India trade policy review

The WTO mandates the review of trade policy of its members regularly and the trade policy of India was reviewed in mid September this year. The previous review took place in 2007. Since then, India has seen marked developments in her economy and the WTO Secretariat’s report reviewing India’s trade policy notes these changes.

Trade liberalisation and structural reforms since the 1990s have resulted in strong economic growth in the last four years covered by the review. The review praised India’s promotion of sustainable growth through trade policy and foreign direct investment and lauded her ability to use trade policy for the achievement of long term goals, such as promoting economic growth.

It also noted that although India has avoided the adoption of protectionist trade measures in response to the global economic crisis, there was room for improvement in areas such as agricultural import tariffs, transparency in Government procurement and the use of anti dumping measures.

However, the secretariat warned, India’s tendencies toward using trade policy for resolving short term problems such as inflation could be counterproductive. The report noted that using trade policy instruments for such purposes “may detract somewhat from the stability sought, as this requires constant fine tuning of policies, rendering the trade regime more complex”.

The review notes important changes in India’s import regime, notably reducing the Most Favoured Nation (MFN) tariffs from 15.1 in 2006- 2007 to 12% in 2010-2011.WTO members as well as the WTO Secretariat commended India’s attempts streamline customs procedures, particularly the adoption of an electronic customs clearance system.

In the past, complicated customs procedures had resulted in frustrating many an exporter and importer who had to waste time and money trying to get through customs matters resulting in what could be described as a Non Tariff Barrier. In a country as large as India with a number of entry points by sea and air, the apparent lack of coordination among the Customs authorities was a major obstacle to the smooth implementation of the Indo Lanka Free Trade Agreement, particularly in the early years of implementation of the FTA.

Although improvements in the above-mentioned areas were commended, the review noted that further improvements were required in the areas of agricultural tariffs and anti dumping measures. Despite an overall drop in tariffs, it was noted that as compared to a tariff of 8.9% for manufactured goods, agricultural tariff was 33.2% and notes that this is protective trade policy which could “propagate low productivity and modest growth rates”.

Some members present at the review also noted the continuance of Sanitary and Phyto Sanitary (SPS) measures and technical barriers to trade while others noted that the scientific basis for certain SPS measures were questionable and urged India to eliminate those technical standards that acted as barriers to trade. Although many such barriers were eliminated through discussion and negotiation, these were also problems faced by some Sri Lankan exporters in the early years of implementation of the FTA between Sri Lanka and India.

Transparency concerns were also mentioned by members with US representative stating that “India’s failure to submit required notifications to the WTO, particularly in the areas of agriculture and subsidies” and not regularly engaging in public notifications of matters impacting trade and investment as a source of difficulty for firms seeking to conduct business with India.

With the increasing trade and investment contacts between Sri Lanka and India, the WTO Trade Policy Review of India is a well documented report which would be useful to those already doing business with India and those intending to do business with India.

(Manel de Silva holds an Honours Degree in Political Science from the University of Ceylon, Peradeniya and has engaged in professional training in Commercial Diplomacy at ITC and GATT. She has served as a trade diplomat in several Sri Lankan Missions overseas and was the first female Head of the Department of Commerce as Director General of Commerce.)