19 - India's Trade Policy and the WTO

Summary

On 31 March 2001 India will witness a dramatic change in its foreign trade regime, when quantity restrictions on the import of virtually all goods are removed. The only permitted exceptions will be a few special goods on grounds of security and religion.

Broadly speaking, there are two methods of curbing imports—the first is to charge a tariff on the commodity being imported, and the second is to rule that the commodity is not allowed to be imported. The latter is described as a ‘quantity restriction’; and it is just as well it has a popular acronym, QR, since it has been used so widely in India. A whole range of agricultural, consumer, and some capital goods—a total of over 700 goods—are prevented from entering the country under this criterion.

Once QRs are removed on all these 700 items, a host of new goods will flow into India. Unsurprisingly, a lot of Indian businessmen are exercised over this imminent policy shift.

It is true that, left to ourselves, we would have phased out QRs more slowly. But we had no choice. Ever since the conclusion of the Uruguay Round of GATT in 1993 there has been pressure on India to open its borders. In 1997 India proposed a nine-year phase-out plan to the WTO, arguing that it should be given temporary shelter under Article XVIII B of GATT which allows developing countries to use QRs to counter balance-of-payments problems.