforms
Other than the reforms
directly connected with the trade regime, an array of reforms to make the economy more
competitive, and thereby, indirectly, provide a greater impetus to trade, both domestic
and international, have been introduced.
Through the New Industrial
Policy of 1991, the total number of industries reserved for public sector enterprises was
reduced to eight, and since then two more industries in the mining sector have been
further de-reserved. With delicensing of consumer electronics, at present only 14
industries remain under the purview of industrial licensing. Guidelines for Euro Issues
and External Commercial Borrowing (ECB) have been liberalized to ease the access of Indian
companies to international capital markets. Some deregulation of administered prices have
taken place with the deregulation, in February 1997, of the prices and distribution
of certain grades of coal and by the decision of the Government on 1.9.1997 to dismantle
the Administered Pricing Mechanism in the petroleum sector by introducing reforms in a
phased manner, whereby consumer prices of major petroleum products will be moved towards
import parity.
Decontrol of the banking
system is continuing. There has been deregulation of interest rates on term deposits of
over one year, and on non-resident external rupee deposits above two years. Selective
credit controls on a number of commodities were eliminated from October 1996.
Competition in the banking sector has increased gradually as ten new private sector banks,
out of the 13 "in principle" approvals given so far, have started functioning.
The RBI has issued guidelines for the setting up of new local area private banks. Two such
banks have already been given "in principle" approval. Banks were allowed to fix
their own foreign exchange aggregate gap limits, starting April 1996. From October 1996,
banks were permitted to provide foreign currency denominated loans based on their FCNR
accounts, to be used to meet either foreign currency or rupee requirements. The
Incremental Cash Reserve Ratio of 10% for banks has been removed and the Statutory
Liquidity Ratio on incremental net domestic demand and time liability reduced
substantially. The replacement of the system of issue of ad hoc Treasury Bills by the RBI
to meet temporary mismatches in Government receipts and expenditure with a system of Ways
and Means advances has been put in place to act as an effective ceiling on the automatic
monetization of the fiscal deficit and create a favourable macroeconomic condition for
setting a "monetary target". An Insurance Regulation Authority has been
established.
Significant capital market
reforms introduced and encompassed primary and secondary markets, equity and debt, and
foreign institutional investment. Among the reforms undertaken to impart greater
flexibility were the Capital Depositary's Act 1996 to facilitate dematerialization of
securities; formulation of SEBI regulations, 1996 which allow the Securities and Exchange
Board of India (SEBI) to regulate establishment and functioning of depositories; giving up
vetting of public issue offer documents by SEBI; FIIs permitted to set up pure (100%) debt
funds, and make investments in Government securities; modification of eligibility criteria
for registration as an FII to allow endowment funds, university funds, foundations and
charitable trusts to register; issuance of SEBI regulation on Venture Capital Fund (VCFs),
allowing them to invest in unlisted companies etc. so as to provide flexibility to VCFs to
provide high-risk finance; introduction of a modified take-over code; and the decision to
constitute an Independent Tariff Commission.
India is of the view that
not all areas of economic activity can be made a subset of trade concerns for
consideration in the WTO, since many of these areas have a development perspective.
However, insofar as the ongoing reforms have proved conducive to trade, they have been
touched on in this presentation.
Recent Trade Facilitation Measures
Since the last Review in
1993, the green channel facility for customs clearance has been enhanced. Large
established exporters receive expeditious assessment of their imports Bills of Entry by a
group of Appraisers and Assistant Collectors especially earmarked for this purpose. They
are also provided facilities for de-stuffing containers at their factory premises by the
Central Excise Officers, after the containers are moved straight from the port to the
factory. On-line assessment and clearance through Electronic Data Interchange (EDI) has
started at Delhi and is likely to be extended to all other Customs Stations by the end of
1998. An importer can file documents 30 days in advance of the expected date of arrival of
a vessel, which facilitates customs clearance. Exports of perishable goods have been
exempted from routine customs examination. A large number of ICDs/Container Freight
Stations have been started in the hinterland areas to facilitate imports and clearing
cargo at production/consumption sites.
Further, import of cargo by
courier has been provided and the Multimodal Transport Act has been enacted with the
objective of expeditious movement of cargo.
Harmonization of Indian
standards with international standards, which is progressing rapidly under the activities
of BIS, etc., are also adding to the quality/sanitary aspects of Indian products and
therefore to their competitiveness.
Key economic parameters: results of the reform
process
The initial spurt of reforms
from 1990-91 to 1993-94 was successful, by all accounts, resulting in a jump in economic
growth to 7.2% in 1994-95 (in terms of GDP at factor cost). GDP grew by 7.1% in 1995-96
and at 6.8% during 1996-97. The average growth rate during the latest three years at 7%
probably places India among the top ten performers in the world during this period.
Foreign currency assets grew by 16.4% during 1996-97.
The average annual growth of
exports during 1993-94 to 1995-96 was buoyant, amounting to 20% in US$ terms.
Consequently, India's share in world exports increased from 0.41% in 1992-93 to 0.6% in
1995-96. The growth rate of imports also increased, from a rate of 15.3% in 1993-94 to
36.4 in 1995-96. However, a slow-down occurred in 1996-97, with exports registering a
growth of only 4% and imports a growth rate of 6% with an increase in the trade deficit to
$5.4 billion in 1996-97 as compared to $4.5 billion in 1995-96.
Impediments to growth of india's international
trade
India's share of world
exports had declined from 2.53% at the time of independence (1947) to only 0.4% in 1980,
but the reforms instituted led to some growth, with India's share in trade reaching 0.64%
in 1995. However, the deceleration of the growth rate of exports from 20% in the initial
years of the reforms to just 4.01% during 1996-97, and the slow down in the growth rate of
imports, has caused concern. While the slow down is partly related to a general slow-down
in the growth of world merchandise trade from an annual increase of 19% in 1995 to 4% in
1996, it is also, to a degree, due to denial of meaningful market access to Indian goods,
and to non-tariff barriers, including anti-dumping activity, by developed countries.
This is attributable to the
fact that although multilateral negotiations conducted under the aegis of GATT have
greatly helped in bringing down tariffs all over the world, similar success has not,
however, been achieved on non-tariff barriers affecting world trade. Although quantitative
restrictions are not overtly being used by most of the countries to restrict the flow of
trade, quotas, standards, subsidies and indiscriminate use of anti-dumping/countervailing
duty investigations are some of the most important NTBs being used to restrict the flow of
trade from countries such as India.
An analysis of India's
external trade reveals that the 16 countries/territories to whom four-fifths of our
exports are directed, maintain eight major categories of non-tariff barriers restricting
our market access. These are (i) restrictive import policy regimes (import charges other
than customs tariff, quantitative restrictions, import licensing, customs barriers); (ii)
standards, testing, labelling and certification (including phytosanitary standards) which
are set at unrealistic levels for developing countries or are scientifically unjustified;
(iii) export subsidies (including agricultural export subsidies, preferential export
financing terms, etc.); (iv) barriers on services (visible and invisible barriers
restricting movement of service providers, etc.); (v) lack of intellectual property
protection; (vi) government procurement regimes; (vii) barriers to investment; (viii)
other barriers (including anti-dumping and countervailing measures).
Amongst the import policy
issues, quantitative restrictions, especially in the textiles area, are one of the most
important of the non-tariff barriers affecting India's trade. While the MFA is being
phased out, there is a certain "back loading" insofar as items of interest to
India are concerned. Another problem in the area of textiles arose with the introduction
of new "country of origin rules" by some of our major trading partners, limiting
the flexibility of Indian exporters in finishing garment/textile items from other
countries for export to the trading partners, which have invoked such rules. Numerous
restrictions on sanitary and phytosanitary grounds on India's agricultural products are
often not supported by adequate scientific justification. Even the so-called environmental
bans, as, for example, on Indian marine products harvested without certain environmental
protection devices insisted on by certain trading partners, do not appear to be
substantiated by sufficient scientific evidence. The restrictive visa regime in several
developed countries has proved to be a disincentive for exports in the services sector by
our skilled professionals, especially in the software sector. Repeated anti-dumping
investigations on the same items, without regard to the special dispensation enshrined in
Article 15 of the Agreement on Anti-dumping, have proved to be extremely disruptive
to our external commerce.
Most of these problems are
being vigorously addressed in the appropriate fora, including the Dispute Settlement Body.
However, it is our perception that the time has come when nations would suo motu
realise that in an interdependent world, there is no room for unjustified trade
confrontations. Non-tariff barriers, especially levy of anti-dumping duties and repeated
investigations on the same issues give rise to a feeling that we should, in turn,
retaliate by denying market access to outsiders. A slow-down in exports, with consequent
widening of the trade gap, will definitely militate against our efforts to bring down
tariffs. Export growth, especially for reduction of the trade deficit, is very necessary
if India is to progress with further trade and economic liberalization. This calls for
better and greater market access by India's trading partners.
India and the wto
India's role in the WTO
India is a founding member
of the GATT (1947), it actively participated in the Uruguay Round Negotiations, and is a
founding member of the WTO. India strongly favours the multilateral approach to trade
relations and grants MFN treatment to all its trading partners, including some who are not
members of WTO. India participated actively in the last Ministerial Conference held in
Singapore. Within the WTO, India is committed to ensuring that the sectors in which the
developing countries enjoy a comparative advantage are adequately opened up to
international trade, and also that the Special and Differential Treatment Provisions for
developing countries under the different WTO Agreements are translated into specific
enforceable dispensations, in order that developing countries are facilitated in their
developmental efforts. India feels that the multilateral system would itself gain if it
adequately reflected these concerns of the developing countries, so as to create the
necessary impetus to enable developing country members to catch up with their developed
country counterparts.
India's WTO Commitment
Bindings
Under the Uruguay Round
India has bound 67% of all its tariff lines, whereas prior to that only 6% of tariff lines
were bound. The bindings range from 0 to 300% for agricultural products from 0 to 40% for
other products. Under the Uruguay Round manufactured products were bound at 25% on
intermediate goods and 40% on finished goods.
The phased reduction to
these bound levels from the very high level prevailing in 1990, is where necessary, in
instalments over the period March 1995 to the year 2005. In textiles, where reductions
will be achieved over ten years, India has reserved the right to duty levels prevailing in
1990, if the integration process envisaged under the Agreement on Textile and Clothing
does not materialize in full or is delayed. Finally, in agriculture, where, except for a
few goods, India's bound rates range from 100 to 300%, India is in the process of
renegotiating some of its tariff bindings. Many applied tariffs are below the Uruguay
Round levels.
Balance of Payments
Under the exceptional
provision of Article XVIII:B of GATT, India has some residual quantitative restrictions on
imports maintained for balance-of-payments purpose. These aggregate to 2,714
tariff lines at the eight-digit level of the Indian Trade Classification. In May
1997, India presented to the WTO a plan for the elimination of these restrictions in
imports, including those on consumer goods. This plan was considered at the consultations
with India of the WTO Committee on Balance-of-Payments Restrictions in June-July 1997,
when noting the divergence of opinion among WTO Members on, inter alia, the
length of the plan, it was agreed to conclude the consultations. However, pursuant to
consultations under Article XXII of the GATT 1994, a bilateral mutually agreed solution
has been reached with Australia, Canada, the European Communities, New Zealand and
Switzerland, as well as with Japan (which had third-party interest in these disputes).
At the request of the United
States, a panel was constituted on 18 November 1997 to examine the US allegation that
the continued maintenance of quantitative restrictions on imports by India is inconsistent
with India's obligations under the WTO Agreement.
Simplification of customs procedures
The Customs Valuation Rules, 1988, India's
legislation on Customs Valuation, has been amended to bring it into conformity with
provisions of the WTO Agreement on Implementation of Article VII of GATT 1994, the Customs
Valuation Agreement.
Steps for international standards in trade and
industry
India is a signatory to the
Agreement on Technical Barriers to Trade and that on Sanitary and Phytosanitary measures
and there is greater emphasis on bringing Indian standards to international levels. Most
standards in India are voluntary although health and safety regulations are mandatory for
several products.
The Bureau of India
Standards (BIS) responsible for formulating and setting national standards, has been
harmonizing Indian standards with international standards for the last decade. So far
nearly 3,500 Indian standards have been harmonized with ISOTEC and EC
standards/regulations.
Although BIS is the national
standards body of India, standards and certification schemes are also operated and
enforced in certain specified sectors by other bodies. Thus for example, sanitary and
phytosanitary measures are regulated by Director of Marketing and Inspection, Ministry of
Agriculture, and quality and hygiene of processed foods are dealt with by the Ministries
of Health and Food Processing.
India is concerned that
although the BIS and the expert bodies in the field of sanitary standards participate in
the policy making committees of international bodies such as the ISO, the Codex
Alimentarius etc. the developing countries are grossly outnumbered in these deliberations,
at times resulting in standards development not conducive to their implementation. There
is a strong sentiment in India that in view of our lack of access to technologies
developed abroad for achieving standards acceptable to importing countries, specific
measures need to be taken by developed country Members to give effect to the clauses
extending "Special and Differential treatment" to India as a developing country
in the implementation of these WTO Agreements.
Agriculture
The only commitment India
has undertaken under the Agreement is to bind its agricultural tariffs. This commitment
has been fulfilled by India binding its tariffs for primary agricultural products at 100%,
processed food products at 150% and edible oils at 300%. India's prevailing agricultural
tariffs are well within the bound rates. Under the Uruguay Round, whenever we have bound
tariffs on agricultural commodities at zero or very low-levels, renegotiation of tariff
bindings have been sought under Article XXVIII of GATT. The phased reductions of
quantitative restrictions would also cover certain agricultural products.
The Agreement on Agriculture
was designed to improve world trade, raise prices of agricultural products and ensure
higher standards of living for farmers. The retention of domestic subsidies at a high rate
by many developed countries continues to give us cause for concern. In our view, the
clamour for greater market access for agricultural products would carry more conviction if
a definite effort is also made to force the pace in respect of bringing down such
subsidies.
Textiles
As per the obligations under
the Agreement on Textile and Clothing (ATC) to integrate this sector into GATT 1994 in
stages, the Indian Government moved cotton and wool yarn, polyester staple fibre and 20
other industrial fabrics on to the list of freely importable goods in 1995. For
implementation of the second stage of integration, with effect from 1.1.98, a second
tranche of textile products, mainly fabrics, was placed on the "free" list.
India is concerned about the fact that repeated anti-dumping investigation by certain
trading partners on the same product lines, without giving full effect to the special
dispensation provisions of Article 15 of the Anti-dumping Agreement has resulted in trade
harassment for its exporters of textiles.
Intellectual property
India is availing itself of
the transition periods due to her under Article 65 of the TRIPS Agreement to meet her
obligations under the seven areas covered by the Agreement.
India's achievements in this
field have been in the passing of TRIPS plus legislation in the field of Copyright Law.
The 1994 amendments to the Act of 1957 provides protection to all original literary,
dramatic, musical and artistic works, cinematographic films and sound recordings. The most
recent changes bring sectors such as satellite broadcasting, computer software and digital
technology under Indian copyright protection.
Trade related investment measures
Substantial modifications
have already been made to the foreign investment regime, increasing the number of sector
where foreign investment can take place and also increasing the foreign equity limit on
these investments. India has already notified the trade-related investment measures
maintained by it in terms of Articles 2 and 5 of the TRIMs Agreement and the illustrative
list annexed to the TRIMs Agreement. India has time up to 1.1.2000 to eliminate these
TRIMs. TRIMs which have already been removed include dividend-balancing requirements and
mixing requirements in respect of newsprint.
Anti-dumping and safeguards
Anti-dumping and
countervailing duties are imposed under the Customs Tariff Act 1975 and the Rules made
thereunder. The Act and Rules are on the lines of the respective GATT Agreement on
anti-dumping and countervailing duties. The time limits and the procedures prescribed
under the Indian laws/GATT Agreement are strictly followed by the designated authority.
With the increasing number of cases, the Government of India proposes to set up a
Directorate General of Anti-dumping and Allied Duties for expeditious disposal of
anti-dumping and countervailing duty cases.
Section 8 (B) of the Customs
Tariff Act, 1975, was introduced recently to make provisions for imposition of safeguard
duties as per the provisions of the WTO Agreement on Safeguards. The Act provides for
imposition of safeguard duties on products being imported in increased quantities such as
to cause or threaten to cause serious injury to the domestic industry that produces
directly or indirectly a competitive product. The Director General of Safeguards has been
appointed to consider complaints received from domestic industry suffering injury from the
increased imports, for imposition of safeguard duties.
Services sector
The services sector accounts
for about 40% of India's GDP, 25% of employment and 30% of export earnings. Recognizing
the importance of the services sector in achieving higher economic growth, the government
is giving added emphasis to improving services such as telecommunications, shipping,
roads, ports and air transport. The foreign direct investment regime has been liberalized
to attract foreign investment in the services sector. However, a path of gradual
liberalization has been adopted so as to have wider acceptability of the reform process.
India actively participated in the Uruguay Round services negotiations and made
commitments in 33 activities as compared to an average of 23 for developing countries.
India also participated in the spill-over negotiations. In basic telecommunication
services, India has undertaken commitments in the areas of voice telephone service for
local and long-distance (within the service area), cellular mobile services and other
services such as circuit switched data transmission sources, facsimile services, private
leased circuit services as per details given in the schedule of commitments. India also
participated in the recently concluded financial services negotiations and improved its
offer by enhancing the annual limit for foreign bank branches from 8 to 12 and withdrawing
India's MFN exemptions relating to banking services.
While developed countries
have surplus capital to invest, most of the developing countries have surplus of skilled,
semi-skilled and unskilled workers. We have a large pool of well-qualified professionals
capable of providing services abroad. As developed countries have a comparative advantage
in exporting capital intensive services, similarly developing countries have a comparative
advantage in exporting labour intensive services involving movement of persons. While GATS
recognizes "movement of natural persons" as one of the modes for supply of
services, the commitments undertaken by the developed countries have very little to offer
to the developing countries in terms of opening their markets or facilitating the
administrative arrangements or providing national treatment in the area of movement of
natural persons. The present commitments are largely restricted to business visitors and
intra-corporate transferees. There are very limited commitments for qualified specialist
personnel and even where commitments are made for qualified specialist professionals, they
cannot move in an individual capacity but should be an employee for a specified duration
of the juridical person supplying the services.
In Article IV of GATS, there
is a clear obligation to increase the participation of developing countries in trade in
services. The Agreement also recognizes the basic asymmetry in the level of development of
the services sector in developed and developing countries and a commitment that the
developed countries will take concrete measures aimed at strengthening the domestic
service sector of developing countries and providing effective market access in sectors
and modes of supply of export interest to developing countries. However, the GATS
objectives of increased participation of developing countries in trade in services has
hardly been addressed. Therefore, in order to achieve required balance in GATS and
increase the participation of developing countries in trade in services as per Article IV
of GATS, the developed countries should undertake a higher level of commitments on
movements of natural persons mode and other areas of export interest to the developing
countries.
Government procurement
India is not a member of the
Plurilateral Agreement on Government Procurement. However, we are taking part in the
discussions in the Working Group on Transparency in Government Procurement set up as per
the mandate of the Singapore Ministerial Conference of the WTO.
Environment
With the rapid increase in
the international trade and consequent increase in cross-border movement of products, the
linkage between trade and environment has become a relevant issue for the international
community. GATT/WTO being the chief trade body addressing international trade issues has
taken cognizance of it. Already certain Agreements within WTO, such as the Agreement on
Technical Barriers to Trade, and the Agreement on Sanitary and Phytosanitary measures have
addressed environmental issues to some extent.
India's approach on the
issue of the relationship between trade and environment has been:
- work
already accomplished in the GATT must provide the starting point;
- international
rules should not create unnecessary or unjustifiable obstacles to international trade;
- there
has to be a clear recognition that environmental standards differ from country to country
and that the solution lies in mutual recognition of product-related standards rather than
harmonization and, lastly;
- where
proprietary substances or processes are mandated for use by international or national laws
for environmental purposes, owners of intellectual property should be obliged to sell
technologies or products at fair and most favourable terms and conditions.
Information technology (IT)
During the Singapore
Ministerial Conference a Ministerial Declaration on Trade in Information Technology
Products was adopted. This Declaration aims to expand world trade in information
technology products. India participated in the negotiations on the Agreement from the
early stages and after examination of the implications of the proposed agreement and
extensive discussions with trading partners joined as a participant on 1 April 1997. India
is committed to phasing out the import tariffs on the products covered by the ITA as
scheduled. The quantitative restrictions imposed on these products for BOP reasons would
also be phased out by 31 March 2000.
At the same time, India has
also raised the issue during plurilateral discussion that if the global information
technology infrastructure is to be strengthened, the rules for movement of skilled persons
working in this sector should also be liberalized.
Trade and Investment and Competition Policy
India has been actively
participating in the educative process in the Working Groups in the WTO. India's
standpoint in this educative process is that the development dimension should be fully
integrated into the process.
Regional trade arrangements
India attaches significance
to her participation in regional agreements within the framework of multilateral rules.
India has been instrumental in setting up the South Asian Association for Regional
Cooperation (SAARC), whose major achievement in 1995 was the conclusion of the
negotiations on trade preferences within the framework of the SAARC Preferential Trading
Arrangement (SAPTA). SAPTA became operational on 7 December 1995 and includes preferential
tariff concessions on 226 items and product groups. A second round of SAPTA trade
negotiations was launched in January 1996 to broaden tariff concessions. India granted
concessions on 902 tariff lines, effective 1 March 1997. The third round of trade
negotiations commenced in July 1997. The goal is to continue the SAPTA process with the
ultimate aim of having a South Asian Free Trade Area (SAFTA) not later than the year 2001.
India is a member of the Bangkok Agreement, originally signed in 1975, and which now also
includes Bangladesh, the Republic of Korea, the Lao People's Democratic Republic, Papua
New Guinea and Sri Lanka. The Agreement provides for the liberalization of tariff and
non-tariff barriers between its members.
The Indian Ocean Rim
Association for Regional Cooperation was recently formed along with 13 other countries in
the region. The Charter of the Association was adopted in March 1997. Economic cooperation
is expected to take place in trade facilitation, promotion and liberalization, promotion
of foreign investment, promotion of scientific and technological cooperation, tourism, the
movement of natural persons and service providers, and the development of infrastructure
and human resources. An enabling clause to identify other areas of cooperation is also
included in the agreement. India has also signed sub-regional agreements with Nepal,
Bangladesh, Myanmar and Bhutan and more recently with Bangladesh, Sri Lanka and Thailand.
Details of the agreement known as BISTEC are presently being formulated.
India has signed bilateral
agreements with two neighbouring countries, Bhutan and Nepal, to provide them with
preferential access. More limited agreements have been signed with Bangladesh, which
receives the preferential treatment India accords to least developed countries under
SAPTA, and with Myanmar. Commonwealth preferences continue to be extended to Mauritius,
Tonga and the Seychelles.
Conclusions Back to top
India, with its per capita
GNP of barely US$340 (which is low even as per the general income levels of US$430 and
US$1,090 for low-income and middle-income economies respectively) has already taken major
strides in integrating herself with a globalized world trade order and is committed to
fulfilling her multilateral obligations. It is her perception that the multilateral
trading system is itself likely to gain in credibility and acceptance if the sectors of
comparative advantage to the developing world are liberalized early, justified market
access is not denied to them and enough time and resources are made available to the
developing world to catch up with their developed country trading partners. To this end,
it is our perception that the concerns of special interest to developing countries should
be addressed early and the enabling special and differential treatment provisions for
developing country members enshrined in the WTO Agreements translated into specific,
enforceable dispensations. |
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