RESTRICTEDWORLD TRADE
ORGANIZATIONWT/TPR/G/100
22 May 2002
(02-2680)
Trade Policy Review Body Original:  English
TRADE POLICY REVIEW
INDIA
Report by the Government
Pursuant to the Agreement Establishing the Trade Policy Review Mechanism
(Annex 3 of the Marrakesh Agreement Establishing the World Trade
Organization), the policy statement by the Government of India is attached.
Note: This report is subject to restricted circulation and press embargo until the end of the meeting
of the Trade Policy Review Body on India.India WT/TPR/G/100
Page 3
CONTENTS
Page
I. INTRODUCTION 5
(1) I NDIA 'S ECONOMIC PERFORMANCE AT A GLANCE 5
(2) S OME IMPORTANT SOCIAL INDICATORS 6
(3) I NDIA 'S FOREIGN TRADE PERFORMANCE DURING LAST FOUR YEARS 6
(i) Exports 6(ii) Imports 7
II. KEY DEVELOPMENTS IN TRADE AND ECONOMIC POLICY SINCE THE LAST
REVIEW 7
(1) R
EMOVAL OF QUANTITATIVE RESTRICTIONS FOR IMPORTS 8
(2) R EMOVAL OF QUANTITATIVE AND OTHER RESTRICTIONS ON EXPORTS 8
(3) T RADE FACILITATION MEASURES 8
(4) R EFORM IN TAX ADMINISTRATION 9
(5) F ISCAL CONSOLIDATION 9
(6) R EFORMS IN FOREIGN INVESTMENT REGIME 10
(7) R EFORMS IN INDUSTRIAL LICENSING REGIME 11
(8) E XCHANGE MARKET REFORMS 11
(9) D EREGULATION OF INTEREST RATES 11
(10) O THER BANKING SECTOR REFORMS 12
(11) L IBERALIZATION IN INSURANCE SECTOR 12
(12) P RIMARY MARKET REFORMS 12
(13) C ORPORATE GOVERNANCE 12
(14) R EFORM OF CONTROL SYSTEMS 13
(i) Petroleum sector 13
(ii) Sugar sector 13
(iii) Deregulation in Agriculture Sector 13
(15) I NFRASTRUCTURE REFORMS 13
(i) Power 13(ii) Roads 14(iii) Ports and Airports 14
(16) T
ELECOM 14
(17) P RIVATIZATION OF PUBLIC SECTOR UNITS 15
(18) I MPEDIMENTS TO THE GROWTH OF INDIA 'S INTERNATIONAL TRADE 15
III. INDIA AND THE WTO 16
(1) A GRICULTURE 16
(2) S TEPS FOR INTERNATIONAL STANDARDS IN TRADE AND INDUSTRY 17
(3) I NTELLECTUAL PROPERTY 17
(4) S ERVICES 19WT/TPR/G/100 Trade Policy Review
Page 4
Page
(5) TRIM S 20
(6) WTO D ISPUTE SETTLEMENT 20
(7) T RADE DEFENCE MEASURES 21
(8) I MPLEMENTATION ISSUES 21
IV. REGIONAL TRADING ARRANGEMENTS 21
V. CONCLUSION 22India WT/TPR/G/100
Page 5
I. INTRODUCTION
1. During the period following the last Trade Policy Review in 1998, the Indian economy has
shown considerable resilience and has remained one of the fast growing major economies of the
world.  This is despite the fact that this period was characterized by several external shocks, including
the East Asian crisis, oil price increase in 200 0-01 and the most recent world economic slow down.
Domestic disturbances in the shape of an adverse security environment, natural disasters like theOrissa cyclone and the Gujarat earthquake also posed additional challenges.
2. The focus of India's further economic reforms during this period has been on bringing about a
closer integration of the domestic economy with the world market.  Reforms, however, have a greater
chance of success when they are perceived as pro-people and public opinion regarding them is
favourable.  A consensual approach therefore has to be evolved taking into account the democraticand federal structure of the country.  The gradual, but continuous progress in reforms, in spite of
successive changes in Government, should be looked at in this backdrop.
3. A key focus of the external sector reforms has been on trade liberalization and export
promotion.  Several steps have been taken to bring about transparency, remove controls, reduce tariff
and other barriers and simplify procedures.  Trade reforms have been introduced in the framework ofa medium term perspective thereby reducing the scope for ad hocism and uncertainty.  The Export-
Import policy of the Government continues to be  based on a five-year framework, with the EXIM
policy for 2002-2007 just having been announced.  The medium term export strategy also spells out
the broad policy of the Government with regard to export promotion for the next five years.
(1) I
NDIA 'S ECONOMIC PERFORMANCE AT A GLANCE
4. The average rate of growth of the economy was sustained at around 6% during the period of
review making India one of the rapidly growing major economies of the world despite the globalrecession and industrial slow down in the domestic ec onomy.  However, it is recognized that the rate
of growth in important sectors like industry and agriculture have fluctuated during the last four years.
The growth of industrial production in 2001-02 has fallen to 2.3% compared to 4% in 1998-99, 6.4%
in 1999-00 and 5.8% in 2000-01.  The low growth rate in the current year is on account of several
factors, the most important amongst them being slow down in domestic and global demand.  In theagriculture sector, the estimated growth rate of 5.7% during 2001-02 is significantly higher than the
negative growth rate of (-)0.2% during 2000-01 and 1.3% during 1999-00.  However, it is lower than
the growth of 6.2% recorded in 1998-99.  The last year's poor performance was on account of drought
like situation in some areas like Rajasthan, Gujarat, Madhya Pradesh, and Chattisgarh.  The average
inflation for the period 1996-97 to 2000-01 at 5% (in terms of the 52 week annual average) is thelowest since the mid 1950s.
5. In respect of balance of payments, the current account deficit declined from 1.1% of GDP in
1999-00 to about 0.5% in 2000-01.  The exchange rate of the rupee in terms of the major currencies of
the world remained reasonably stable despite occasional fluctuations caused by normal market forces
of supply and demand.  The foreign currency assets of the RBI have increased from US$29.5 billionin 1998-99 to US$49.1 billion as on 15 March 2002 amounting to about ten months of imports
requirement.  India's external debt situation also improved significantly as a result of effective
external debt management by the Government.  The external debt-GDP ratio decreased to 21% at the
end of September 2001 making the country a "less indebted" country in terms of World Bank's
classification.WT/TPR/G/100 Trade Policy Review
Page 6
(2) SOME IMPORTANT SOCIAL INDICATORS
6. The economic progress would also need to be seen in the context of the overall social
development.  The incidence of poverty expressed as a percentage of people living below the poverty
line has declined from 36% in 1993-94 to 26% in 1999-00.  The overall employment grew by about
1% per annum during 1993-94 to 1999-00.  The employm ent in organized sector has however shown
a declining trend due to slowing down in employm ent in the public sector, which has showed a
negative growth of (-)0.03% per annum during 1994-00.  So the major contribution in the overall
growth of the organized sector employment has been made by the private sector after 1995 and the
further growth in employment in this sector is  also dependent on the employment growth in the
private sector.  The literacy rate increased from 52.21% in 1991 to 65.38% in 2001.  The 93rd
Amendment of the Constitution passed in the Lok Sabha on 28 November 2001, seeks to make the
right to free and compulsory education for children between 6-14 years of age a Fundamental Right.
The average annual growth rate of population has declined to 1.93% as compared to 2.14% in 1991.
The per capita income at constant price (base year 1993-94=100) has increased from Rs 9,271 in
1997-98 to 10,207 in 1999-00.
(3) INDIA 'S FOREIGN TRADE PERFORMANCE DURING LAST FOUR YEARS
(i) Exports
7. For the entire post-reform period i.e. 1991 to  2000 the compound annual growth rate (CAGR)
of exports was 10.2%.  Export growth during the past four years has been positive except in 1998-99
when it declined by about 5% in US dollar value primarily due to world wide economic recession.
Exports in 1999-00 exhibited a sharp turn-around with a growth rate, in US dollar value, of about
11%, which increased to 21% in 2000-01.  The export growth reflected buoyant global demand and
improvements in world commodity prices.  This was dr iven by factors like high growth in information
technology sector, a rise in world energy demand, recovery in international oil prices and fading of
contractionary forces linked to financial crisis.  An important feature of this performance was the
turn-around in exports of agriculture and allied products in 2000-01, which were declining since
1996-97.  However, the upswing in exports has been sharply reversed in 2001-02.  Exports during the
period April-December 2001 increased by only 0.6%.  Some of the reasons for this decline are amarked deceleration in the world output and trade, the slackening of global demand particularly
following the tragic events of 11 September 2001, global down turn in information technology,
softening of commodity prices and a slowdown of the domestic economy.
8. India's exports as a percentage of world exports which remained at around 0.5%, in the first
half of 1990s has improved in the second half of 1990s to 0.61% during 1998 and further to 0.65%during 1999 and 0.7% in 2000-01.  However, India's share in world exports is still very low.  Growth
rate of exports in respect of commodities/item groups like ores and minerals, leather and
manufactures, chemical and related products, engineering goods, electronic goods, textiles and
petroleum products etc., registered moderate to steep rise over the period 1997-98 to 2000-01.
However, there has been a substantial decline in export growth rate of commodities relating toplantation crops, handicrafts, carpets, cereals and some other agricultural products.  Apart from the
dependence on the international economic situation, India's export basket is still confined to a limited
range of products.  Factors affecting the international demand for these products, or domestic supply
constraints resulting in a deceleration in export growth in these sectors bring down the overall growth
in exports.
9. The Government has unveiled a Medium Term Export Strategy whose main features,
inter alia  are:  (i) Examination of the import basket of India's major trading partners and identifyingIndia WT/TPR/G/100
Page 7
potential items of exports based on India's competitiveness;  (ii) Examination of country and
commodity specificities of India's major exports along with macro issues affecting country's exports;
(iii) Reduction in transaction costs;  (iv) Drawing up guidelines for State level export policies
considering the key role of State Governments;  (v) Sector specific strategies for exports of different
items currently being exported.  It is expected that implementation of such a strategy will help realize
India's strong export potential, and enhance the overall competitiveness of Indian exports.
(ii) Imports
10. Imports registered a positive, but varying, growth rate during the last four years.  The import
growth, in US dollar value, was 2.2% in 1998-99, 17.2% in 1999-00 and 1.7% in 2000-01.  The
import growth in 2001-02 continued to be subdued a nd it grew, in US dollar value terms, by 0.3% in
the first nine months (April-December 2001).  The major items of the Indian import basket arepetroleum crude and products, pearls, precious an d semi-precious stones, machinery, organic and
inorganic chemicals, electronic goods, gold, and si lver.  In the second half of 1990s, the proportion of
imports of items that are related to export production has increased.  The high growth rate of import in
1999-00 was on account of high international oil prices, a sharp increase in exports related imports
like pearls, precious and semi-precious stones on account of increase in exports of gems and jewelleryduring this period.  Other sectors of import growth during this period were electronic goods, wood
and wood products, non-metallic mineral manufactures  and chemicals, thus broadly reflecting the
improvement in manufacturing output during the year.  The import growth in 2000-01 was sluggish
on account of a slowing down of domestic demand during the year.  In the year 2001-02, on account
of slump in crude oil price since September 2001 oil imports have contracted, and the rise in imports
during April to December 2001 is accounted for by increased non-oil imports, thus hinting at some
revival of the domestic demand.
11. A noteworthy feature of the import regime is the progressive removal of quantitative
restrictions (QRs) maintained on BOP grounds.  Out of 714 items, on which restrictions were
removed on 31 March 2000, 92 items recorded imports worth more than Rs 50 million.  Diamonds
and semi-precious stones constituted 35% of the total imports of these 714 items and another 14%
was contributed by imports of telephonic/telegraphic equipments, industrial vacuum cleaner andcathode ray picture tubes, which are items necessary for domestic industrial activity.  Some growth
was also seen in the import of prepared foodstuffs, beverages and tobacco, plastic and rubber, leather
products, glassware, ceramic products, footwear, and umbrellas.
II. KEY DEVELOPMENTS IN TRADE AND ECONOMIC POLICY SINCE THE LAST
REVIEW
12. During the last four years, various economic reform measures have been introduced in the
Indian economy with the objectives of achieving greater integration with the world economy,
facilitating more investments, enhancing the competitive edge of indigenous industries, reducing
poverty through sustained high growth and allowing higher private initiative in industrial and
technological development.  This can be seen in various policy initiatives like removal of quantitativerestrictions and doing away with dividend balancin g requirements, reforms in tax administration and
lowering of customs duties, a very liberal foreign direct investment regime, deregulation of important
sectors like banking and insurance, repeal of Foreign Exchange Regulation Act (FERA) and its
replacement by a more liberal Foreign Exchange Management Act (FEMA).  These policy initiatives
are sought to be complemented by undertaking domestic reforms in some key areas, like removal of
administered price mechanism in the petroleum s ector, agriculture diversification, rationalization of
user charges for various services, monetary policy reforms including reduction of interest rates,WT/TPR/G/100 Trade Policy Review
Page 8
privatisation of public sector units, improvement and modernization of the infrastructure sector,
introduction of laws for better corporate governance and efforts to reduce the fiscal deficit.
(1) REMOVAL OF QUANTITATIVE RESTRICTIONS FOR IMPORTS
13. The Government progressively liberalized imports by removing quantitative restrictions
(QRs) maintained under the balance of payments cover.  From a national perspective, the lifting of
these restrictions has been of far-reaching significance and the domestic industry is still going throughthe process of adjusting to the new situation.  QRs were removed on 488 items in 1996, on 391 items
in 1997, 894 items in 1998, 714 items in 2000 and the balance QRs on 715 items on 31 March 2001.
These items are classified according to ITC (HS) Classification at the 8-digit level.  Action has thus
been completed on removal of restrictions on tariff lines (2,714 items) notified to WTO under the
BOP cover.  The Special Import Licence (SIL) Scheme has also been discontinued.  Restrictions stillin force only relate to those items as permi ssible under Article XX and XXI of GATT on grounds
such as security, health, safety, and moral conduct.  India has reviewed these restricted items also and
in 2002, it has removed QRs on about 60 items.
(2) R
EMOVAL OF QUANTITATIVE AND OTHER RESTRICTIONS ON EXPORTS
14. Export of commodities continues to be liberalised over a period of time.  In the recent past
quantitative restrictions/packing requirements/registration requirements/MEP have been removed for
cotton yarn, butter, pulses, wheat and wheat products, non-Basmati rice, coarse grains, groundnut oil,
several varieties of agricultural seeds, coir and coir products, hand knotted carpets, woollen carpets,
stone boulders, raw hides and skins, aviation turbine fuel, high speed diesel and motor spirit.  The
condition of export of kerosene and LPG through State Trading Enterprise has also been removed.
(3) TRADE FACILITATION MEASURES
15. Several steps have been taken to simplify the rules and procedures and improve the speed of
transaction in the Directorate General of Foreign Trade (DGFT) with the help of information
technology.  All 32 offices of the DGFT have been fully computerized and the exporters can transact
all business with the DGFT on-line without having to visit these offices.  All the rules and
notifications are available real time on the DGFT website and 75% of the licence applications are
being filed and processed on-line.
16. A new commodity classification for imports and exports has been adopted by DGFT and this
classification shall be adopted by the Central Boar d of Excise and Customs (CBEC) and Directorate
General of Commercial Intelligence and Statistics (DGCI&S).  The common classification to be used
by DGFT and CBEC will eliminate the classification disputes and hence reduce transaction cost and
time.
17. The automated customs clearance system has been extended to 24 locations covering all
major ports, airports, Inland Container Depots (ICDs), and Land Customs Stations.  This system
enables on-line assessment, duty payment, and clearance procedures and EDI connectivity with
clearing agents.  EDI implementation at the national level would be taken up after commissioning of
the Customs Electronic Commerce Gateway, which would also provide for web enabled solutions forfiling documents.  This Gateway would handle all transactions centrally and route them over the
customs network.  It would also allow exchange  of messages on international messaging standards
such as UN/EDIFACT.  Connectivity with Airport Au thority of India, Port Trusts and Banks would
be effected through message exchange servers between the respective LANs.  Greater transparency
for goods clearance has been imparted with the implementation of the Interactive Voice ResponseIndia WT/TPR/G/100
Page 9
System (IVRS) in some of the major ports/airports.  The percentage of physical examination of export
cargo has been reduced to less than 10% except for few sensitive destinations.
(4) REFORM IN TAX ADMINISTRATION
18. The Government has also taken major steps to introduce reforms in direct and indirect
taxation, both in the rate structure and in procedures.  A single rate of 16% has been adopted for the
levy of central excise duty (CENVAT).  Special excise duty over and above this rate applies only oneight items.  As for customs duties, the rates have been progressively reduced from the peak rates of
45% in 1998 to 30% in 2002 with the stated goal to move towards a two basic rate duty regime of
20% and 10% by the year 2004-05 for non-agricultural products.  On procedures, there has been
significant liberalization and modernization.  As under the customs law, the concept of transaction
value has been adopted in central excise assessments with effect from 1 July 2000.  Excise duty isnow payable on the value of transaction (excluding  taxes) instead of the earlier deemed wholesale
price concept.  The central excise rules have been rewritten to make them simpler.  With effect from
1 July 2000, all statutory records for excise purposes have been abolished and the assessee's private
records are accepted for determination of tax liability.  The system of advance payment of excise duty
has been done away with and a new system of payment of excise duty on fortnightly basis for non-SSIunits and on monthly basis for SSI units has been introduced.  In 24 major customs stations, the
processing of import and export declaration has been automated.  Computerization is also being
carried out in central excise with a focus to capture profiles and monthly returns of all assessees so as
to use this data for all requirements of revenue monitoring and audit based control.
19. The direct tax reforms include reduction of tax rates, broadening of tax base and
modernization of tax administration.  Income tax and corporate tax rates have been brought down to
internationally comparable levels.  There has also been a reduction accompanied by rationalization offiscal incentives given in the shape of concessions, etc.
20. The tax base is also being expanded by bringing more and more services under the indirect
tax net.  Service tax had a modest beginning in 1994-95, but has since registered almost a nine-fold
increase in collection (from Rs 4.07 billion in 1994-95 to estimated Rs 36 billion in 2001-02).  From
the initial levy on only three services, presently 41 services are subject to service tax, and ten more areproposed to be added after May 2002.  The service tax as a proportion of GDP originating in the
service sector (excluding public administration and defence) still remains a miniscule fraction.  It is
estimated to be 0.41% in 2001-02 and this obviously is an area, which holds promise for higher
revenue generation in the times to come, as the share of industry in the GDP is decreasing while that
of services is expanding.
21. A noteworthy feature of the taxation regime is that the share of the indirect tax revenue as a
percentage of Gross Tax Revenue has declined from 66.7% in 1998-99 to 61.8% in 2001-02.  Most of
this decline is on account of decline in the custom revenue from 28.3% in 1998-99 to 24.2% in
2001-02.  On the other hand, the share of direct tax revenue as a percentage of gross tax revenue has
increased from 32.4% in 1998-99 to 37.6% in 2001-02.  There is also earnest movement towardsintroduction of a comprehensive value-added system (VAT) in all the States by 2003.  States have
also implemented a uniform floor rate of sales tax and have since 2001 phased out sales tax based
incentives.
(5) F
ISCAL CONSOLIDATION
22. Control of fiscal deficit is one of the priorities of the Government.  The fiscal deficit in
2001-02 is expected to be 5.7% of GDP.  The Fiscal Responsibility and Budget Management Bill isWT/TPR/G/100 Trade Policy Review
Page 10
likely to be passed as a law soon.  This, inter alia,  aims to reduce the central fiscal deficit annually by
at least 0.5% of GDP with a view to achieving a deficit of not more than 2% of GDP by
31 March 2006.  Another step taken in this direction is the replacement of the system of issue of
ad hoc  Treasury Bills by the Reserve Bank of India to meet temporary mismatches in government
receipts and expenditure with a system of Ways and Means advances, which acts as an effective
ceiling on the automatic monetization of the fiscal deficit.  This has created a favourablemacroeconomic condition for monetary management.  Steps are also being taken for reduction of
manpower in the government sector and to reduce the subsidies.  The subsidy on LPG and Kerosene
is proposed to be phased out in the next three to five years.  Major subsidies as a proportion of GDP
has declined from 1.7% in 1990-91 to 1.2% in 1999-00 and is estimated to be 1% during 2000-01.
The administered interest rates have been brought  down during the last few years and they are now
proposed to be benchmarked to the annual average yields of government securities of equivalent
maturities in the secondary market.
23. States are being encouraged to undertake reforms in the agricultural sector and the urban
infrastructure sector.  In agricultural sector, allocations from the Centre for centrally sponsored
schemes have been linked to decontrol and deregulation carried out by the States in the agriculturalsector.  Similarly, in the urban infrastructure development, the Central Government has created an
Urban Reform Incentive Fund with an initial allocation of Rs 5 billion to provide reform linked
assistance to States in the areas such as reform of Rent Control Laws, repeal of Urban Land Ceiling
Acts, rationalization of high stamp duty regimes, levy of realistic user charges and resource
mobilization by urban local bodies and revision of municipal laws.  State Governments have also
undertaken some corrective measures to enforce greater financial accountability.  Fiscal reforms in
States include laying down limits on extending gu arantees for borrowings through Public Sector
Undertakings and Financial Corporations (Gujarat, Rajasthan, Karnataka, and Tamil Nadu) and
creation of Guarantee Redemption Funds (Rajasthan and Tripura).
(6) R
EFORMS IN FOREIGN INVESTMENT REGIME
24. Reforms in this field have been extensive.  Barring a few areas, foreign investment in India
can be made in all sectors under the Automatic Route under which foreign investors only need toinform the Reserve Bank of India within 30 days of bringing in their investment and within 30 days of
issuing any shares.  In most sectors, foreign investment is permitted up to 100% of the paid up capital.
Only in some areas, investment is subject to sectoral caps on account of security/strategic/sectoral
considerations.  FDI up to 100% has been permitted under the Automatic Route for manufacture of
drugs and pharmaceuticals, in hotel and tourism sector, for Mass Rapid Transport Systems in allmetropolitan cities including associated commercial development of real estates.  A new Auto policy
has been unveiled, which does away with indigeniza tion requirements or trade balancing obligations
and allow foreign equity investments up to 100% under automatic approval.  Investment up to 100%
is also permitted with government permission in airports, for development of integrated townships,
city and regional level urban infrastructure facilities such as roads and bridges, mass rapid transitsystems and manufacture of building materials, in courier services subject to exclusion of activity
relating to distribution of letters.  FDI up to 49% from all sources is permitted in the banking sector on
the automatic route.
25. As a result of these initiatives, the FDI policy framework of India today is amongst the most
liberal investment regime.  The actual inflow of  FDI into India increased from Rs 133.4 bn. in 1998 to
Rs 161.3 bn. for the period January to October 2001.  To some extent, the industrial slow down and
certain structural factors have a bearing on the investment climate in the country.  While structuralissues are being addressed through various policy measures, it would also be important not to over-
play such constraints for the overall investment scenario.India WT/TPR/G/100
Page 11
(7) REFORMS IN INDUSTRIAL LICENSING REGIME
26. The liberal FDI regime has been complemented by virtual abolition of industrial licensing
regime except in the case of six industries on strategic, public health, safety and environmental
considerations.  Important industries like coal an d lignite, petroleum (other than crude), bulk drugs
and sugar were delicensed in 1998-99.  Coal, lignite and mineral oils were dereserved from the
purview of the public sector in the same year.  Peri odical review of items reserved for manufacture in
SSI sector has also been undertaken in consultation with the stakeholders, and based on such reviews,
39 items have been dereserved since 1997.  The Government has initiated steps to dereserve another
about 50 items.
(8) EXCHANGE MARKET REFORMS
27. The Indian Rupee is now being managed according to market principles with the Reserve
Bank of India intervening occasionally to curb ex cessive volatility whenever such circumstances
arise.  To consolidate and amend the law relating to  foreign exchange with the objective of facilitating
external trade and payments and for promoting the orderly development and maintenance of foreign
exchange market in India, the new Foreign Exch ange Management Act (FEMA) came in force from
1 June 2000 replacing the more stringent Foreign Exchange Regulation Act (FERA).  Fullconvertibility has been enshrined in the FEMA for current account transactions.  A more recent
development has been the move towards capital account convertibility.  To begin with, it is proposed
to bring in non-resident Indians' deposit schemes under full convertibility.  The NRIs will now be
permitted to freely repatriate their current earnings in India such as rent, dividend, pension, interest
etc. in foreign currency.  The existing Foreig n Currency Non-Resident (FCNR) and Non-Resident
External Rupee (NRE) schemes will continue to be repatriable.  Schemes that do not offer full
convertibility to NRIs will be discontinued from 1 April 2002.  In addition, domestic mutual fundswill be allowed to invest in securities within the existing limits in countries with fully convertible
currencies.  Earlier such investment was permitted only in the case of American Depository Receipts
and Global Depository Receipts (ADRs and GDRs) issued by the Indian companies in overseas
markets.  It is also proposed to increase the lim it of investment in overseas joint ventures through
market purchases and to put the Foreign Curren cy Convertibility Bonds (FCCB) Scheme under the
automatic route up to a limit of US$50 million.  Investment up to 50% of the investing company's net
worth will not need prior approval as against a limit of 25% earlier.
(9) D
EREGULATION OF INTEREST RATES
28. A number of monetary/interest rates easing measures have been undertaken by the Reserve
Bank of India in recent times.  First, the Bank Rate was reduced to 6.5% effective 23 October 2001,which is the lowest since May 1973.  The nominal Prime Lending Rates (PLR) of public sector banks
declined to a range of 10-12.5% by December 2001 from the level of 12-14% in March 1999 and
continues to show a softening trend.  With a view to stimulate growth and impart greater liquidity to
banks for lending to the private sector, the Cash Reserve Ratio (CRR) has been lowered from 11% in
1998 to 5.5% in 2001.  The incremental Reserve Ratio of 10% for banks have been removed and theStatutory Liquidity Ratio on incremental net domestic demands and times liability has also been
removed.  With progressive deregulation of interest rates, banks now have considerable flexibility to
decide their deposit and lending rate structures and manage their assets and liabilities.  On the deposit
side, except for savings deposits, banks have been given the freedom to offer a fixed rate or a floating
rate linked to an anchor rate.  Interest rates on term deposits have been deregulated.  On the lending
side, banks are free to prescribe their own Prime Lending Rates (PLRs) across various tenors, and also
to lend at sub-PLR rates.WT/TPR/G/100 Trade Policy Review
Page 12
(10) OTHER BANKING SECTOR REFORMS
29. Structural reforms have been undertaken to improve the efficiency of the banking sector.  The
specific areas where action is being taken includes re-capitalization of weak banks subject to a viable
restructuring programme, setting up of Financial Restructuring Authority, implementation of
Voluntary Retirement Scheme (VRS), rationalizing branch network, reduction of non-performing
assets and increasing productivity and profitability.  About 11.7% of the total staff strength of thebanks at the end of March 2000 was relieved under VRS.  Competition in the banking sector has been
increased.  Ten new private sector banks have started functioning.
(11) L
IBERALIZATION IN INSURANCE SECTOR
30. With the passage of the Insurance Regulatory and Development Authority (IRDA) Act, 1999,
the Insurance Regulatory and Development Authority was set up on 19 April 2000.  Its objectives areto protect the interest of the holders of insurance policies and to regulate and promote growth of
insurance industry.  Insurance is now recognized as a permissible form of business, and banks are
now permitted to enter into insurance business subject to certain guidelines.  Under IRDA, the Indian
insurance industry has also been opened to private Indian companies with a cap on foreign holding at
26%, thus ending the exclusive privilege of the public sector Life Insurance Corporation and GeneralInsurance Corporation to transact in life and non-life insurance business respectively.
(12) P
RIMARY MARKET REFORMS
31. In the primary market, major policy initiatives include relaxed norms relating to information
technology, media, entertainment, telecom and in frastructure sector, 100% book building along with
prescription of sub-limits for different categories of investors, issuance of guidelines for buy-back of
shares of own companies to facilitate capital re structuring.  Measures relating to trading and
settlement practices include, progress of dematerialization of scrips and the consequent gradual switchover to rolling settlement, introduction of derivatives trading in equity based products, internet trading
including trading on wireless media and opening of trading terminals abroad.  The Securities Laws
(Amendment) Bill, 1999, has been introduced for increasing the efficacy of primary and secondary
markets in devolution of resources.  On the institutional front, framing of regulations relating to
Venture Capital Funds (VCFs) including Foreign Venture Capital Investors Regulations, 2000,allowing Mutual Funds (MFs) to invest in mortgage  backed securities of investment grade and above,
raising of the investment limit of the FIIs in the secondary market to the sectoral limit on FDI,
creation of an Overseas Investors' Cell to facilitate investments by overseas investors and increase in
the limit on purchase of shares in Indian Companies in the secondary market by the NRIs were the
main highlights of the policy initiatives taken.  FIIs have been permitted to invest in Stock IndexFutures for the purpose of hedging.
(13) C
ORPORATE GOVERNANCE
32. Detailed norms for corporate governance have been laid down which, inter alia,  include
norms relating to composition of Board of Directors, appointment and structure of Audit Committee,
shareholders' rights and disclosure of compliance on corporate governance.  Certain codes of bestpractices have been made mandatory by the SEBI for ensuring transparent corporate governance.  A
national award for excellence in corporate governance has also been instituted from 1999.  The
Government has also taken a policy initiative to enact a Competition Law.  The Bill was introduced in
Parliament on 6 August 2001 and is presently under examination by a Parliamentary Standing
Committee.  The proposed law is expected to cover areas like prohibition of anti-competitiveIndia WT/TPR/G/100
Page 13
agreements, prohibition of abuse of dominance, regulation of combinations (acquisition, mergers,
etc.) and establishment of a Competition Commission of India (CCI).
(14) REFORM OF CONTROL SYSTEMS
(i) Petroleum sector
33. There has been considerable progress in refo rming the existing control system governing the
petroleum sector.  The administered price mechanism stands dismantled from 1 April 2002.  As aresult, the pricing of petroleum products will become market determined, the Oil Pool Account would
stand dismantled, and private companies would be allowed to participate in distribution of petroleum
products subject to guidelines.
(ii) Sugar sector
34. The decontrol of sugar sector has been carried out in a phased manner.  The levy obligation
on sugar factories (i.e. requisitioning a fixed percentage of sugar production from sugar factories for
distribution through the Public Distribution System at a uniform retail issue price) has been reduced
from 40% before 2000 to 15% from February 2001.  Futures/forward trading in sugar is being
introduced as a step before full decontrol of sugar.  The supply of Public Distribution System (PDS)
sugar is now mostly restricted to the below poverty line families in the country.  After full decontrol
of sugar, there will be no levy obligation on sugar factories.
(iii) Deregulation in Agriculture Sector
35. A series of initiatives have been launched in the agriculture sector to reduce the existing
market distortions and at the same time to safeguard the interest of the farmers.  Trade in agricultural
commodities has been freed from controls under the Essential Commodities Act 1955.  The
Government has removed licensing and stocking requirements and movement restrictions enabling
free and unrestricted stocking and trading in wheat, rice, coarse grains, edible oils, oil seeds, and sugarso as to have an integrated countrywide market for agricultural products.  An amendment of the Milk
and Milk Products Control Order is proposed to remove restrictions on new milk processing
capacities while at the same time to continue to regulate health and safety conditions.
(15) I
NFRASTRUCTURE REFORMS
36. The general policy direction of the Government in this sector is to move towards imposition
of appropriate user charges necessary to provide adequate returns on investment.  This is already in
place in telecom, road, and ports sectors.  The Railways have carried out tariff rationalization in the
Budget of 2002-03 with the same objective.  This policy is being extended to other areas like power,
urban infrastructure and other transportation.
(i) Power
37. Some of the major initiatives taken by the Government in this sector are:  (i) Passing of
Electricity Laws (Amendment) Act, in 1998, which recognizes transmission as a separate activity
which would help attract private capital in the transmission sector;  (ii) Setting up of a Central
Electricity Regulatory Commission (CERC) in 1998 as a regulatory body, which would, inter alia,
assist in rationalization of tariffs;  (iii) Introduction of a new Bill called the Electricity Bill 2001 inParliament, which would make power sector reforms mandatory in the States;  (iv) Passing of an
Energy Conservation Act in 2001, paving the way for creation of Bureau of Energy Efficiency which
would be responsible for conduct of audits, labelling of electrical appliances, awareness campaignsWT/TPR/G/100 Trade Policy Review
Page 14
etc;  (v) Introduction of a new scheme by the name of Accelerated Power Development Programme
(APDP) in 2000-01 to assist in strengthening of s ub-transmissions and distribution system, renovation
and modernization and metering.
(ii) Roads
38. The Government has embarked upon an ambitious project to upgrade the existing national
highways infrastructure.  A programme for 4/6 la ning of National Highways under National Highway
Development Project (NHDP) comprising of Golden Quadrilateral connecting the four metros of
Delhi, Mumbai, Chennai and Kolkata and the North-South, East-West corridors connecting Srinagar-
Kanyakumari and Silchar-Porbandar respectively has been formulated.  The Programme is targeted to
be completed by 2007 involving an expenditure of Rs 540 billion.  An ambitious project called
Pradhan Mantri Gram Sadak Yojana has been launched in December 2000 with the annual allocationof Rs 25 billion to improve road transport links with rural areas.
(iii) Ports and Airports
39. The major ports are proposed to be corporatized in a phased manner.  Private sector
investment has been facilitated and 17 projects wort h more than Rs 45 billion have been approved.  A
Tariff Authority for Major Ports has been established to introduce efficient regulatory practices.Corporatization is proceeding at a fast pace for Ennore, JNPT, Marmagao and Tuticorin ports.  As a
result of the continuing reforms, there have been considerable improvements at major ports in terms
of average berthing waiting time, average turn around time etc.  International airports at Delhi,
Mumbai, Chennai, and Kolkata are proposed to be upgraded to the standards of world class airports
by inducting private sector management and investment through long-term leasing systems.
(16) T
ELECOM
40. Under the GATS, India had undertaken to re view in 1999, the opening up of the domestic
long distance telephony to competition.  The review was conducted in 1999 and the sector actually
opened up to competition in August 2000.  There is now no limit on the number of service providers
in this sector.  In the field of international telephony, India had agreed under the GATS to review its
opening up in 2004.  However, open competition in this sector has already been announced with
effect from April 2002.  With the opening up of  International Long Distance Voice Communication,
all the telecom services in the country have been opened up for private participation and competition.
In preparation of competition from Private Sector Se rvice Providers, the service-provider activities of
the Department of Telecom was separated from its policy making functions and a new Department of
Telecom Services was created on 15 October 1999.  This has in turn been corporatized on
1 October 2000, and has now become Bharat Sancha r Nigam Limited (BSNL), the main Public Sector
Service Provider.  Similarly the public sector international telecommunication service provider,
Videsh Sanchar Nigam Limited (VSNL) has been divested and management control has been
transferred to a private company in February 2002.
41. In the backdrop of rapid convergence of telecom, computers, television and electronics, under
the New Telecom Policy-99, a new comprehensive statute has been prepared to replace the IndianTelegraph Act 1885.  The Communication Convergence Bill 2001 aims to promote, facilitate and
develop in an orderly manner the carriage and content of communications (including broadcasting,
telecommunications and multimedia), for the establishment of an autonomous commission (to be
called the Communication Commission of India) to regulate carriage of all forms of communication
and for establishment of an Appellate Tribunal.  This will also replace the TRAI Act.  The Bill has
been introduced in the Parliament on 31 August 2001.India WT/TPR/G/100
Page 15
(17) PRIVATIZATION OF PUBLIC SECTOR UNITS
42. State-owned enterprises have historically played an important role in India's development by
way of building infrastructure for economic development, creation of employment opportunities and
self-reliance through the development of local indu stries.  However, with the shortcomings of the
public sector starting to manifest over a period of time, India has now embarked upon an ambitious
programme of disinvestment and privatization of state-owned units.  The rationale of such a step is tohelp in regeneration of economy, better utilization of national assets created during the five decades
after independence, exposure of such industries to  greater competition for their survival and growth
and consequential expansion of employment opportu nities.  Disinvestment of public sector units
between 1997-98 to 2001-02 (up to Feb. 2002) has yielded Rs 157.58 bn.  It is expected that there will
be a significant acceleration in the speed of privatization of public sector units on account of a recentjudgment of the Supreme Court of India given on 10 December 2001 in BALCO disinvestment case.
In this judgement, while validating the BALCO di sinvestment, the Hon'ble Court observed as follows:
"Thus, apart from the fact that the policy of disinvestment cannot be questioned as such, the facts
herein show that fair, just and equitable pro cedure has been followed in carrying out this
disinvestment."
(18) I
MPEDIMENTS TO THE GROWTH OF INDIA 'S INTERNATIONAL TRADE
43. New tariff barriers faced by Indian products in various overseas markets are severely
constraining our exports.  These barriers may broadly be enumerated as:  (i) restrictive import policy
regimes (import charges other than customs tariff, quantitative restrictions, import licensing, custom
barriers);  (ii) standards, testing, labelling and certification (including phytosanitary standards), which
are set at unrealistic high levels for developing countries or are scientifically unjustified;  (iii) export
subsidies (including agricultural export subsidies, preferential export financing schemes etc.);(iv) barriers on services (visible and invisible barriers restricting movements of service providers,
etc.);  (v) government procurement regimes;  and (vi) other barriers including anti-dumping and
countervailing measures.
44. Quantitative restrictions, especially in the textiles area, are one of the most important of the
non-tariff barriers affecting India's trade.  The major trading partners of India have not made anyindustrial adjustment nor have accorded any meaningful access to developing countries like India.
The integration programme implemented by the im porting countries has not been in line with the
spirit of the Agreement on Textiles and Clothing (ATC), though it may have conformed to the narrow
technical and legal requirements of the Agreement.  In the first stage starting from 1 January 1995,
major restraining countries integrated no product under restraint for India; and in the second and thirdstages, integration of restraint products has been negligible.  The result is that even in the tenth year of
the transition period, more than 95% of India's apparel and yarn trade would remain un-integrated
with some of its major trading partners.  Further, the integration schedules have a greater
concentration of low value added products.  It is, thus obvious that the major importing countries have
continued to back load the integration process and the bulk of integration would take place only at theconclusion of the transition period.
45. Another problem in the area of textiles exports is unilateral changes introduced by certain
trading partners in their rules of origin.  These changes have adversely affected exports of textiles and
India's rights under the ATC including the full utilization of quota.  Repeated anti-dumping
investigations on the textile products like cotton fabrics and cotton bedlinen, in which India enjoys a
measure of comparative advantage, had a debilitating effect on the Indian textile industry and exports.
The export of textile products has also been affected because of ban on use of Azo dyes.WT/TPR/G/100 Trade Policy Review
Page 16
46. Another area of concern regarding market access for textile trade is an increasing tendency to
enter into bilateral pacts for conferring selective liberalization of quotas.  The tariff preferences have
also been extended bilaterally, which are otherwise m eant to be provided to all developing countries
on a non-reciprocal basis.  There is also a growing regionalization of textile trade on account of
formation of Free Trade Areas and Preferential Trading Arrangements.  It is estimated that 59% of
world trade in textiles is presently taking place under RTAs.  Such localization of world textile tradeis adversely affecting India's textile trade.
47. In a number of other product sectors of export interest to India, market access has been
affected by several non-tariff measures (NTMs).  In the agricultural product sector, there are barriers
to export of mangoes and other fruit on account of insistence of some of our major trading partners to
use only the Vapour Heat Treatment (VHT) procedure.  In the floriculture sector, there are certainplant quarantine procedures in some importing countries including zero tolerance for some insects and
pests, which affect our market access.  The expo rt of Indian milk product is affected on account of
certain conditions like proof of absence of TSE/Scrapie in India insisted upon by some trading
partners.  There is continuing ban on import of Indian meat by some countries even though India has
been free from rinderpest for the last three years and the same has been published in the OIE bulletinreleased from Paris.  There are different regulations on use of pesticides and pesticides residues by
various importing countries, which has affected market access of Indian products like grapes, egg
products, gherkins, honey, meat products, milk pr oducts, tea, and spices.  Non-harmonization of
regulations for approval of exporting units of I ndian egg products and non-approval of Indian egg
processing establishments by one of our major trading partner is another market access barrier.  In the
leather products sector, Indian exporters face NTMs like chemical and dye content of leather, other
standards (like different shoe size standards, more than appropriate stringent standards for flex testing,
tearing strength, colour fastness and flammability testing), packaging and labelling requirements (like
insistence on use of recyclable card boxes for packing footwear, at times insistence on reshipping the
packaging material back to the point of origin), violation of MFN and national treatment (for instance
testing, double certification and standards compliance may not be mandatory or as strict for local
manufacturers or for some other exporting countries), visa restrictions and other import bans (like banon use of Nickel in footwear, ban on use of colour pigments with additive base).  Unreasonable social
security requirements and visa restrictions enforced by some of our major trading partners have
affected the growth of our software exports.  The requirement of assembly of bicycles according to
the security and safety norms of a trading partner in a discriminatory manner and need for a certificate
of compliance by an authorized organization has severely affected market access of Indian bicycles tothat country.  The illustrative examples of NTMs given in this paragraph indicate the significant
financial and time costs, which have adversely impacted on the market access for Indian goods and
services.
III. INDIA AND THE WTO
(1) A
GRICULTURE
48. Agriculture continues to remain one of the most significant sectors of the Indian economy as
it provides employment to approximately 65% of the population and contributes about 25% to the
GDP of the country.  Yet India's share in the world market remains at less than 2%.  The post-
Uruguay Round experience has been a mixed one for agricultural trade in India.  Thus, in the ongoing
negotiations on the Agreement on Agriculture India has submitted detailed proposals with a view to
safeguarding the food and livelihood security of the large subsistence level farming community in
India and maximizing export opportunities for Indian agricultural products by seeking a reduction inthe high tariffs and subsidies prevalent in developed countries.India WT/TPR/G/100
Page 17
(2) STEPS FOR INTERNATIONAL STANDARDS IN TRADE AND INDUSTRY
49. India is a signatory to the Agreement on Technical Barriers to Trade and the Agreement on
Sanitary and Phytosanitary measures and there is greater emphasis on bringing Indian standards to
international levels.  Most standards in India are voluntary although health and safety regulations are
mandatory for several products.  133 products are under compulsory BIS certification for domestic
goods through various Quality Control Orders issued by various Ministries/Departments.
50. The Bureau of Indian Standards (BIS) is responsible for formulating national standards and
has so far formulated 17,428 Indian standards for the various sectors.  It has also been harmonizing
these Indian standards with international standards since beginning.  So far, nearly 3,000 Indian
standards have been harmonized with ISO/IE C/EN/CODEX/Others standards.  The pace of
harmonization of Indian standards with internationa l standards has increased in the last few years.
Between 1998-99 to 2000-01, out of 1,026 standards formulated by BIS, 428 standards (about 42%)
were harmonized with international standards.
51. India is concerned that although the Ministry of Health and other Ministries, BIS and expert
bodies involved in the field of sanitary standards participate in the policy making committees of
international bodies such as the ISO, the Codex Alim entarius etc. the developing countries are grossly
outnumbered by the developed countries in these deliberations, at times resulting in international
standards development not conducive to their implementation by the developing countries.
Simultaneous and rapid development of standards has made it even more difficult for developing
countries to suitably respond to the proposals.  There is a strong sentiment that development of newer
technology is leading to newer and higher standards in developed countries, which are sought to be
justified on the ground that it is necessary to have the highest level of protection for consumers rather
than appropriate level of protection thereby making it even more difficult for developing countries toachieve these levels.  Another area of concern is lack of use of adequate data from developing
countries and from different regions in the process of standard setting.  It is also strongly felt that in
view of our lack of access to technologies developed abroad for achieving standards acceptable to
importing countries, specific measures need to be taken by developed country Members to give effect
to the clauses extending "Special and Differential treatment" to developing countries in theimplementation of these WTO Agreements.
(3) I
NTELLECTUAL PROPERTY
52. Consequent to India's obligations under the TRIPS Agreement, appropriate and necessary
changes have been identified and enacted in almost  all cases in legislations relating to protection of
intellectual property rights (IPRs).  In addition India has enacted sui generis legislations in some
TRIPS related areas .
53. India has repealed and replaced the Trade and Merchandise Marks Act, 1958 with the Trade
Marks Act, 1999.  The Act provides for the registration of distinctive marks for goods and services
and for the prevention of the use of fraudulent marks.  It provides the procedure for and duration of
registration, assignment and transmission of marks, for the protection of collective marks, certificationtrademarks and well-known marks.  An appellate board to hear appeals against orders of the Registrar
has also been provided, which will be a fast track appellate mechanism.  Penalties for offences under
the Act have also been strengthened.
54. For the protection of Geographical Indications of Goods, a sui generis  legislation viz. the
Geographical Indications of Goods (Registration & Protection) Act, 1999 has been enacted in order to
comply with the requirements under the TRIPS Agreement and to protect products of Indian origin asWT/TPR/G/100 Trade Policy Review
Page 18
well.  The Act provides for the registration of a geographical good, which owes its distinctiveness,
essential characteristics or reputation and quality to its geographical origin and would include
agricultural, natural or manufactured goods.  Significant characteristics of this legislation include
registration of geographical indications of goods, provision for higher level of protection for notified
goods and provision for procedures relating to offences and penalties.
55. The Designs Act, 2000 repeals and replaces the earlier Act of 1911 and seeks to provide a
much broader scope of protection to registered designs.  It meets the requirements under the TRIPS
Agreement in respect of Designs.  Salient features of this legislation include provision for
identification of non-registrable designs, replacement of Indian classification by the internationally
followed Locarno system of classification and provision for restoration of lapsed designs.
56. The Indian Parliament has recently passed the Protection of Plant Varieties and Farmers'
Rights Act.  The objective of this legislation is to  give a significant thrust to agricultural growth by
providing an effective system for the protection of plant varieties and farmers' rights, which will
stimulate investments for research and development both in the public and the private sectors for the
development of new plant varieties by ensuring appropriate returns on such investment.  This
legislation recognizes the role of farmers as cultivators and conservers of plant varieties and thecontribution of traditional, rural and tribal communities to the country's agro biodiversity by
rewarding them for their contribution through benefit sharing and protecting the traditional rights of
the farmers.  This Act will also fulfil India's obligation under Article 27.3(b) of TRIPS Agreement of
WTO by providing an effective sui generis  system for protection of Plant Varieties.  Under this Act,
new plant varieties shall be registered for Plant Breeder Rights based on the international criteria of
newness, distinctiveness, uniformity, and stability.  The essentially derived varieties shall also be
registered under this legislation based on internationally accepted criteria.  This legislation also hassome unique features like Benefit Sharing, Comm unity Rights, Gene Funds, Compulsory Licensing
etc.  Penal provisions have also been provided in this legislation on infringement of Plant Breeder
Rights.
57. Following the long tradition for the protection of  copyrights in India, the Indian Copyright
Act, 1957 was enacted to protect and foster creativity.  The Copyright Act 1957 was revisedperiodically to address the challenges posed by technological developments.  That the Indian law
required only a minor amendment to extend the period of protection of performers from 25 to 50 years
to fulfil India's TRIPS obligations in 1999 shows the contemporariness of the Indian copyright laws.
58. The Patent (Second Amendment) Bill, 1999 to m odify the existing Patent Act of 1970 was
introduced in the Parliament in 1999.  The Bill was referred to a Joint Committee of Parliament forconsideration.  The Joint Committee has now submitted its report to the Parliament.  The Bill aims at
installing a TRIPS compliant patent regime.
59. The Semiconductor Integrated Circuits Layout-Design Act was enacted in the year 2000 to
provide for the protection of semiconductor integrated circuits layout-designs.  The Act provides for
exclusive rights to the registered proprietor of a layout design and also to the registered users.  TheAct also provides for criminal remedies for infringe ment of layout-design so as to act as effective
deterrent.  The Act also provides for establishment of an Appellate Board to hear appeals against the
orders of the Registrar.
60. India provides for the protection and enforcement of different fields of intellectual property
through both specific national legislation as well as the Code of Civil Procedure and the Code of
Criminal Procedure by way of civil remedies and criminal penalties.  These provide effectiveIndia WT/TPR/G/100
Page 19
deterrent to infringement of IPRs. The criminal cases and civil suits for infringement of IPRs lie in the
judicial system for other cases.
61. As a complementing activity to various legislativ e initiatives relating to the installation of the
legal framework for the administration of intellectual property laws, India has taken several steps to
modernize the different intellectual property offices in the country.  The copyright office, the patent
offices including the design office and the trade marks registry are being modernized andstrengthened considerably through the extensive application of information technology, redesign of
work procedures and human resources development.  A separate registry for processing applications
for the registration of geographical indications has been established recently.  These initiatives have
already started showing positive impact in the administration of intellectual property rights protection.
62. Government of India has taken several initiatives to improve enforcement of intellectual
property rights and particularly in enforcement of copyrights.  The Government has constituted a
Copyright Enforcement Advisory Council under the Ministry of Human Resource Development
(Ministry handling the copyright matters in the Government of India).  The Council consists of
representatives of copyright industry, collective administration societies, Heads of Police force of
major States and representatives of other connected departments of Government of India.  ThisCouncil makes recommendations on enforcement of copyrights and monitors implementation of such
recommendations.  As the enforcement of law is the responsibility of the State Governments in the
federal set up, the Central Government has requested the State Governments to set up special cells for
copyright enforcement headed by senior Police Officers.  In many States these cells handle other IPR
enforcement issues.  Industry organizations are encouraged to deal with these cells to sort out
enforcement issues.  Training programmes on enforcement of copyrights are also organized for senior
administrators, senior police officers, and customs officers.
(4) S
ERVICES
63. The Services sector accounts for 49% of India's Gross Domestic Product.  India recognizes
the importance of the services sector to the economy and its growing significance in achieving higher
economic growth.  Therefore, Government is giving increased emphasis for efficient performance of
the services sector particularly, the infrastructure services, such as telecommunications, banking,insurance, shipping, roads, ports, and air transport.  As already discussed earlier in the Report, private
investment has been encouraged and appropriate regulatory authorities have been set up with a view
to ensure fair competition and protection of consumer interests.
64. India actively participated in the Uruguay Round Services Negotiations and made
commitments in 33 sub-sectors as compared to an average of 23 for developing countries.  India alsoparticipated in the extended negotiations on Telecommunication services and Financial services and
improved its offer and took enhanced commitments.  India has sincerely implemented the
commitments undertaken and in some sectors lik e telecommunication, the commitments have been
fulfilled even before the scheduled date.
65. In line with the agreed Guidelines and Procedures for Negotiations on Trade in services
(NGP), India feels that Negotiations should aim to  increase the participation of developing countries
in the Trade in Services.  There should be appropriate flexibility for individual developing country
members for progressive liberalization in line with their development situations and national policy
objectives.  The positive list approach which is the cornerstone of the GATS architecture should be
maintained.  The Assessment of Trade in Services in overall terms and on a sectoral basis with respect
to the objectives of the GATS and Article IV should be carried out by the Council for Trade in
Services in Special Sessions.  Account should be taken and credit given in the Negotiations forWT/TPR/G/100 Trade Policy Review
Page 20
autonomous liberalization undertaken by Members since previous Negotiations.  The request and
offer approach should be the main method of Negotiations.
66. While developed countries have surplus capital to invest, most of the developing countries
have surplus of skilled, semi-skilled and unskilled workers.  India has a large pool of well-qualified
professionals capable of providing services abroad.  As developed countries have a comparative
advantage in exporting capital intensive services, developing countries have a comparative advantagein exporting labour intensive services involving movement of persons.  While GATS recognizes
"movement of natural persons" as one of the modes of supply of services, the commitments
undertaken by the developed countries have very little to offer to the developing countries in terms of
opening their markets.  The present commitments are largely restricted to business visitors and intra-
corporate transferees.  There are very limited commitments for qualified professionals and even wherecommitments are made, they are linked to commercial presence.  The effectiveness of even these
limited commitments is further reduced through a host of limitations and administrative hurdles.
67. In Article IV of GATS and the NGP, there is a clear obligation to increase the participation of
developing countries in trade in services.  The Ag reement also recognizes the basic asymmetry in the
level of development of the services sector in developed and developing countries.  The Agreementenjoins the developed countries to take concrete measures aimed at strengthening the domestic service
sector of developing countries and providing effective market access in sectors and modes of supply
of export interest to developing countries.  However, the GATS objectives of increased participation
of developing countries in trade in services has ha rdly been addressed.  Therefore, in order to achieve
the required balance in GATS and to increase the participation of developing countries in trade in
services as per Article IV of GATS, the developed countries should undertake a higher level of
commitments on Mode 4, i.e. movement of natural persons and in sectors of export interest to thedeveloping countries.
(5) TRIM
S
68. India notified three trade related investment measures (TRIMs) under Art. 5.1 of the
Agreement on Trade Related Investment Measures (TRIMs).  These are:  (i) Local content
requirement in the case of Newsprint;  (ii) Local content requirement in respect of Pencillin G andRifampicin;  and (iii) Dividend balancing requirement in the case of investment in 22 categories of
consumer goods.
69. The local content requirements in respect of Newsprint and Pencilllin - G & Rifampicin have
been eliminated in 1995-96 by the Government of India.  As for the dividend-balancing requirement,
legal opinion indicated that the same was not a TRIM prohibited by the TRIMs agreement.  However,the Government of India decided to eliminate the measure on an autonomous basis in early 2000.  At
present there are no notified TRIMs maintained by India.
70. Certain WTO Members approached the WTO Dispute Settlement Body arguing that certain
measures related to India's auto policy 1997 were inconsistent with the provisions of the TRIMs
agreement.  India has eliminated all such provisions in its new auto policy.
(6) WTO D
ISPUTE SETTLEMENT
71. Since the establishment of the WTO, India has been involved in 29 disputes;  as a
complaining country in 16 disputes and as the country complained against in 13 cases.  In addition
India has also actively participated as a third party in various disputes.  India requested consultations
16 times with various WTO Members.  These disputes are at different stages – in some cases the
reports have also been adopted and the implementation is complete.India WT/TPR/G/100
Page 21
(7) TRADE DEFENCE MEASURES
72. India has been actively involved in the meetings of WTO's subsidiary bodies relating to
anti-dumping practices, the SCM Committee and the Committee on Safeguards.  India has also
submitted proposals to the SCM Committee on countervailing duty investigation procedure,
generalized and aggregate rates of duty remission and treating capital goods as inputs consumed in the
production process.  India has been regularly notif ying changes in its anti-dumping, countervailing
duty and safeguard statute along with notifying an ti-dumping and safeguard action to the respective
committees of the WTO.
(8) IMPLEMENTATION ISSUES
73. India attaches considerable importance to find meaningful solutions to the implementation
issues raised by the developing countries, which essentially seek to address the asymmetries andimbalances in the Uruguay Round agreements, n on-realization of anticipated benefits and non-
operational and non-binding nature of special and differential provisions.  With a view to
operationalizing Article 15 of the Anti-dumping Agreement, which is a special and differential
treatment provision of the agreement, India has presented a detailed proposal to the Anti-dumping
Committee.  India hopes that the outstanding issues would be satisfactorily resolved within the time
frame set in the Doha Ministerial Declaration and the Decision on Implementation-Related Issues and
Concerns taken in the Doha Ministerial Conference.
IV. REGIONAL TRADING ARRANGEMENTS
74. India attaches significance to her participation in regional agreements within the framework
of multilateral rules.  India has been instrument al in setting up the South Asian Association for
Regional Cooperation (SAARC), whose major achie vement in 1995 was the conclusion of the
negotiations on trade preferences within the framework of the SAARC Preferential TradingArrangement (SAPTA).  Since the coming into  force of the SAPTA Agreement in December 1995,
three Rounds of negotiations have been conclude d for exchanging tariff concessions between the
Member States.  The Third Round of negotiatio ns, which concluded on 23 November 1998 was more
comprehensive in its product coverage with concessions being exchanged on more than 3,000 tariff
lines.  A combination of sectoral and product-by-product approaches was adopted in thesenegotiations.  Up to the Third Round, India has granted concessions on 2,565 tariff lines to Member
countries of SAARC with special concessions for the Least Developed Countries (Bangladesh,
Bhutan, Maldives, and Nepal).  The Fourth Round of SAPTA negotiations are expected to be
launched shortly.   The goal is to continue the SAPTA process with the ultimate aim of having a South
Asian Free Trade Area (SAFTA) Treaty not later than the year 2002.
75. India is a member of the Bangkok Agreement, originally signed in 1975, and which includes
Bangladesh, the Republic of Korea, the Lao Peopl e's Democratic Republic, Papua New Guinea, and
Sri Lanka.  China has also acceded to the Bangkok Agreement in the year 2001.  The Agreement
provides for the liberalization of tariff and non-tariff barriers between its members.  Till date, only
two Rounds of Trade Negotiations have taken place.  The Third Round of negotiations is expected tobe launched shortly.
76. The Indian Ocean Rim Association for Regional Cooperation was recently formed along with
13 other countries in the region.  The Charter of the Association was adopted in March 1997.
Membership of the Association now stands at 19 with Egypt and Japan as dialogue partners.
Economic cooperation is expected to take place in trade facilitation, promotion and liberalization,
promotion of foreign investment, promotion of scientific and technological cooperation, tourism, theWT/TPR/G/100 Trade Policy Review
Page 22
movement of natural persons and service providers, and the development of infrastructure and human
resources.  India is also a member of the regional grouping named BIMST-EC (Bangladesh, India,
Myanmar, Sri Lanka, Thailand Economic Cooperation) formed in 1997.  Six areas have been
identified for cooperation, namely, trade and investment, technology, transportation and
communication, energy, tourism, and fisheries.
77. India has signed bilateral agreements with two neighbouring countries, Bhutan and Nepal, to
provide them with preferential access.  A Free Trade Agreement was signed between India and
Sri Lanka on 28 December 1998 and was operationalized in March 2000.  The Agreement envisages
phasing out of tariffs on all products except for a limited number of items in the Negative List over a
period of time.  While India will complete the process of tariff elimination over a period of
three years, Sri Lanka will achieve this in eight years.  Commonwealth preferences continue to beextended to Mauritius, Tonga, and the Seychelles.
V. CONCLUSION
78. The brief overview of the trade and other economic policy initiatives undertaken by India
during the last four years indicates India's firm commitment to a more open and liberal economy
which would help to realize the full benefits of the multilateral trade regime embodied by the WTO.India is committed to pursue and deepen its policies of reform in order to release its full economic
potential.  India realizes the fact that international trade is a vital part of development strategy, and it
can be an effective instrument of economic grow th, employment generation and poverty alleviation.
However, there is also an expectation that our trading partners in the WTO would take steps to
address those Indian concerns, which have tended to impede the country's market access.
__________