Restrictive trade regime gets India poor WB ranking

At a time when India is demanding at the World Trade Organisation’s Doha Round negotiations that the developed world, including the US and the European Union, should drastically reduce their trade-distorting farm subsides and substantially open up their markets for goods and services from the developing countries, the World Bank has termed New Delhi’s trade regime as “much more restrictive” than its peer emerging economies like Brazil, China and Russia.

The World bank has ranked India a poor 117 th of 125 countries after judging it by the latest Trade (Most Favoured Nation) Tariff Restrictiveness Index (TTRI). It has also ranked India 59 th out of 125 countries on the latest Market Access TTRI (including preferences) saying Indian exports face more favorable access to foreign markets than its comparators.

“In agriculture, the country’s average tariff of 42% is about seven times that for nonagricultural products (6.4%) and one of the highest in the world. MFN duty-free imports were only 7.8% of total merchandise imports in 2005,” the World Bank said in its latest World Trade Indicators (WTI). WTI is an interactive tool to benchmark a country’s trade policy and institutions and help policy makers, advisors, and analysts’ to identify the main border and behind-the border constraints to trade integration.

The report said the 43% (1997) nontariff measures frequency ratio for India was one of the highest in the world and the overall TRI that incorporates their trade impact was the second highest in the world.

The report also ranked India 177 th in the subcategory Enforcing Contracts (177 th ). It added that India’s Ease of Doing Business overall rank is 120 th (out of 178), which, although a substantive improvement over its previous rank of 132 th , still reflects a generally poor business environment.

On the infrastructure front, the World bank came down heavily on the country saying “with severe power shortages, congested roads, and poor quality railways and ports, deficient infrastructure is a major binding constraint to trade activity in the country.”

However, the report said India surpasses its comparators on nearly all aspects of the 2006 Logistics Performance Index with a rank of 39 th (out of 150). “Its strongest logistics indicator was timeliness of shipments, while its weakest were efficiency of customs and other border procedures and quality of transport and information technology (IT) infrastructures,” the report said.

Also, in the Doing Business?Trading Across Borders subcategory, India jumped to 79 th position from the previous year’s 142 nd due to “substantive reductions in the average cost (per container) and time required to trade across borders.”

The country’s 2007 share of trade in GDP (integration ratio) is 45.2%, a substantial increase over its late 1990s average (24.9%) and comparable to the integration ratios of other large emerging economies like China, Russia, and Mexico. However, this was lower than the regional (73%) and low income group (80%) averages. The services share in total exports is a high 36.7%, as the country has become a major exporter of professional services, the report said.