EXIM policy 2000 - Competition ahoy! - Views on News from Equitymaster

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EXIM policy 2000 - Competition ahoy!

Apr 1, 2000

The World Trade Organisation (WTO) may be having a challenging time in trying to make both the United States and the European Union comply with its ruling. India on the other hand seems to be diligently opening up its economy, in line with its commitments to the WTO, to international competition. The Commerce Minister has proposed that quantitative restrictions (QRs) on 714 items be reduced. Measures have also been initiated to set up special export zones to promote foreign trade. The government has introduced several other measures to promote foreign trade. Among these is a proposal to permit companies (earlier only exporters were permitted) to import machinery at a concessional rate of 5%.

The Indian consumer is definitely in for a better time more products to choose from, probably at competitive prices. However domestic companies may not be as enthusiastic about these measures.

Take for example the capital goods sector. The government has permitted the import of second hand capital goods that are under 10 years old to be permitted with out the need for a license. The move will definitely increase competitive pressures for domestic companies. The decision to remove QRs on 714 products will have similar implications for the domestic companies.

India seems to be on course as far as the implementation of the guidelines set by the WTO go. But the concern pertains to the growth of Indian exports, which have been languishing for the past two years. No concrete steps seem to have been initiated that will propel export growth to the pre slowdown rate of 20%.

It seems that India has given its share of concessions without getting much in return. But on the contrary, the prospects of growth in an open environment are definitely much better (India's experience of closed markets clearly reflects this).

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