India is seeking to prolong the regime of quantitative restrictions (QRs) on imports. Many first world countries had accepted the plea for letting India continue with QRs till 2002, but not the United States, which wants them dismantled earlier. Obviously, by acquiescing to the US (which has a WTO ruling backing it), India will have to open up imports of a variety of consumer goods to all countries, and not just the US. This is perhaps the reason why the government is dragging its feet. But assume that QRs are dismantled sooner rather than latter, will that be a disaster? The fear that imported consumer goods will flood the country is exaggerated. The craze for `phoren' has vanished with import liberalisation. Thus, special import licences under which many imports are allowed as a measure of export promotion fetch a premium of less than 2 per cent. So many foreign brand names compete with Indian ones, but not always successfully.
Yes, QRs have helped bring in foreign direct investment which has jumpedthe tariff wall to start manufacturing in this country (cars, liquor, cigarettes, etc) and their abolition may retard new FDI in consumer goods industries. But then the government's policy is to get FDI in certain priority areas - the entire infrastructure spectrum and high technology industries; QRs are not central in these areas (where what matters are tariff reform, administrative permissions and facilities and so forth).
So, why is the government making an issue of the QR business instead of replacing them with import tariffs? It will make little difference whether QRs go in fifteen months or in twenty-four. Actually, considering the stagnation in non-oil (and non-gold) imports, it may not be a bad idea to dismantle as desired by the Americans and get them to remove barriers and quotas against Indian exports. Besides, if crude and petroleum product prices remain at current highs for long (as seems likely), the rupee will take a depreciation: QR-freed imports will become dearer in rupee terms, andimport tariffs on these need not be too stiff.
Under reform, the Indian economy has undergone a change: import protection per se does not matter. However, reform has not given the required export-orientation to the economy. Why do not producers, including FDI in this country, not seek to make exports an integral part of their production programme? A key reason could be the non-tariff trade barriers raised by the OECD countries, led by the US. This is where India should takethe US head-on instead of taking a defensive stance on QRs.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.