OECD for opening up of Indian market, raps SEZs

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New Delhi, September 21:: A report prepared by the Paris-based Organisation for Economic Cooperation and Development (OECD) has described India as “a closed economy both in absolute terms and relative to other developing countries, including China.”

This is despite the on-going reform process in the country, it said.

OECD, the inter-governmental body of 30 developed countries, suggested further opening up and removal of tariff barriers to usher in a manufacturing-led growth. “Current protection levels on imports of both goods and services are still much higher when compared to other BRICs, “

Arguing for opening up, the OECD study – India’s Trade Integration, Realising the Potential – authored by Przemyslaw Kowalski and Nora Dihel said that the overwhelming majority of India’s imports (between 72% and 100%) were not imported for domestic consumption, but were used as intermediate inputs by domestic manufacturing and service sectors. The remaining trade barriers combined with domestic red tape, infrastructure bottlenecks and factor market rigidities restricted new entry and competitiveness particularly in agriculture and manufacturing at relatively low levels.

“Indeed, the 2005 trade-weighted average tariffs of close to 52% in agriculture and 12% in manufacturing still imply a significant wedge between domestic and world prices and act as an indirect tax on exports through imports. This puts many Indian producers that rely on imported inputs at a competitive disadvantage, while shielding uncompetitive domestic producers from competition,” it said.

The OECD paper clearly indicates the developed countries’ insistence for opening up of markets in the developing world on the pretext of growth. It is particularly relevant when the discussions are due in Geneva on Don Stephenson’s draft on non-agricultural market access (NAMA).

According to the OECD paper the recent growth in India’s trade has been led by services rather than manufacturing and that manufacturing trade was highly concentrated in low-technology goods and the share of high-technology manufactured goods in the total exports barely changed since mid-1990s and remained under 5% as compared to 30% for China.

Regarding services sector, the study said that barriers in India still remain high and the sector suffers from domestic constraints in terms of burdensome regulatory measures and state monopolies.