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India to end import curbs but industry seen safe

Surojit Gupta in New Delhi

India's plans to scrap import curbs on more than 700 products as part of its 2001-02 trade policy will mean tougher competition but manufacturers are unlikely to suffer much, industry analysts say.

After all, India lifted curbs on more than 700 items last year as a first step toward complying with a World Trade Organisation ruling and the move had no big effect, they say.

"I don't think there will be any significant impact on industry this year as well except increasing competition in some sectors," K K Jain, president of the Federation of Indian Export Organisation, said.

The move under which India will lift import curbs on a slew of goods including food, agricultural products, stationery, textiles, vehicles and electronic goods, will be a key focus of its 2001-2002 (April-March) export-import policy to be announced on Saturday.

India has five-year-long Export-Import (Exim) policies -- the current one runs from April 1997 to March 2002. But it fine-tunes the policy every year.

Still, even though experts say trade liberalisation will not deliver a body blow to industry, it will mean sharper competition in some sectors such as textiles, agriculture, automobiles and consumer electronics.

China is seen as the main threat to Indian goods followed by Taiwan and Indonesia, the Federation of Indian Chambers of Commerce and Industry (Ficci), a leading trade body, said.

Officials say India's creaky infrastructure and high cost of key inputs like power as well as bureaucratic bottlenecks make many of its exports uncompetitive.

Promised safeguards

The government has promised legislation to safeguard domestic manufacturers and farmers against any surge in imports and trade analysts say WTO mechanisms provide scope for such protection.

"The World Trade Organisation agreement provides enough safeguards against unfair imports and governments can increase tariffs even beyond permitted levels," Indian Institute of Foreign Trade dean B Bhattacharya said.

Earlier this month Commerce Minister Murasoli Maran pledged to "create a level playing field for our industry during the transition period so that they are able to stand on their feet" but did not specify how long the transition period would last.

Economists say as part of the safeguard measures, India is likely to insist that consumer goods confirm to domestic safety standards and retail prices in rupees be printed on packaging.

India began liberalising its trade policy when it launched its economic reform programme in the early 1990s. But it maintained restrictions on imports of 1,429 items, citing balance of payments problems.

But after the United States complained about the restrictions, the WTO ruled against India and ordered it to end the curbs on all the items by April 1, 2001, saying the country's balance of payment situation had improved.

However, import restrictions will remain on more than 100 items, primarily in defence and hazardous chemicals.

The government is expected to come up with a number of trade-supportive measures to try to maintain and even increase merchandise exports which have been growing at a robust 20 per cent year-on-year in recent months.

Exceed target

The government has already said it is confident it will exceed its 18 per cent growth target for the current financial year. Despite this strong growth number, India's share of world export trade is a paltry 0.64 per cent.

Government officials say India may set up a market access fund to boost exports in new markets such as Latin America and take steps to promote the 'Made-in-India' label as a premium brand.

Ficci also has asked the government to strengthen its economic intelligence gathering to help exporters identify new markets as well as expand the trade basket.

The big cloud hanging over India's exports this year, though, will be the economic slowdown in the United States which accounts for 23 per cent of India's export market.

"Demand conditions are not very conducive and the slowdown in the US, Asean region and Japan where a large chunk of India's exports go would create a certain amount of pressure," Bhattacharya said.

Some trade analysts suggest the US slowdown could pull down India's export growth to less than 10 per cent. But Commerce Minister Maran said the government was on top of the situation.

"Our trade target will take into consideration the slowdown in the US, the behavior of the currency and how competitive our exporters are," he said.

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