Asia Times: India announces liberal export-import policy


	April 5, 2000	atimes.com

India/Pakistan

India announces liberal export-import policy
By Ranjit Dev Raj

NEW DELHI - India announced, Friday, the dismantling of 50-year-old import restrictions to open up a market worth $25 billion dollars under an export-import (EXIM) policy which aggressively competes for foreign direct investment (FDI).

''India, by not following vigorous policies, is undoubtedly ceding billions of dollars of FDI each year to China and other East and Southeast Asian neighbors,'' said Commerce and Industry Minister Murasoli Maran.

Maran said, effective Saturday, quantitative restrictions, maintained originally on grounds of poor balance of payments under the defunct general agreement on trade and tariff (GATT), would be removed from 714 items. ''I am confident that scrapping quantitative restrictions will not hurt Indian industry and the doubts and apprehensions exhibited in some quarters are exaggerated and not well founded,'' Maran said.

According to Maran, quantitative restrictions only encouraged ''rent seeking'' by entrenched interests in previous regimes and that in any case only four other countries, Tunisia, Pakistan, Bangladesh and Sri Lanka still maintain them.

India is committed to remove all quantitative restrictions by 2001 and thereby open up a market for goods worth more than $25 billion going by sales last year.

Criticism of India's new liberalized policy has come from within the ranks of the right-wing Bharatiya Janata Party (BJP)-led coalition government of Prime Minister Atal Bihari Vajpayee. ''It is well-known that the developed world resorts to protectionist measures when it suits its interests while making strong recommendations to the developing world to practice free trade,'' said Kirit Somaiya, a member of the ruling coalition.

Agricultural experts have warned that removal of protection could hurt local producers of meat, fish, dairy products, spices, liquor, coffee and tea in the food category especially because many of these items are subsidized in the west.

According to Prof M S Swaminathan, India's leading food expert, the cost of producing food in this country, in spite of low labor costs, has been rising steadily while automation lags far behind that in the West. ''We produce 75 million tonnes of milk providing livelihoods for 80 million women who own a buffalo or two cows. For the same output the West would deploy 100,000 people,'' Swaminathan said.

Similarly, because fisherfolk do not have the benefit of cold-storage chains and must sell their catch the same day import of cheap processed seafood would ruin them and result in their moving to urban slums as farm workers are already doing, he said.

But Maran insisted that such fears were unwarranted and said his government was determined to raise India's share in world exports and indeed make exports the engine for economic growth. Indian exporters, he said, should take up the challenge and the government still retained instruments such as tariffs and anti-dumping and anti-subsidy duties allowed by the World Trade Organization.

''All fast growing economies in the developing world are also export success stories because they recognize the importance of openness and they have either changed or are changing their trade polices accordingly,'' Maran said.

The minister pointed out that while countries in the region like Malaysia, Philippines, Thailand and Indonesia earned billions of dollars by exporting items like toys, clothing, gift items, radio receivers and telecom equipment, India's share was negligible.

''The rapid growth of exports achieved by China and Southeast Asian countries has demonstrated that given the right polices and freedom from interference we can ensure sustained quantum growth in exports.''

Maran said India lagged behind China in the export of items like toys mainly because they were, in this country, reserved for the small scale industries (SSI) sector and so he had no choice but to dereserve them under the EXIM policy.

Also, following China's example, Maran announced the setting up of Special Economic Zones in different parts of the country where production can take place ''free from the plethora of rules and regulations governing import and export''.

Yet another strategy borrowed from China is the involvement of state governments in the export promotion drive. Maran said so far foreign trade has been a federal subject and there existed no institutionalized arrangements at the state level. Maran said the western states of Gujarat and Punjab alone could match Pakistan for agricultural and industrial exports while southern Tamil Nadu and Kerala states together could match Sri Lanka.

Maran said, under a new scheme that would be announced soon, India's states would be empowered with necessary resources, flexibility and infrastructure to engage in export activities on their own.

Thanks to decades of inward looking trade policies under the Congress party, India's share of exports in many top items of world trade remains negligible - notable exceptions being rice at 12 percent, tea at 11 percent and spices, 12 percent.

But, following a balance of payments crisis in 1991, India began integrating itself into the world trading system and entered a rapid phase of liberalization after a BJP-led coalition was returned to power following elections last September.

Under the coalition, powerful regional partners, including Maran's DMK party which rules southern Tamil Nadu state, have been clamoring for greater freedom in matters of trade, commerce and and a greater share of revenues.

The EXIM policy was welcomed by the apex business chambers with leaders unanimous that the creation of Special Economic Zones (SEZs) would increase the flow of foreign investment.

''The SEZs would have positive spin-offs including accelerated flow of investment and international quality standards,'' said G P Goenka, president of the Federation of Indian Chambers of Commerce and Industry.

(Inter Press Service)

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�1999 Asia Times Online Co., Ltd.

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