Govt May Agree To 5-Year Phaseout Of Import Curbs

The final phase-out period for removal of quantitative restrictions on imports is likely to be five years, according to senior government officials.

The commerce ministry has indicated that seven years is the minimum period required by India to eliminate import curbs. However, Indias offer of a seven-year phase-out period has already been rejected outright by both the US and the European Union. The developed countries have been insisting that India should adopt a two-three year schedule to phase out import curbs.

The contrasting stances adopted by India and her major trading partners at the balance-of-payments consultations at Geneva earlier this month resulted in the talks being suspended without any result. The talks, which are being conducted under the auspices of the World Trade Organisation (WTO), will resume on June 30, 1997.

 

Government sources said commerce secretary P P Prabhu the leader of the Indian delegation to Geneva went with an open brief from the Union cabinet to negotiate the longest phase-out period possible. However, the cabinet note did not indicate any specific period. Therefore, it is not clear whether there is any need to seek a fresh cabinet view on the issue.

Government sources said Indias demand for a seven-year phase-out period and the developed countries insistence that this should be reduced to two-three years are postures. Ultimately, the antagonists will compromise on a mid-way period of five years, the sources claimed.

Diplomatic sources also felt that a phase-out schedule of five years seemed the most acceptable solution to the impasse. However, they added that pre-empting the negotiations would not benefit either party.

Industry associations like the Confederation of Indian Industry (CII) have suggested that import curbs should be gradually removed over five years. CII has suggested that the import curbs should be eased out over the ninth Plan period (1997-2002). Says CII senior director Manashi Roy:

Items must first be moved from the restricted to the special import license list and then to the open general license list. Tariffs should not just be brought to nil all of a sudden.

India has been reiterating that it is committed to gradually opening up consumer goods imports, but does not perceive the need to do so too soon. These decisions have to be taken keeping in mind issues of long term viability on the external account, the rising trade deficit and the countrys external debt obligations, senior government officials have maintained.

The cabinet note points out that India will also ask for safeguards, including reinvoking Article XVIII B, which will allow the country to take recourse to the balance-of-payments cover in case foreign exchange reserves deteriorate at any point.