Businessmen On Notice

and costly, QRs are in place, many scores of items are on the banned list of imports and, in most cases, customs duties are still high by international standards.

All this is about to change soon. The moment India signed the WTO agreement in 1995, it bound itself to opening up its markets to international competition. The agreement provided that different sectors would be opened up at different speeds but the fact of opening up was never in doubt. While many Indian producers correctly assessed the consequences of the WTO agreement, the majority of them seem not have done so. Whether this was due to their own failure or that of the government, which failed to adequately explain the import of what it had agreed to, is a matter of debate. On balance, it would seem that the primary fault lies with the government which first gave the impression that it would not be "coerced" into signing an "unfair" agreement and then, having signed it, didn't bother much to explain the provisions to the business community. But now the birds are coming home to roost and Indian producers are waking up to the possibility of the stiffening competition that looms large over the near-horizon.

 

It is not clear what defensive action Indian firms are taking. One ploy is to play for more time, but that now seems doomed to fail. Even if it works, it will help only if the time is used for becoming more competitive in price and quality. Some firms are indeed gearing up in this direction but the majority seem not to be bothered. If they go under when competition hits, the judgement on who is to blame will have to be reserved. The more sophisticated could ask for import protection through an overvalued rupee but that will hit exports and is therefore out of the question. India could also devise its own version of non-tariff barriers a la Europe and Japan and that will succeed for a while. But much the best option for Indian producers is to face the battle rather than cower in fear. It is not as if no Indian producer has succeeded. Many have and others must emulate them.