Aug 25, 1999|
WTO sounds death knell for Indian industry
According to newspaper reports, India may be forced to remove all import curbs ahead of its proposed March 31, 2003 deadline. This follows the rejection of India's appeal against a ruling in its dispute with the US by the World Trade Organisation (WTO). The US and Indian authorities now have a 90 day arbitration period within which they have to work out a plan to phase out import curbs imposed by India. While the US has informally agreed to a phase out by April 1, 2001, the Indian authorities are hoping to extend it further to 2002.
Steel is among the most prominent sectors that are protected by these import curbs. The government had imposed floor prices on the import of steel products to limit dumping by international companies. The move had favourably impacted the domestic steel industry. However, if the import curbs were to be withdrawn in the immediate future, the steel industry would once again become vulnerable to international dumping as well as regular imports. In case of regular imports, international companies have an edge in terms of pricing and quality. Similar is the case with most of the other industries.
Indian industry, atleast a large part of it, is as yet unprepared to take on international competition in the absence of import restrictions. This is so because these domestic industries lack the size and technology required to produce goods at globally competitive prices. A case in point is the automobile industry, where companies lack both economies of scale and technology. If the import curbs on automobiles were to phased out with immediate effect, the Indian companies could face fierce competition from internationally based companies, which could then service the Indian market from their international plants. Moreover, the import of second hand cars could further dent the fortunes of the domestic automobile industry.
The move to remove import curbs ahead of the scheduled date is a cause of concern for the Indian industry. Whether the industry will as yet take measures to become internationally competitive is still debatable.
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