India Offers 7-Year Schedule To Phase Out Import Restrictions

India has offered to tighten her schedule for phasing out all import curbs from nine years to seven years. However, even this new offer is unacceptable to Indias major trading partners, including the US and the European Union.

Diplomatic sources said the Indian delegation had finally backed down and indicated that the country could consider reducing the transition period to seven years towards the end of the second day of the balance-of-payments consultations in Geneva. However, this phase-out period was also rejected by the developed countries, which have been insisting on a two-three year phase-out schedule.

An analysis of Indias original, nine-year phase-out proposal shows that 74 per cent of the 2,714 tariff items are proposed to be liberalised in the last two tranches (from 2000 to 2006). Of the 802 agricultural items, import barriers on 78 per cent will be lifted between the fourth and ninth years (from 2001 to 2006).

 

Similarly, of the 581 textile items, 86 per cent are scheduled to be moved to the open general license list between 2001 and 2006. And 66 per cent of the remaining 1,331 industrial goods will be freed in the last two tranches.

Indias statement to the World Trade Organisation (WTO), which was delivered by commerce secretary P P Prabhu, pointed out that the components of the balance of payments indicate a degree of potential volatility. Prabhu specifically referred to the countrys heavy reliance on inward remittances from non-resident Indians, NRI deposits and portfolio investment. He also mentioned the decline in export growth rates, the external debt burden and rising oil imports.

However, the negotiations were postponed till June 30 following the impasse on the issue. Sources said a fresh proposal is likely to be drawn up and submitted to the cabinet for consideration. Senior government officials are hopeful that the developed countries will relent on their stand, paving the way for a compromise agreement of a phase-out schedule of five-six years. Sources pointed out that Indias position could worsen if any of the countries opposing its stand moves the WTOs dispute settlement mechanism. In such a situation, India could be asked to immediately lift all restrictions with immediate effect unless its balance of payments deteriorates dramatically.

EDIT: Positional imbalance