WORLD TRADE
ORGANIZATIONWT/TPR/M/33
22 September 1998
(98-3627)
Trade Policy Review Body
16-17 April 1998
TRADE POLICY REVIEW
INDIA
MINUTES OF MEETING
Chairperson:  H.E. Mr. Ali Said Mchumo (Tanzania)
Page
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON  2
II. OPENING STATEMENT BY THE REPRESENTATIVE OF INDIA  3III. STATEMENT BY THE FIRST DISCUSSANT    5IV. STATEMENT BY THE SECOND DISCUSSANT  7
V. STATEMENTS BY MEMBERS  9
VI. REPLIES BY THE REPRESENTATIVE OF INDIA
AND ADDITIONAL COMMENTS 20
VII. CONCLUDING REMARKS BY THE CHAIRPERSON  29WT/TPR/M/33
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I. INTRODUCTORY REMARKS BY THE CHAIRPERSON
1. The second Trade Policy Review of India was held on 16 and 17 April 1998.
2. The Chairperson welcomed the delegation of India, led by Mr. N. N. Khanna, Special
Secretary, Ministry of Commerce, and the discussants Ambassador Chak-Mun See (Singapore) and
Mr. Ric Wells (Australia).  As usual, both discussants would act in their personal capacities, and not
as representatives of their countries.  A summary of  the main issues to be raised by the discussants
had been circulated in advance in document WT/TPRD/D/18.
3. The Chairperson recalled the purpose of the Trade Policy Reviews and the main elements of
the procedures for the meeting.  The report by the Government of India was contained in documentWT/TPR/G/33 and that of the WTO Secretariat in document WT/TPR/S/33.  Copies of written
questions submitted by nine delegations, (Australia, Canada, European Union, Hong Kong, China,
Japan, New Zealand, Republic of Korea, Switzerland, and United States) had been transmitted to the
delegation of India.WT/TPR/M/33
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II. OPENING STATEMENT BY THE REPRESENTATIVE OF INDIA
4. The representative of India emphasized that  despite political fluidity, India's trade and
economic reforms had remained on course.  As a f ounder member of the GATT and the WTO, India,
moreover, attached great importance to the multila teral negotiating process and believed that the
rules-based system would create more stability and predictability, leading to greater trade and
prosperity for all participants.
5. India's trade reforms to date included a reduction of the "negative" list of imports and exports,
lifting of import licensing restrictions on capital goods and partial liberalization of consumer good
imports.  The outward-looking thrust of India's trad e policy had also recently been enunciated through
the Export-Import Policy for 1997-2000 with the objective of moving towards a "globally orientedvibrant economy" for achieving sustained economic growth.  Trade reforms had been complemented
by exchange rate reforms, including the unificat ion of exchange rates and the removal of exchange
controls on the current account.
6. Internal reforms had aimed at improving the co untry's infrastructure by involving the private
sector, such as in telecommunications, civil aviation, ports, power and highways; reducing the number
of industries subject to public-sector reservation and industrial licensing;  deregulating administered
prices in key commodities such as coal and petroleum; deregulation of the banking sector and capital
markets; reforms in the public sector; and expansion of the list of industries eligible for automatic
foreign direct investment up to 50% (mainly mining), up to 51% (mainly manufacturing) and 74%(mainly infrastructure-related sectors).
7. The reforms initiated voluntarily in 1991/92 ha d resulted in GDP growth rates averaging 7%
per year until 1996/97, a decline in inflation from 16% in 1991 to around 5% in March 1998, average
export growth of 20% between 1993 and 1996 and an improvement in foreign exchange reserves from
$ 1.5 billion in July 1991 to $ 24.45 billion in February 1998.  In 1997/98, however, a slight slow-
down was noted, with GDP and export growth falling to 5.2% and 3.3%, respectively.
8. The policies of the new Government, as set out in the National Agenda for Governance,
emphasized a review of all laws and regulations concerning industry, so as to remove bureaucratic
controls; the institution of a system of voluntary compliance with laws; speedy redressal of industrial
sickness; meaningful interaction between industry and government; and a revival of the capital marketas a viable and transparent mechanism for raising capital.  The Export-Import Policy, announced on
13 April, had been the first indicator of the new policy, which aimed to create a transparent and
competitive environment for exporters, including through a rationalization of export promotion
schemes.  The policy also continued to progressively reduce the number of products subject to
restrictive import licensing, moving 340 tariff lines to the list of goods free from import licensingconstraints;  84 tariff lines had been moved to the freely importable list earlier in 1997/98.
9. Even though India was committed to meeting its obligations under the WTO, developing
countries such as India faced difficulties in implementing these commitments, especially in new
disciplines such as intellectual property rights and services.  India expected its developed countrytrading partners, which had found it easier to switch over to the WTO regime, to be understanding and
sensitive to the problems faced by India in the implementation process.  There was particular concern
about the provisions relating to special and differential treatment for developing countries, many of
which needed to be more sharply defined and guidelines issued for their implementation.  For
example, Article 15 of the Anti-Dumping Agreement, which provided for constructive remedies to beexplored before applying anti-dumping duties where they would affect the essential interests of
developing country members, had never been implemented because it had not been clearly defined.
In the manner of implementation, there was hardly any distinction drawn between Article XII and
Article XVIII:B of GATT 1994.  Other areas of concern included region-specific protection, whichWT/TPR/M/33
Page 4
was provided to wine and spirits under relevant WTO provisions but not to developing country
products; and unjustified non-tariff barriers created by local health and environmental concerns, but
which did not have transboundary effects.
10. Looking at the forward agenda for reform, he urged industrialized trading partners to support
India's liberalization programme by ensuring open markets for Indian products and that all forms of
disguised protection were avoided.  A certain amount of redefinition and realignment might be
necessary in developing the workings of the WTO system.  For this it might be most appropriate to
concentrate on the issues and concerns arising out of the implementation of the Uruguay Round and
the built-in agenda of the Marrakesh Agreement and eschew contentious new issues.  But at the same
time international trade law, which the WTO sought to redefine and redevelop, had to evolve in a
dynamic fashion, through discussion and negotiation within the consensus based approach of theWTO.WT/TPR/M/33
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III. STATEMENT BY THE FIRST DISCUSSANT
11. The first discussant (Ambassador Chak-Mun See) focused on three areas:  (i) the reform
programme and its impressive results; (ii) trade policy reforms - shift towards export-orientation;  and
(iii) the role of foreign direct investment as a substitute for trade.
12. The discussant noted that the results of the programme of trade liberalization and economic
deregulation, initiated by India in 1991, were impressive on all accounts.  Maximum tariffs had been
reduced from 355% in 1990/91 to 45% in 1997/98, while the simple average tariff rate had been
reduced from 125% to 35%.  As a result of the Uruguay Round, 67% of India's tariff lines had been
bound, compared to 6% previously.   Exports grew by an average annual rate of 20% during the
period 1993-96.  India's share in world exports increased from 0.4% (1992/93) to 0.6% (1995/96).GDP grew by 7.1% in 1995/96 and 6.8% in 1996/97.
13. The objectives of this trade reform programme were to:  (a) derive maximum benefits from
expanding global market opportunities, (b) provide access to essential raw materials, components and
capital goods for domestic production, (c) enhance technological efficiency and improve thecompetitive strength of the Indian economy, and (d) provide consumers with good quality products at
reasonable prices.  However, this was not to be construed as a departure from India's traditional policy
of self-reliance and planned development, nor a ch oice between the market mechanism and planning,
but that the challenge was to effectively dovetail the two.
14. The remarkable growth in India's export sector, at least during the initial years of the trade
reform programme, appeared to have been a result of an export-oriented policy rather than an
outward-oriented policy.  Exporters were assisted by export incentives and an import licensing policy
designed to permit importation of component inputs and capital equipment for subsequent export.  By
and large, imports of consumer goods remained regulated.
15. However, the trade reform objectives did not appear to highlight the benefits of trade.  Given
the size of India's GDP, there appeared to be high potential for India to use external trade as an engine
of growth.  External trade still accounted for a relatively low share in the Indian economy (20% of
GDP).  Although this was higher than the comparative figure for Brazil (external trade accounted for
13% of GDP), this was much lower than some of  the more outward-oriented developing economies
such as Chile (44%), Korea (56%) and Malaysia (165%).
16. Trade could not be used as an engine of growth as long as the Indian Government maintained
a relatively high effective tariff rate, and a restrictive import licensing system which in most areas,
acted as import bans, as evident from the following: (i) 32% of the tariff lines were subject to import
restrictions; (ii) an effective tariff rate skewed towards 20-45%; (iii) a high level of tariff escalation;(iv) a rather complex tariff structure with five di fferent rates as well as a complicated tax exemption
system often linked to export performance requirements, and (v) an import licensing system which
implicitly placed ceilings on the products covered.
17. The policy of self reliance was also reflected in the low ratio of foreign direct investment to
India's GDP (1.5% in 1997).  However, control on foreign equity participation and the limit on
holdings by individual foreign investors had been relaxed.  The high level of tariff escalation, and an
effectively high average tariff rate combined with a restrictive import licensing system suggested that,
in India, FDI had acted more as a substitute for trade rather than a complement.  Moreover, as stated
in the report by the Secretariat, India's relatively high trade protection was likely to have reduced thepotential benefits of foreign direct investment by directing investment into globally uncompetitive
import-substituting markets.  It concluded that tr ade liberalization could be expected to reverse this
tendency and increase India's intra-industry trade.WT/TPR/M/33
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18. Another trade policy question related to fiscal policy.  The relatively high reliance on import
duties as a share of revenue (32% of Central Government revenue) in tandem with high public deficit
meant considerable fiscal constraints in future  trade liberalization programmes.  Expenditure on
subsidies still accounted for 14% of GDP, largely fo r maintaining food security, e.g. farm production
support, or for ensuring reasonable, low-level basic food prices for the vulnerable section of society.
19. The discussant noted that India had become a fairly active user of anti-dumping measures.
Thirty-seven cases were initiated during the period 1995-97, twice the number initiated during the
period 1992-95.  Apparently, the Foreign Trade Act and Customs Tariff Act were amended in order to
impose safeguard duties to protect domestic industries from the surge of imports, particularly in view
of currency depreciations in some of the Asian countries.  The report by the Government indicated
that if there was denial of market access to Indian goods, especially through the use of non-tariffmeasures, including anti-dumping actions by develope d countries, India would in turn "retaliate by
denying market access to outsiders".
20. Finally, he concluded that the domestic economy was still very much protected from foreign
competition, as evident from the relatively high average tariff rate and restrictive import licensingsystem.  It was unclear whether the pronouncements  by the newly elected Government, which pointed
towards a policy of domestic deregulation and selective opening of the Indian economy to foreign
direct investment in the areas of infrastructura l development and heavy industries, would eventually
raise expectations and hence economic pressures that might lead to a greater degree of openness of the
Indian market.  Moreover, as foreign trade occupied a relatively low share in the Indian economythere appeared to be a high potential for trade to act as an engine of growth both for the Indian
domestic industries and for the rest of the world, particularly the developing economies.WT/TPR/M/33
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IV. STATEMENT BY THE SECOND DISCUSSANT
21. The second discussant pointed out that an important result of the Uruguay Round was the
more effective integration of developing country trade regimes into the multilateral trade system.  In
this respect, the progressive liberalization of India's trade regime and its movement towards WTOnorms would be viewed with great interest.  In turn, India's determination to gradually remove its
quantitative restrictions, justified for balance-of-payments reasons, should be seen as a major
development in the multilateral trade system.
22. Trade liberalization in India had formed an integral part of broader reforms in its economic
policies.  This was evident from its policies with regard to trade, investment, intellectual property
protection and the use of subsidies.  However, progress had been slower than expected.  While theGovernment of India had aimed at achieving an average tariff of 25% by 1997, the average tariff rate
was currently 35%; liberalization of foreign investment in basic telecommunications had also been
slower than planned; and agriculture remained heavily protected.  In addition, trade liberalization had
not been consistent with greater liberalization in investment, creating a tendency for investment to be
a substitute rather than a complement to trade in some sectors.  In services, some sectors had beenmore liberalized than others.  He questioned the reasons for such uneven and sometimes slower than
planned liberalization.
23. In the agricultural sector, in particular, he believed that India continued to face serious
challenges, especially because the needs and costs of poverty alleviation were greatest in rural areas.Although there had been some reforms of minimum pricing and export restrictions, agriculture
remained tied up in a complex web of public distribution, credit subsidies, subsidized inputs,
minimum support and procurement prices, quantitative restrictions and import licensing, and high
bound and applied tariff rates.  He questioned whether the system, with enormous fiscal costs, was
working; whether the most effective way to alleviate poverty was through public distribution andminimum prices, which sometimes discouraged farmers from providing goods; and whether India
could afford the costs of subsidizing inputs to farmers.
24. He also pointed out certain discrepancies between restrictive trade policies in the sector and
actual industry conditions.  Notably, while India maintained restrictive import licensing on a large
number of agricultural products, and high tariff bindings, prices in India in most cases seemed to be
lower than international prices.  It was not clear, therefore, that India would face intense importcompetition if it liberalized its trade regime.
25. In the manufacturing sector, reform had clearly been more thorough and more successful,
including the removal of quantitative restrictions, reduction of tariff protection, and liberalized
investment conditions for important industries such as steel and electronics, which had developed intoefficient, outward-oriented industries.  Plurilateral efforts in the WTO to liberalize trade in
information technology goods would further improve the prospects of the electronics sector.
26. Reforms in other industries in the manufacturing sector, however, had been less thorough.
Investment conditions in the automobile sector had been liberalized to a greater extent than importrestrictions.  It was not clear why India retained import restrictions, given the success of domestic
suppliers in providing low-cost cars to the Indian market.  In the textiles and clothing industry,
although India was understandably concerned about restrictive trade regimes in its major markets, it
was questionable whether the best preparation for the full implementation of the Agreement on
Textiles and Clothing was a restrictive import regime.  More generally, he questioned whetherquantitative restrictions served India's needs better than tariff protection.
27. Uneven liberalization was also notable in the services sector.  In software for example, India
had developed an outward-oriented industry with few restrictions for foreign participants.  In banking,WT/TPR/M/33
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gradual liberalization had taken place with the consequent improvement in public sector bank
performance.  Given that India's foreign investment policy in the banking sector was more liberal than
its WTO commitments, he questioned why India had chosen not to bind its relatively liberal practices.
As in manufacturing, certain services sectors had been reformed more rapidly than others.  In
telecommunications, for example, the low telephone penetration rate in India made foreign investmentcrucial.  Despite this, most of the licences awarded were being disputed in court.  Insurance remained
a government monopoly and although the monopoly agen cies had been successful in providing good
geographical coverage of branches, competition wa s clearly needed to improve product development
and promote increased public savings.  He asked about the implementation of the Malhotra
Committee's recommendations.
28. Finally, he discussed discrepancies in India's regime for the protection of intellectual property
rights.  India was well advanced in providing protection to holders of copyright material, especially in
line with its own enormous interests in the audiovis ual and computer software sectors.  However, in
the case of patents, the situation remained more complex particularly for pharmaceutical and
agricultural chemical products.  Nevertheless, and irrespective of India's rights and obligations under
the TRIPS Agreement, it appeared to be in India's interest to improve its patents regime, especially to
encourage its pharmaceuticals industry to invest in new drug development.WT/TPR/M/33
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V. STATEMENTS BY MEMBERS
29. Delegations commended India on its economic reforms and liberalization programme
undertaken since 1991, and welcomed the Government's commitment to continue the liberalization
process.  India was encouraged to further open its markets to trade and investment, which would
greatly benefit its producers and consumers.  India had continued to demonstrate its strong
commitment to the multilateral trading system and ha d been an active participant in the WTO.  They
also thanked the Secretariat for its comprehensive report.
30. The representative of Canada noted that since 1991, India had embarked on a path of
liberalization and opening up of the economy to increased trade and foreign investment.  A trade
policy based on "greater openness" contributed directly to improved economic performance anddevelopment; this would appear to be confirmed by  India's own experience as it had achieved higher
growth rates since 1991.  The stronger economic fundamentals resulting from India's increased
openness also allowed it to remain largely unaffected by the financial crisis in Southeast Asia.
31. While Canada applauded the new Government's commitment to continue the reform process
as reflected in the National Agenda for Governance, the evolution of the reform programme to date
had tended to be export-oriented as opposed to outward-looking.  The reforms also appeared to
encourage foreign direct investment as a substitute for imports.  A balanced, outward-looking
framework,  including the removal of barriers on imports generally and not only those directly related
to subsequent exports, would reinforce the basis for sustained growth.  It was encouraging that thenew Government would continue to welcome fo reign investment in India's infrastructure.
32. The National Agenda for Governance stated that India would "carefully analyze the effects of
globalization, calibrate the process of it by devising a timetable to suit our national conditions and
requirements so as not to undermine but strengthen the national economy, the indigenous industrialbase and the financial and services sector".  Like all WTO members, Canada expected that any
decision to "calibrate the process" would be in  full compliance with India's obligations under the
WTO and with the bilateral agreements reached in 1997 on the removal of import restrictions.
33. While commending India for its tariff reforms over the last several years, which encouraged
the integration of India's economy, he noted that tariff rates remained relatively high.  It appeared that
the new Government might increase tariffs on various products when imported for domestic use orconsumption.  He encouraged India to continue reducing its tariffs, and to simplify its tariff structure,
including by reducing tariff escalation.  He welcomed India's decision to join the Information
Technology Agreement in March 1997.
34. Despite some progress on the tariff front, many goods could not be imported until import
licensing requirements were liberalized, and import bans lifted.  Canada reached a bilateral agreement
with India in late 1997 to phase out long-standing import restrictions related to prior balance-of-
payments concerns on the part of India.  The import restrictions (approximately 2,700 tariff lines)
generally took the form of quantitative restrictions and outright import bans.  The effect of this
agreement and similar agreements reached with some of India's other trading partners, would be toremove restrictions on these goods by March 2003, in three phases.  During the first and second
phases, India had committed to carry out the liberalization in annual tranches in a balanced manner on
a MFN basis.  Some 300 items had been liberalized under the recently announced Export-Import
Policy.  Canada would have to look at the details of India's recent announcement.  Nevertheless, many
products would continue to face import licences or quantitative restrictions.  Canada was looking toIndia to maintain its momentum on trade liberalization.
35. Canada encouraged India to continue to modernize its customs and import procedures.  Trade
facilitation was a key complement to international trade and economic integration.WT/TPR/M/33
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36. The representative of Canada expressed concern regarding the significant increase in India's
use of anti-dumping measures in recent years.  The strengthening of India's capacity to conduct
antidumping cases suggested that India foresaw an increase in its actions in this area.  While Canada
supported India's right to use the WTO mechanisms, he cautioned against allowing anti-dumpingmeasures to become a de facto  trade barrier or disincentive.  This would apply equally to safeguard
measures.
37. Canada welcomed India's accession to the WTO financial services agreement.  In the basic
and cellular telecommunications services sector, non-transparent bid methods and additional fees
added after the bidding process had frustrated Canadian firms' access to the market.  The TRAI, an
independent regulator of the Indian telecommunicat ions sector with wide-ranging powers, should
make the market more transparent, open and predictable.  The representative also noted that the Indian
insurance sector was completely in the hands of two government-owned monopoly providers.
Canadian insurance companies, which had been active in Indian before the nationalization in the
1950's, had renewed their interest and looked forward to the opening up of this sector to foreign
participation.
38.   The Canadian delegation had submitted several questions in writing and looked forward to
receiving responses.
39. The representative of New Zealand noted that despite the reforms undertaken by India since
1991, much remained to be done.  Little or no emphasis had been laid, for example, on reforms to
agriculture, import licensing restrictions on consumer goods, and export subsidies and incentives.
Although positive effects on trade in agricultural products were expected as a result of indirect effects
of non-agricultural reforms, the potential for long-lasting effects of trade liberalization in agriculture
were reduced or may not be achieved until that sector and related trade policies were reformed.  Heencouraged India to consolidate the gains made in the reform process thus far, extend the process to
the agricultural sector, and continue with parallel work on liberalization in tariff and non-tariff
barriers.
40. He noted India's concern at the high levels of agricultural subsidies in many developed
countries and the negative effect on developing countries.  Such subsidies artificially lowered the
world price of agricultural products - exactly those products that developing and least-developedcountries had a comparative advantage in producing.  He hoped that others would take note of this
concern and refine their policies accordingly.
41. His delegation had submitted several specific questions in writing and looked forward to
receiving responses.
42. The representative of Australia noted that India's economic reform process had led to
significantly faster economic growth, increased in ternational trade, and larger flows of inwards
foreign investment.  India could best ensure that this continued by renewing its commitment to
liberalization, and rejecting arguments for protectionism.  He was encouraged in this regard by thestatements of the new Indian Government.
43. He acknowledged the active role played by India in the WTO, and welcomed the
establishment in New Delhi of a special commerce secretary with responsibility for WTO issues.  He
hoped this would help to increase transparency of decision making and existing regulations affectinginternational trade and investment.
44. While India had made real advances in economic reform since the last trade policy review,
significant areas of concern remained.  The agricultural sector, for instance, was largely untouched toWT/TPR/M/33
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date, despite the commendable absence of export subsidies.  He urged India not to shirk from
extending its outward-oriented reform policies to this important sector; and in particular, urged India
to re-instrument its agricultural support policies.  The existing public distribution system and the
provision of support prices to farmers were costly to sustain in the long-run and detracted from trade
liberalization.
45. India had made advances in reducing its peak tariff rates since 1991 and a large number of
non-tariff import restrictions had been removed.  However, significant restrictions remained,
principally affecting imports of consumer goods.
46. In services, the banking sector remained fairly protected, and insurance even more so.  His
delegation had submitted several written questions related to this sector and looked forward toreceiving responses.
47. The representative pointed out that notification of an agreement with India on the removal of
quantitative restrictions had been lodged with the WTO.  While that agreement did not specify on an
annual basis the products from which quantitative restrictions were to be removed, India's annualExport-Import Policy provided some clarification as to the products covered.
48. An effective multilateral trading system was essential for India's increasingly export-oriented
industries.  India's support for further comprehensive multilateral trade liberalization would help
strengthen the WTO and the rules-based multilateral trading system.  It would also assist in increasingthe potential of Indian producers to export their goods and services, and improving market access for
the benefit of the Indian consumer.  To the exte nt that economic growth caused incomes to rise it
would also expand opportunities for India's trading partners.
49. The representative of Japan welcomed the new Government's commitment to continue the
implementation of economic reforms and liberalization policy initiated in 1991.  He encouraged the
Government to vigorously continue on this path in order to better integrate and benefit from the
international economic and trading system.  He also encouraged India to maintain its posture as an
influential and important WTO Member.
50. He expressed concern about the frequent use of anti-dumping measures as well as the
increased number of safeguard investigations.  Another concern related to the possibility of raisingtariffs to the bound level; the Government was urged to resist any domestic protectionist pressure.  On
tariffs, further reduction and simplification of the tariff system was needed, including in the textiles
and clothing sector where India was highly competitive.
51. In the context of the draft Budget, drastic measures were necessary to reduce the fiscal deficit,
which would be imperative for further trade liberalization, as well as the enhancement of
infrastructure.
52. He noted the important role of foreign direct investment and strongly urged India to create an
investor-friendly environment.  He sought clarification on the implications of the National Agenda forGovernance for the policy stance regarding foreign di rect investment in "core areas" and "non-priority
areas"; and of the statement in the Agenda "in the WTO we will assert more robustly India's national
interests".
53. He expressed appreciation for the agreement on the phase-out of the quantitative restrictions,
but urged India to provide Japan with necessary information on the dates of the implementation.WT/TPR/M/33
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54. Japan had submitted a number of written questions - including,  inter alia , issues related to
TRIMs and WTO-consistency, and intellectual property rights - and looked forward to receiving
responses.
55. The representative of Hong Kong, China welcomed the firm statement by the Indian
Government of its commitment to the multilateral trading system as well as its aim towards greater
openness.  Fuller participation by an increasing share of the Indian economy in the world trading
system, and liberalization of its own system could only be good for India.  He encouraged India to
speed up and deepen the reforms it had already embarked up on.
56. India had stated that its challenge was effectively to dovetail the market mechanism and
planning.  But the difficulty in ensuring efficient use of resources in that process was welldocumented in the report by the Secretariat and in his delegation's written questions.  He was
sympathetic to the challenges India faced in modernizing its economy, providing decent
infrastructure, weaning off subsides, and managing this process in a manner that its people would
support; and to some of the problems India had identified in accessing foreign markets.
57. He hoped that India would open up more of its sectors to the discipline of efficiency and
produce what the consumers wanted.  One specific area of concern was the increased use of anti-
dumping measures.  His delegation had submitted a number of written questions and looked forward
to receiving responses.
58. The representative of Switzerland noted that India's courageous policy since 1991 had led to
spectacular growth during the last few years, making it an important market for Switzerland.  He
welcomed the additional measures announced by the leader of the Indian delegation.  India needed,
however, to continue the reform process.  In light of high customs tariffs and around one third of
tariffs not subject to bindings, the recent decision to charge an additional 5% duty was of seriousconcern.  Non-tariff restrictions were slowing dow n or impeding the import of consumer goods.  In
addition the granting of licences was still too often dependent on the use of national products or the
obligation to export a certain determined quantity.  He hoped that these restrictions would be
progressively eliminated in the next few years.
59. In the area of investment, especially foreign direct investment, a gap still remained between
the sums announced and the sums realized and he hoped for an improvement.  He encouraged theIndian Government to continue the reforms as this was the best way to maintain effective growth and
to contribute to the development of the Indian economy.  He welcomed the answers to written
questions submitted by Switzerland earlier.
60. The representative of the European Communities stated that since the previous TPR, India's
trade policy had evolved in a positive direction, although from a low base.  The Indian economy and
its trade policy had moved away from a situation of central control, with policy objectives largely to
erect and maintain a system of autarchy.  As India's own report recognized, in an increasingly
interdependent world economy, trade liberalization was necessary and provided the right stimulus to
domestic competition, economic growth and social development.  The challenge for India was todemonstrate to a sometimes sceptical public that liberalization benefited growth, employment and
overall development.  Figures from the Secretariat's document could provide India with a good basis
for making this argument, notably that exports had led domestic growth, with the exception of 1997,
thereby functioning as an engine for economic growth.
61. As India's largest trading partner for many years, the European Communities welcomed these
positive developments in India's trade and economic policies.  Great importance was attached to
India's continued efforts at full implementation of the Uruguay Round Agreements, which would
improve transparency and consistency in India's trade policy and its trade with WTO partners.  HeWT/TPR/M/33
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was, however, concerned about the difficulties mentioned by the Indian representative, as well as
declarations made during the course of recent Pa rliamentary elections in India, which cast doubt on
India's continued acceptance of its commitments to the WTO.  He hoped that any uncertainties about
its intentions would be dispelled during the meeting; a policy of non-engagement by India would
discourage its trading partners to strengthen trade relations, which would not be beneficial.
62. Despite an important degree of liberalization, the trade regime remained extraordinarily
complex.  Major examples included the complex three-tiered import licensing system, further
complicated by a list of canalized products.  While the import licensing regime was supposed to
introduce a gradual liberalization, in practice its functioning could be considered distortive and a
barrier to trade.  The European Community had its doubts about how many products covered by
India's restrictions for balance-of-payments reasons were on the recently liberalized list of productsreleased by the Export-Import Policy.  He looked forward to seeing the full balance-of-payments
negotiations reflected in further liberalization of the licensing regime and a complete liberalization of
all items restricted for balance of payments reasons.
63. He also requested a detailed explanation of India's safeguard mechanism whose operative
criteria were far from transparent from the point of view of India's trading partners.  He also raised
concerns about export restrictions, such as those on raw hides and skins, whose compatibility with the
WTO was unclear.  Although procedural steps were  being taken to reduce bureaucracy and to smooth
the flow of goods, he wondered whether India's trade facilitation measures would work better if
matched by a comparable loosening up of the underlying restrictions.
64. A factor which added to the unpredictability of trading with and investing in India was the
existence of provisions that differed from state to state, including additional taxes resembling duties
levied at inter-state boundaries, implying that, for the movement of goods, India was not a single
market.  The Community urged India to ensure that all such legislation be applied on a uniform basisthroughout the country.
65. He referred to the satisfactory outcome of balance-of-payments negotiations based on the
Community's insistence that India no longer had a balance-of-payments problem, and which had set a
reasonable phase-out timetable for India to adapt its unduly protected sector s to normal GATT rules.
However, GATT Articles XX and XXI restrictions on around 600 items were less satisfactory; he
hoped that the Indian Government would either provide convincing justification for these restrictionsor abandon them.
66. On the issue of anti-dumping and countervailing measures, he did not contest the right of a
country to use such measures, provided they were in conformity with the WTO Agreements.
However, he was concerned about the failure of the Government to provide information regardinginitiations and outcomes of  investigations and on the handling of individual cases.  Although the
Community had taken up the issue bilaterally with India he believed that in light of its systemic
importance, it was an issue worth raising in this forum too.
67. Other trade related measures of concern included the use of trade-related investment measures
in the automotive sector, and he advocated the removal of any measures incompatible with the TRIMs
Agreement.  Although it was the prerogative of a developing country such as India to defer to a later
date the implementation of certain obligations, for example TRIPS, he nevertheless urged India to
establish a mailbox system as was required under the Agreement.  Another issue was a differentiated
corporate tax rate at 48% for foreign companies and 35% for Indian companies.  Despite aconsiderable increase in the number of tariff lines bound, and a substantial lowering of the simple
average effective tariff, a notable difference remained between the applied rate and the bound rate.
For the sake of predictability, a narrowing of this gap was called for.  He noted that in important
sectors such as telecommunications and financia l services, although Indian participation wasWT/TPR/M/33
Page 14
welcomed, India's commitments were rather limited so far.  He remained  convinced that further
comprehensive liberalization, rather than policies based on protection and restriction of trade, were in
India's long-term interest for economic development.  For this reason he hoped that the reference to
retaliation in the Indian statement did not reflect a change in heart of the Indian Government and
hoped for continued support for the WTO system.
68. The representative of the United States noted that India was an important trading partner and
commended India for its contributions during recent trade liberalizing negotiations such as the
Information Technology Agreement, the Global Basic Telecommunications Services Agreement and
the recent Financial Services Agreement.  She hoped that these agreements would provide improved
access for India's trading partners in these markets and expected India to benefit substantially from the
agreements and from expanding the scope and strength of trade rules under the WTO.  While Indiahad taken important steps to bring its regime into compliance with the WTO, its overall trade regime
remained among the most protectionist of all WTO Members, and much work remained for India to
fully implement its WTO commitments and to c ontinue economic and trade reforms vital for
economic growth and health.  It was critical for India to intensify reform efforts, address important
infrastructure bottlenecks and take appropriate actions to implement its WTO obligations and removeinconsistent measures.  An important challenge was also to address the human dimension of trade
through implementing and enforcing core labour standards.
69. She highlighted a number of concerns, including restricted access for foreign products and
services; bureaucratic obstacles to foreign investment; and other constraints to export and economicgrowth such as infrastructure bottlenecks; high fe deral and state fiscal deficits; a slowdown in trade
liberalization; substantial export incentives, leading to a misallocation of resources; little or no reform
in the agricultural and labour sectors; and a regu latory framework that did not support the foreign
investment sought by India.  Taken together, all these issues presented serious concerns that required
immediate action.
70. She highlighted the importance of labour and India's efforts to raise the standard of living for
its people.  Implementation and enforcement of internationally recognized core labour standards was
an important aspect of the human face of trade, to which Ministers at Singapore recently renewed
their commitments.  Although India had made strides in recent years in addressing labour issues,
concerns remained with the lack of implementation and/or enforcement of core labour standards,
notably with regard to child labour, forced labour  and the so-called informal sector, which by some
accounts, was responsible for as much as 98% of the workforce in trade, commerce and the
agricultural sectors.  It was hoped that India would take a lead on the work being done at the ILO on a
declaration on core labour standards and that the ILO and WTO Secretariats could coordinate on
providing technical assistance.  It was hoped that  India would fulfil its commitments on core labour
standards and inform WTO members of any steps taken in this direction.
71. On the Indian trade environment, in nearly all cases there were high barriers, including tariffs
and significant bureaucratic and regulatory barriers.  Moreover, while importers faced considerable
hurdles, exporters continued to be given broad and valuable export incentives.  Many of these barriers
and policies were questionable with regard to WTO consistency, including restrictive importprohibitions, licensing, and sanitary and phytosanitary measures for several basic agricultural products
and for the protection of intellectual property rights.
72. In the pharmaceuticals sector a denial of patent protection resulted in patented pharmaceutical
products frequently being reproduced in India without the permission of the inventor.  This, combinedwith rigid price control, ensured that companies th at invested significant resources to develop new,
advanced pharmaceutical products, stayed out of the Indian market, thus denying these products to
Indian consumers.  India's exports of textiles and cl othing to the United States had grown significantly
over the past few years, in part because India had guaranteed, non-competitive access especially to theWT/TPR/M/33
Page 15
U.S. market.  She questioned how India could justify tying duty levels to the integration process under
the Agreement on Textiles and Clothing (ATC).  The integration schedule was defined in the ATC
and was being followed.  In contrast, India's textil es market remained nearly closed to its trading
partners, with the industry remaining completely protected from competition.  In the automobile
sector, she questioned the consistency of India's ne w investment scheme, which included local content
and trade balancing requirements, with its TRIMs obligations.  In the services sector, the Indian
insurance market remained mostly closed to fore ign participation; the strong influence of the
government-owned monopoly telecommunications service provider restricted the value of
liberalization commitments made; and while India sought to improve market access to foreign
markets to its professionals, it limited access to its own market for foreign professionals.
73. Although India had made some progress since the last TPR, much remained to be done,
including an urgent need to address reforms in infrastructure, agriculture and labour, the trade regime,
quantitative import restrictions, promoting a supportive bureaucratic and regulatory environment to
facilitate the foreign investment it sought, and taking necessary steps to implement its WTO
obligations.  India had clearly benefited from the international trading environment and all the
Members of the WTO looked to India to play a leading role in further liberalization of trade andinvestment.
74. The representative of the Republic of Korea expressed his sincere hope of continued success
in the reforms.  He expressed concern, however, on a number of issues including tariffs, import policy
structure, procurement and others.  He highlighted two points in addition to written questions.Although the pace of liberalization in India had been rather slow, except for capital goods and raw
materials, the Indian Government had  initiated safeguard investigations on the grounds that
temporary increases in imports of liberalized items had occurred.  For example, in the case of imports
of carbon black for which a safeguard investigation was initiated, the Indian domestic industry had
claimed serious threat of injury.  However, such a threat had been difficult to identify since some of
the relevant Indian companies were still making noticeable profits.
75.  According to clause 11 of the Exchange Control Manual, maintained by the Reserve Bank of
India, all trade-related payments had to be made within six months of shipment, after which all money
transfers had to be approved by the Reserve Bank.  The result of this arrangement was that even if
Indian importers wanted to pay through a usance or a deposit account contract of more than 180 days,
they still required approval from the Reserve Bank.  He believed that this policy should be reviewedin order to eliminate any potential distortions.
76. The representative of Norway congratulated India on the excellent results of its programme: a
substantial increase in growth, and trade as well as a large inflow of foreign investment and an
improvement in  the balance-of-payments situation.  The core element of India's more liberal tradepolicy had been to progressively reduce tariff protection and relax and simplify the restrictive import
licensing regime.  However, India still had a considerable way to go.  The reforms had mainly focused
on liberalization of capital goods and inputs for domestic industry to encourage domestic and export-
oriented growth and not consumer goods.  Further liberalization of trade through reductions in tariff
and non-tariff measures would benefit India's economic development.
77. India's reform process should now be broadened in scope to address other fundamental
problems such as a lack of infrastructure, which hampered economic growth and should consequently
be at the top of the priority list, and  high levels of subsidy to various sectors.  India would also
benefit in the long run from investing more in primary education and health, enabling the lessfortunate sections of the population to benefit from improved employment opportunities created by
the economic and trade policy reforms.WT/TPR/M/33
Page 16
78. Reducing the public sector deficit, estimated at 8.5% of GDP, would be a challenging task;
he questioned whether this might influence the speed of liberalization since tariff reductions could
also lead to a reduction in government revenues.
79. A number of positive steps had been taken in the manufacturing sector, including a reduction,
from 18 to 9, of industries requiring compulsory industry licensing;  an increase in the number of sub-
sectors eligible for automatic approval for foreign equity participation; and a reduction in the number
of sub-sectors subject to price controls.  However, tariff escalation remained high in many industries -
including paper and paper products, printing and publishing, wood and wood products - as tariffs on
raw materials were substantially lower than those on final products.  He requested information on
further deregulation in these sectors.
80. He noted that all marine and inland fish were on the negative list of imports, which meant that
imports of these products were either prohibited or required specific import licences, or were
canalized via public sector undertakings.  A co mbination of a complicated and restrictive import
regime and high tariff duties had made it almost impossible for Norwegian exporters of these products
to penetrate the Indian market.  He therefore asked for clarification on the existing import regime forfish products and also for further simplification and relaxation of the present import regime in this
sector.
81. He noted India's increasing concern for core labour standards.  At a conference on child
labour organized by Norway in collaboration with ILO and UNICEF in Oslo in October 1997,representatives from Indian government bodies as well Indian NGOs provided information on
different projects to improve labour standards, particularly those related to reducing child labour.  He
underlined the importance of the on-going work in the ILO on core labour standards;  a declaration
was under preparation and he urged India to take a positive and constructive position on this issue in
accordance with the stipulations for WTO and ILO cooperation laid down in paragraph 4 of the text ofthe Ministerial Conference in Singapore in December 1996.
82. The representative of Indonesia, speaking on behalf of the ASEAN
 member States, noted that
India's continuing liberalization had created opportunities for domestic and foreign traders as well as
investors, particularly in infrastructure.  However, given India's potential the liberalization scheme
ought to be broader and pursued more rapidly to ensure the prosperity of its people.
83. India had steadily removed a large number of items from import restrictions since 1991.  This
was a very positive step and ASEAN believed that India would take further measures in this direction,
taking into account all economic factors and WTO commitments.
84. He sought clarifications on India's tariff regime.  First, he asked whether there were any plans
to address the high tariff escalation in certain industr ial sectors.  Second, he sought information on the
utility of the Special Import Licence (SIL) list and its WTO-consistency.  Finally, he noted that, under
its revised Export-Import Policy, India proposed to shift nearly 340 items from its restricted list to its
open list.  He requested information on the basis of decisions to transfer products between lists and
across lists as well as to any specific time-frames w ithin which such transfers were  to be effected.
85. The Secretariat Report indicated that India had become a fairly active user of the
anti-dumping mechanism.  In addition, five safeguard investigations had been initiated between
December 1997 and February 1998.  He requested India's view as to why there had been an increase
in the number of anti-dumping and safeguard investigations.  He noted that India's revised Export-Import Policy had established an anti-dumping di rectorate and asked whether India was expecting
more anti-dumping cases in the future.  He asked whether India's safeguard authority was also being
strengthened.WT/TPR/M/33
Page 17
86. Services contributed more than 40% to India's GDP and some headway had been made in
liberalizing certain sectors.  However, other sector s continued to attract low foreign participation and
were burdened by significant administrative barr iers.  ASEAN invited the Indian delegation's views
on this assessment.
87. Another ASEAN concern was the policy focus on liberalization of capital goods and inputs
for industry to encourage domestic and export-oriented growth; imports of consumer goods remained
regulated.  Moreover, the agricultural sector had remained relatively untouched by the reform
programme.  He requested confirmation on whether the number and the nature of the state-trading
agencies involved in importing agricultural products had changed since 1996 and whether they were
in compliance with Article 17 of GATT 1994.  Some ASEAN members had submitted written
questions of a technical nature and looked forward to written replies.
88. Finally, it was ASEAN's view that the issue of India's labour standards was beyond the scope
of the WTO; the issue was appropriately dealt with at the ILO.
89. The representative of Mexico noted that India's reforms had produced good results with high
growth rates, a reduction in inflation rates and an improvement in its balance of payments.  However,
he asked about the plan of the new Government to de crease the budget deficit, given particularly the
problems of economic restructuring facing India.  He also asked how the Indian authorities viewed
their policies on the exchange rate particularly in light of the situation in countries in Asia.
90. He noted that in the international trade regime, there had been an orientation towards
fostering exports.  He also noted, both from the statement from the Indian delegation and from actions
taken to eliminate 340 items from the negative list, that the new Government would continue to
simplify and liberalize its import regime.
91. The representative of Egypt noted that the Trade Policy Review of India acquired special
importance, because of India's weight in world trade as a developing country, and its active and
effective participation in the multilateral trading system.
92. The involvement of India in some dispute settlement cases could be considered a healthy
indicator.  India had reached solutions with some parties to the dispute on quantitative restrictions on
imports.  He hoped that the plan offered by India to remove those restrictions would satisfy otherparties.
93. He asked to what extent India benefited from bilateral and plurilateral preferential
agreements, and whether India saw these agreements playing a more active role in serving the
multilateral trading system.  He sought clarification on the Government's plan to address therelationship between the fiscal deficit, as a constraining factor to economic growth, and the large
share of subsidies in Government expenditure aimed at assisting the poor; he wondered to what extent
the private sector and the privatization programme could assist in this regard.
94. He stated that raising issues beyond the competence and scope of the WTO, such as labour
standards, would not serve the objectives of the Trade Policy Review Mechanism and these issues
should be raised in other competent fora.
95. The representative of Colombia pointed to the important role played by India in trade
liberalization in the textiles sector and its key role in the International Textiles and Clothing Office
(ITCO).  India had initiated a fundamental reform in its economic model in recent years generating
highly positive results for its economy, although there remained room to expand this process,
including the simplification of the various import licensing regimes.  Some Colombian exporters had
had difficulty in exporting certain products to India, for example nails for horseshoes, due to certainWT/TPR/M/33
Page 18
restrictions on imports and he sought the view of the Indian delegation on the matter.  He emphasized
the important role played by India in the institutional consolidation of the multilateral trading system
and said that its active participation in the various WTO bodies and its ongoing contribution made it
one of the principle players of this system.
96. The representative of Sri Lanka noted that despite several changes of Government since its
previous review in 1993, India's trade reforms had continued unabated, confirming its strong
commitments to the multilateral trading system.  His delegation welcomed the most recent
announcement to lift import restrictions on some 340 items, while addressing other sector specific
procedural problems.  It once again demonstrated the continuity of the reform process in India, in
keeping with its commitments under the multilateral trading system.
97. The representative of  Pakistan noted that as a result of India's structural reforms, including in
industry, foreign trade, the tariff structure, fiscal policy and the exchange rate regime, its economy
had sustained an average growth of around 7% per year since 1993/94.  Nevertheless, it was of
concern that the overall fiscal deficit remained hi gh at around 8.5% of GDP and there were signs of a
deceleration in the growth of exports.
98. Access to the Indian market had improved as indicated by the current average tariff rate of
35% compared with 71% in 1993/94, although the overall tariff structure still remained somewhat
cascaded.  He noted that, notwithstanding India's overall policy of liberalization, its import regime had
some complex features, and the future evolution of India's trade policy would be followed withinterest.
99. Although  some delegations had raised the issue of core labour standards, referring to it as a
trade-related phenomenon, the issue belonged within  the ILO forum and not the WTO, as agreed at
the Singapore Ministerial meeting.  He therefore believed that the issue by definition was excludedfrom any consideration in the present forum.
100. The representative of Hungary welcomed Indi a's revised Export-Import Policy showing that
the trade reform process would continue.  Hungary's experiences showed that consistent liberalization
was a major factor to maintain sustainable economic  development.  Hungary noted that India followed
the gradual trade liberalization approach commencing with industry, and preliminary processing
industries.  However, agriculture had so far fallen out of the scope of these reforms.
101. The Secretariat Report stated that over two thirds (68%) of imports were free, 10%  fell under
the Special Import Licence regime and 19% was done via state-trading enterprises.  He asked if these
categories covered all imports.
102. The representative of Brazil joined previous speakers in commending India's efforts in
proceeding with its trade liberalization programme.  Brazil understood the difficulties for a large
developing country of a complex political, economic and cultural nature in going through a
liberalization programme.
103. He noted that in 1997, 63% of the consultations made by Brazilian companies regarding
India's trade policy referred to products included in the restricted list of imports.  In light of Brazil's
private sector experience, he requested information about India's plans to remove of products of
interest to Brazilian exporters.
104. The representative of Nigeria commended India for the giant steps it had taken to strengthen
the economy since the last review.  He noted that the transition from decades of state-run economies
and monopolies to market economies, and of fulfilling WTO commitments, was an uphill task that
could not be achieved overnight.  Therefore, Nigeria urged trading partners to be sensitive to theseWT/TPR/M/33
Page 19
transition problems and to give developing countries more time for reforms to be undertaken.  He
noted that comments relating to core labour standards were not for the consideration of the WTO and
should be referred to the relevant body.
105. The representative of Cuba said that his country was a traditional trading partner of India and
was interested in enhancing its trade relations with India.  He was appreciative of India's successful
economic development recently with respect to its policies with minimum social costs.  He shared
India's concerns regarding the need to improve national and differentiated treatment concepts within
the WTO.  He also recognized the important role played by India in the multilateral trading system
and its leadership in questions of development, raised in the WTO and elsewhere.  He said that labour
matters should not be treated in the TPR exercise because, as already pointed out, this  was the remit
of the ILO.
106. The representative of the Dominican Republic echoed comments by the Indian delegation
regarding the major effort required of developing countries in adapting their policy and legislation to
WTO disciplines.  He expressed support for India's continued reforms, as well as an interest in
ensuring that the concerns of developing countries be duly taken into consideration in order to furtherstrengthen the multilateral trading system.  The initiation and continuation of reforms demonstrated
India's commitment as a founding member of bo th GATT and the WTO to fully comply with its
obligations.  On the matter of labour standards, he pointed out that the Ministerial meeting in
Singapore had made clear that these were not the remit of the WTO.WT/TPR/M/33
Page 20
VI. REPLIES BY THE REPRESENTATIVE OF INDIA AND ADDITIONAL COMMENTS
107. The replies by the representative of India were divided into three themes: (i) the economic
environment; (ii) import and export policy issues; and (iii) sectoral and other related issues.  Answers
to technical or specific questions would be complemented through additional written replies to besubmitted at a later stage.
(i) The economic environment
108. The representative thanked delegates for their kind words about the economic reforms and the
results achieved.  Several aspects of the reform approach were responsible for its success.  First, the
appropriate phasing and timing of economic reforms, such as consciously avoiding the “big bang”approach to economic reforms.  Second, the benefits and costs from each measure had been weighted
keeping in mind the social cost.  Third, reforms had made use of the broad political consensus for
removing controls and distortions of Government intervention.  The new Government reiterated its
firm commitment to removing impediments such as bureaucratic controls and outdated laws to
agricultural and industrial production and investme nt.  Finally, the emphasis had been on broad based
reforms, covering areas of production, investment, exchange rate, trade, direct foreign investment,
taxation, fiscal prudence, inflation control and the financial sector.
109. The incoming Government had expressed concern about the fiscal deficit. As India's private
saving rate was comparable to the high levels attained in East Asia, the best way to raise the nationalsaving rate was by increasing the public sector savings rate.  The Government desired to better target
the subsidies, which were a substantial element of the fiscal deficit.  However, the study on subsidies,
which had cited the figure of 14.5% of GDP as the le vel of subsidy, was not directly relevant to the
issue of fiscal control as it included implicit subsidies.  The Central Government's budgetary subsidy
averaged 1.3% of GDP between 1994/95 and 1997/98.
110. The discussants and several delegates had raised questions whether India's policy was export-
or outward-oriented.  The spirit in which these comments had been made was well taken but there was
a danger of getting into semantic arguments.  Export incentives in the form of remission of  taxes and
duties were pioneered by the newly industrialized  countries (NICs).  The Indian delegation had
themselves used the word globalization, which was somewhat wider than a strictly export or trade-
related policy; it included other aspects of interna tional policy such as exchange rate reform and
opening to foreign investment.  It had also been suggested that liberal and open trade regimes had
benefited India more than others.  However, India was one of the top 20 importers in the world, while
the record on the export side was not as favourable.  In this context, he noted that India's relatively
low ratio of trade to GDP reflected the fact that it was a large economy, which in general tended to
have a lower trade to GDP ratio.
111. The basic orientation of the new Export-Import Policy was towards enabling India to
maximise its international trade.  The list of items put on the free list of imports comprised 99 textile
items, 26 marine products, 49 agricultural products, with most of the remaining items being consumer
items.  The new policy also facilitated imports of capital goods at zero duty so that the manufacturinginfrastructure of the country was able to produce goods of international quality, and it facilitated duty
free imports of raw materials for export production by simplification of licensing procedures.  The
policy did not, however, provide for any export ince ntives as such but contained a few schemes for
neutralization of indirect levies on inputs used for exports.
112. Domestic deregulation, decontrol and removal of bureaucratic and legal hurdles to
entrepreneurship and growth were important elements of the domestic policy framework.  Among the
measures undertaken recently were: (i) the reduction of reservation of industries for the public sector
to six; (ii) only nine industries remained under the purview of industrial licensing; (iii) someWT/TPR/M/33
Page 21
deregulation of administered prices and distribution; (iv) continued decontrol of the banking system;
and (v) significant capital market reforms.  Tax reform had been an important element of the overall
economic reforms, while customs tariff reform had been driven by, among other things, the need for
replacing quantitative restrictions by tariffs and reducing the very high peak rates.
113. The Government encouraged foreign direct investment into core areas to overcome significant
bottlenecks, which were currently hampering economic growth.  Such areas would include, inter alia ,
power, telecom, ports, roads, airports, fuel, fert ilizers, cement, items relating to information
technology, particularly software, and metallurgical industries.  The Government was committed to
expediting the processing of foreign investment proposals and taking further steps to decentralise
decision making and approvals.
114. On anti-dumping and safeguard measures, India strongly believed in and supported the rules-
based nature of the WTO.  While recognizing the right of domestic industry to raise their concerns,
India was also conscious of the need to ensure that any preliminary or definitive duties were imposed
only in accordance with the provisions of GATT 1994.  An Anti-Dumping Directorate had been
created primarily to provide further transparency to the process of investigation and to expeditedisposal of cases.  Since the end of 1996, the domestic safeguard regulations had been formulated and
applications were put on hold.  Consequently, when the regulation was finalized a number of
applications were considered together, which should not be interpreted as unjustified protective
action.
115. In the area of services, the necessary structures were strengthened to derive the maximum
benefits from trade opportunities.  The purpose of the Telecommunication Regulatory Authority was
to regulate telecommunications services in a manner of openness, transparency, non-discrimination
and predictability.  Moreover, GATS specifically allowed countries, especially developing countries,
to undertake commitments they could fulfil.  The Government had to demonstrate in tangible terms
the benefits of such commitments to its citizens so that a supportive environment was created for
undertaking higher commitments in the future.
116. The first discussant noted the differences mentioned by the Indian delegation between explicit
and implicit subsidies.  He suggested that the Se cretariat also consider using trade weighted tariff
averages, rather than simple averages, in its trade policy reviews, as these might reflect tariff
restrictions more accurately.  A number of questions had not been addressed by the Indian delegation,including the physical constraints of further liberalization when tariff revenues constituted 32% of
total revenue; and the implications of and justification for quantitative restrictions, especially under
GATT rules.  On the question of India's trade policy stance, he agreed with the Indian delegation that
it was important to look at the general direction of liberalization within a dynamic rather than static
framework; there had been considerable change in the direction of Indian trade policies and he askedfor further elaboration on the new policy direction.
117. The second discussant agreed with the need to see trade reforms in the broader context of
general reforms.  Nevertheless, it was important fo r trade reforms to keep pace; comments had been
made on a disparity in the pace of investment and trade liberalization in some sectors.  He asked forclarification on how liberalization in manufacturi ng had reduced the bias against the agricultural
sector.  He also agreed with the statement made by the Indian representative that agricultural reforms
had not been fortuitous.  However, agriculture itself remained relatively untouched by the reform
programme so far.  On the question of import weighted tariffs he said that in the case of India the use
of import weights could ignore the fact that for many tariff lines there was no trade.  He suggestedthat the more important measure might be that India's tariff reductions had not kept pace with the
Government's plans and it would be interesting to hear the reasons for this.   He asked about plans for
implementation of the reforms mentioned by the Indian delegation.WT/TPR/M/33
Page 22
118. The representative of Japan believed that the Indian statement had been encouraging.
However, he hoped that the reform programme w ould not be "running out of steam" as recently
quoted in the IMF's World Economic Outlook.  He wondered how the Government was planning to
contain the fiscal deficit, projected in the recent budget to be over 6% in 1997/98, especially in light
of a commitment by the Government to invest in social programmes such as housing, food andeducation.  On the statement that foreign investment would be encouraged in "core sectors" and
discouraged in "non-core sectors" he asked for a definition of these sectors.  He also raised a specific
question regarding limitations on remittances of royalties for foreign investors.
119. The representative of Canada agreed that India had been correct in emphasizing overall
reform and its direction.  However, there remained a bias towards encouraging exports and investment
for import substitution, for example subsidies and related revenue forgone in promoting exports.  Heasked for clarification on a phrase used by the Indian Government in the National Agenda for
Governance on calibrating its current approach to the WTO.
120. The Secretariat clarified its position on tariff calculations.  It was pointed out that both kinds
of calculations, trade weighted and simple average tariffs, had benefits. As correctly pointed out bythe second discussant if only weighted averages were used they would miss out high rates, which
could be a barrier to imports as they are not counted so heavily in the average. On the other hand,
simple averages give a very simple impression of tariffs. There was also the question of which
weighting to use, for example, imports, production or world trade.  In the present report on India, both
weighted and simple averages had been quoted in the report. It was hoped that the process of tariffreduction was accurately and clearly set out.
121. The representative of New Zealand asked for clarification on the Indian response on
agriculture. Any protection, either in the form of subsidies or tariff protection, would imply that the
sector did not have comparative advantage, implying that when this protection was removed,resources would move into the sector with comparative advantage. He recalled his earlier point that
reforms in the manufacturing sector only scratched the surface as to the potential gains in efficiency
and competiveness that could result in the agricultural sector through more direct agriculture and
agricultural trade reforms.  He asked for a detailed reference to the World Bank study discussed and a
further elaboration from the Indian delegation on this point.
122. The representative of the United States said that her authorities were studying the list of items
recently moved from the restricted import licensing list to the free list by the Export-Import Policy,
and its implications for U.S. industry, and were awaiting the second section of the phase out.  She also
requested a response from the Indian delegation on questions raised by the discussants on import
licensing.
123. The representative of the European Communities agreed that the reforms were in the right
direction, but felt that they were not as broad-based as expected and continued to distinguish between
sectors, for example, in investment; and TRIMs in the automobile sector.  Tariff reforms had been a
positive development, although a distinction was made between goods considered essential for Indian
industry and non-essential items such as consumer goods.  In addition, the large gap between India'stariff bindings and its applied rates created uncertainty for exporters especially because it allowed the
Government to change certain tariffs (e.g. for newsprint from 0% to 25% recently), within the
bindings.  Finally, he continued to question discriminatory treatment on taxes which could be a
potential problem concerning national treatment.
124. The representative of Mauritius emphasized the relationship between the flow of foreign
direct investment and the development needs of a country such as India, whose major policy goal
should be to uplift the masses.  In this, India was justified in having priority and non-priority sectors
for investment.WT/TPR/M/33
Page 23
(ii) Import and export policy issues
(a) Phasing out of quantitative restrictions and import licensing
125. The representative of India noted that the new list of freely importable items mostly
comprised finished products and consumer goods, cutting across various sectors.  Therefore, India's
trade liberalization could no longer be described as selective or biased towards consumer goods.
126. Regarding the licensing system, he pointed out that India maintained two types of import
licences.  The one for duty-free imports, which was in place for the purpose of accounting, was issued
on an automatic basis.  The licensing applications for items on the restricted list were considered bythe Special Licensing Committee.  While consumer goods for purely consumption purposes were not
allowed, licences for items required for market testing or market seeding prior to the setting up of
manufacturing facilities within India were issued almost automatically.
127. The Special Import Licences (SILs) had been de signed as an instrument to facilitate the
shifting of various products from restricted to open category and to cushion the impact of sudden
freeing of those lines.  SILs, which had a duration of one year, were granted to exporting companies
irrespective of whether they were Indian or foreign.
128. He also pointed out that India's restrict ion based on non-balance-of-payments reasons had
been notified to the WTO.
(b) State trading129. Even a small percentage variation in the demand or the supply of canalized items (such as
petroleum products, fertilizers, edible oils, and cereals) could cause widespread distress; reliance on
an entirely free market was considered an extremely risky proposition.  He stressed that the product
coverage under State trading had not expanded.
(c) Export subsidies130. The Export-Import Policy had not provided for any subsidy.  However, in the absence of a
uniform system of VAT across States, schemes had to be formulated to relieve the exporters of the
incidence of indirect levies at the Central level and these schemes were sometimes misunderstood as
subsidies.
(d) General issues131. The representative responded to a number of specific issues.  First, he stressed that the
import-export code number requirement was a registration formality; the code was provided within
less than a week.  Second, minimum export prices were only applicable in respect of two tariff lines
(stone boulders from West Bengal to Bangladesh and coir from Kerala to Sri Lanka).  Third, thepurpose of a Public Notice was to give effect to any policy change which may become necessary
within the parameters of the Export-Import Policy .  Fourth, the basis for restrictions imposed on
grounds of safety and security was maintenance of law and order.  Finally, second-hand goods were
subject to an actual-user condition, in order to ensure that the imported goods were not sold on to
others.
132. The representative of Japan asked for clarification on the role of the Foreign Investment
Promotion Board (FIPB) and rumours that it was being abolished, as well as further details on the role
of the newly formed Tariff Commission.  He raised questions about internal trade and distribution,WT/TPR/M/33
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from which foreign companies were excluded, and hoped that the decentralization of issuing licences
announced recently in the Export-Import Policy would not give States arbitrary powers to favour local
producers.  He noted that India had recently taken a number of safeguard measures and hoped that
these investigations would be WTO consistent.
133. The Australian representative thanked the Indian delegation for clarification on public
notices.  However, a number of questions remained, including clarification on a large number of
agricultural items whose import remained restricted by quantitative restrictions, which were not
related to security or environmental concerns.  More details were also sought on the extent of private
activities in canalized goods, the items covered, limitations on product coverage and also any future
plans on de-canalization of these goods.   With reference to India's intentions to renegotiate some of
its tariff bindings under Article 28, Australia asked whether the Indian delegation could clarify whenthe Government would be ready to commence those negotiations. On the special duty rate of 5% she
asked what would happen after March 1999 and whether there was any scope for tariff removal on
certain items, especially where nominal tariffs were already very low.  Australia also sought
clarification on the final terms of reference of the Tariff Commission.
134. The representative of Canada reminded India of the need to answer its outstanding questions
on canalization, which had been submitted in writing.  He also sought clarification on the temporary
surcharge of 5% and the date of its removal. Further questions were asked regarding the effective date
for the recent Export-Import Policy changes, whether India considered reviewing its import
requirements and the use of international carnets with regard to products temporarily imported.  Withregard to export financing he asked who absorb ed the difference between the administered export
financing rate of interest and the market rate of interest.
135. The Chairman responded to the issue of answers to questions submitted in advance: given the
lack of time to provide complete answers during the meeting, he was sure that India could provide
outstanding answers within one month of the meeting.
136. The representative of the United States asked how countervailing duty, as defined by India,
was calculated.(iii) Sectoral and other trade related issues
(a) Agriculture137. The representative of India stated that almo st three quarters of the population was dependent
on agriculture for their livelihood.  While reforms had taken place in the agricultural sector, the pace
had been carefully calibrated so as to evaluate possible ramifications.  Examples of recent reforms inthe sector included improved public distribution and support price systems to take into account the
interest of both producers and consumers; relaxation of restrictions on movement of food grains
across the Indian States; removal of restrictions on agro-processing units; increased public
investment; and some agricultural products were front-loaded in the proposed phase-out plan on
quantitative restrictions.  Agriculture had also benefited from other reforms, including the reduction ofhigh tariffs and of controls on imports of manufactures.  India's draft Agricultural Policy Resolution
sought to expedite the process of reforms.
138. India's domestic support measures continued to be below the de minimis  level; a formal
notification would be submitted shortly.
139. Regarding the effect of subsidized inputs on the sector's performance, agricultural crop
production had increased as a result of increased usage of fertilizers; similarly, the provision of creditsWT/TPR/M/33
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had also helped the small and marginal sector to move away from purely subsistence farming towards
generating surplus production.
(b) Services
140. Responding to questions raised concerning future plans in the insurance sector, the
representative of India stated that reforms would be considered by the new Government.
141. With regard to the banking and non-banking financial sector, within its quite liberal
framework, India had granted 15 licences to foreign banks to open maiden branches and for expansion
in 1996/97.  Foreign banks were allowed to undertake all activities undertaken by Indian banking.
India had not made any market access commitment in regard to foreign equity in new banks, as it hadbound only branches.  In the area of non-banking financial services, India had made commitments in
six areas, with majority participation committed in five sub-sectors.  India's offer in financial services
could be considered substantive as it had offered market access bindings.
142. With respect to telecommunications services, two letter of intent for basic services were
pending in the courts and six companies had signed the licence agreements.  Companies operating
cellular mobile telephone services were permitted to have foreign equity up to 49%; it was noted that
India may consider increasing its current commitment of 25%.
143. Removing infrastructural bottlenecks had been another key component of the trade reform
programme: new guidelines allowing private participation in ports had been issued; fresh guidelines
for private investment in the highway sector had been announced; approval had been given for a rail
based mass rapid transit system in Delhi; and a new civil aviation policy for private investment had
been announced allowing 40% foreign equity in domestic airlines.
144. Under the existing law, before chartering a foreign flag vessel Indian traders had to offer first
rights of refusal to Indian shipowners for availability of ships at competitive rates.  The trader was at
liberty to charter a foreign flag vessel if a ship was not available or if the freight quoted was higher
than the market rate.  The question of chartering arose only when traders also undertook the
responsibility of transportation.
145. Responding to questions on India's commitments in the area of professional services, these
were restricted to engineering services.
(c) Textiles and clothing146. It was painful for India to hear that it was protecting its textile and clothing sector; the phase-
out plan had been improved, including the front-loa ding of various products.  India was not in favour
of the quota system, and did not seek any guaranteed quotas in the international market.
147. On hides and skins, exports were restricted due to domestic shortage; the authorities had not
received any export applications for these goods.
(d) Automobile industry148. With regard to questions on imports of CKD/SKD, these were freely importable, subject to
certain conditions; importers were required to set up a plant and an assembly unit.
(e) StandardsWT/TPR/M/33
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149. In order to develop harmonized standards at the national level, six sectoral Coordination
Committees (SSCs) had been established.  The exte nsion of compulsory product certification schemes
for imported products was under consideration by the Government.  The list of 136 products for
which certification was compulsory as well as the list of the harmonized standards with ISO/IEC and
EC standards were available for interested Members.  In addition, in response to questions raisedabout the Eco Mark, he indicated that as there had not been significant consumer demand for the Eco
Mark, the success of the scheme had yet to be established.
150. BIS made no notifications of mandatory standards in 1997 since none were prepared in that
year.  With regard to ISO committees, BIS had par ticipated actively in about dozen such committees.
However, due to various constraints regarding participation, the BIS had found it difficult to influence
decisions in these committees.
(f) Intellectual property rights151. The procedure for the "automatic licence of right", was that, in respect of invention no patent
could be grated for (a) substances intended for use, or capable of being used, as food or as medicine ordrug, or (b) relating to substances prepared or produced by chemical processes (including alloys,
optical glass, semi-conductors and inter-metallic compounds), however claims for the methods or
processes of manufacture should be patentable.  Any person could approach the patentee for grant of
the licence for working the patented invention in I ndia on mutually agreeable terms.  If the parties
were unable to agree on the terms of the licence, either of them may approach the Controller ofPatents.  The Controller decided the terms on which the patentee was required to grant the licence.
The appropriate authority could apply to the Controll er to issue an order to endorse any patent with
words "License of Right" at any time after expiry of three years from the date of sealing.
152. A general indicator of the term "reasonable price" was the purchasing capacity of the public
with reference to that product and the margins av ailable to the manufacturer.  In the context of
granting compulsory licences, a compulsory licence was issued when, inter-alia , the reasonable
requirements of the public had not been satisfied or the subject of the invention was not made
available at a reasonable price.
153. Regarding legislation for protection against infringement of well known trade marks, the
Trade and Merchandise Marks Act 1958 did not define the term, but it provided for defensiveregistration of well known trade marks.  Apart from the rights vested in a registered proprietor,
defensive registration had two special characteristics: (i) the mark could not be removed on the
ground of non-use, and (ii) the mark could not be licensed to a registered user.
154. With regard to the formulation "in accordance with the relevant laws of the Contracting
Party", India felt it necessary to incorporate it in bilateral investment protection agreements because
there was no internationally accepted definition of intellectual property rights.  There was no
intention, however, to limit the scope or circumscribe the level of protection granted to intellectual
property rights through the use of such a formulation.
155. The matter regarding accession to the Paris Convention was under the consideration of the
Government.
(g) Others
156. Responding to questions related to core labour standards, the representative of India noted
that as agreed at the Ministerial Conference in Singapore the ILO was the competent body to deal
with these issues.  Therefore, it was not appropriate to  deal with issues related to core labour standards
in the WTO fora.WT/TPR/M/33
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157. The representative of Canada thanked India for some written responses provided to questions
and asked that these be made available to all the members of the TPRD.  He again reminded India of
outstanding questions posed on technical barriers to trade, Government procurement, oilseeds and
telecommunications services.
158. The representative of Japan expressed his Government's doubts that India's new automobile
policies were consistent with WTO obligations  and asked whether India could provide legal
justification for its new policy in this industry. He urged the Government to notify fully its balance-of-
payments agreements with Japan.
159. The representative of the European Communities maintained that his delegation held a
strongly differing view on the motivations of some policies and their conformity with India's WTO
obligations.  Examples of these differences, included India's policy on automobiles and justifications
under TRIMs; quantitative restrictions under Articl es 20 and 21; and TRIPS.  In addition, there had
been modest participation by India in the negotiations on services; and gaps between commitments
and applied rates, which created unpredictability for traders.
160. The representative of Australia welcomed the recent de-restriction of 49 lines in agriculture in
the recent Export-Import Policy statement bringing the total agricultural lines on the free list to 91.
She pointed out, however, that more liberalization needed to take place in the agricultural sector
before it could be said that the sector was not protected.  The sector was also a serious drain onGovernment resources and its efforts to liberalize its trade regime.  She looked forward to receiving
written responses to outstanding question on agriculture and services, and regarding regional trade
agreements, she asked whether SAFTA would be broadened to cover services.
161. The representative of Norway asked about Norwegian marine products and their absence
from India's negative list notification to the Committee on Balance-of-Payments Restrictions.  In the
petroleum sector, he noted that while the new policy had tried to increase domestic production of
petroleum by inviting foreign investment for exploration, there had been a modest response from
foreign companies, suggesting that the terms of investment may not be sufficiently attractive.  He
asked for India's assessment of the situation and whether the conditions would be improved for
foreign-owned companies in the sector.
162. The representative of the United States noted that outstanding questions remained on risk
assessment for soybeans, oilseeds and other agricultural restrictions; intellectual property rights
protection and price controls in the pharmaceutical sector, textiles and clothing; and local content and
trade balancing requirements in the automobile sector.
163. The representative of Korea mentioned that there was no answer to the question regarding the
import payment approval system of the Reserve Bank of India and asked again for even a brief
response.
164. The representative of New Zealand thanked India for foreshadowing its intention to notify its
domestic support measures for agricultural and its willingness to provide detailed information on the
frontloading of quantitative restrictions after the meeting.  He also welcomed India's accelerated
support for its agricultural infrastructure.  Efficiency gains had been made in agriculture from reforms
in manufacturing and in trade but long lasting effects in agriculture could only come from direct
reforms.  He therefore urged India to continue its import licensing reforms.  He also pointed out thatthe free list meant free of quantitative restrictions only, as tariffs continued to apply to products on
this list.  He looked forward to receiving written responses to questions posed earlier.WT/TPR/M/33
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165. The representative of Hong Kong, Chin a requested written answers on a number of
outstanding questions concerning the special import duty, tariffs and additional duties and regional
trade agreements.
166. The representative of Thailand, speaking on behalf of the ASEAN  countries thanked the
Indian delegation for its presentation and requested outstanding responses.  He also asked that written
responses be circulated to all TPRB members.
167. The representative of Switzerland requested answers to its questions on the control of prices
in the pharmaceutical sector.168. The representative of the European Communities noted that divergences of view between
Members was evident from time to time and it was an important part of the TPR exercise to clarify
and convey these differences.  He pointed out that India should take this as encouragement to continue
its reforms.
169. The representative of the United States acknowledged that the ILO was the competent body
for discussion of the issue of core labour standards;  the issue was mentioned at this meeting because
the United States wished to see India making progress.  Moreover, while the Singapore declaration
referenced the competence of the ILO and that the WTO and ILO would continue their existing
collaboration, the declaration did not, as India has alleged, prohibit members from making comments
about core labour standards at the WTO.VII. CONCLUDING REMARKS BY THE CHAIRPERSON 
170. The second Trade Policy Review of India was conducted by the TPRB on 16-17 April 1998.
These remarks, prepared on my own responsibility, are intended to summarize the main points of the
discussion and not to be a full report.  Details of the discussion will be reflected in the minutes of themeeting.  Participants raised a large number of questions in writing.  The representative of India
provided written replies in the context of the meeting and undertook to supply further details as
necessary.
171. The discussion developed under three main themes: (i) the economic environment, (ii) import
and export policy issues and (iii) sectoral issues.
(i) The economic environment
172. Members commended India for the pursuit of its economic reforms initiated in 1991, which
had contributed to healthy economic growth.  Howeve r, in the light of the fiscal imbalance, the
sustainability of this economic performance was queried;  it was suggested that comprehensive taxreform and a reduction in subsidies would be desirable to reduce the fiscal deficit.  On the structural
front, infrastructure services were identified as a severe bottleneck to trade and growth;  Members
encouraged India to promote further investment in these areas.  It was also emphasized that trade
liberalization would assist further effective agricultural reform.
173. It was noted that in recent years the overall policy stance appeared to focus on export-
orientation, rather than more general outward orie ntation.  Clarification was sought on whether the
recently announced Export-Import Policy reflected a continued emphasis on exports or a more neutral
policy orientation.
174. Some members noted that, in India, liberaliza tion of foreign investment in combination with
restrictive import licensing could mean that invest ment substituted for trade, rather than being a
complement to it.  Further liberalization of the trad e regime was, in their view, essential for attracting
the right kind of foreign direct investment.  Cl arification was sought on the discrepancy betweenWT/TPR/M/33
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approved and effective foreign investment;  increas ed transparency in the approval mechanism was
seen as necessary.
175. Several members sought a statement of the new Government's commitment to ongoing reform
and the promotion of competitiveness through more open import policies.  Some members questionedthe implications of the new Government's National Agenda for Governance for protection of local
industry, as well as the policy stance regarding in vestment in "core" and "non-core" areas.  It was
stressed that internal deregulation could complement the trade liberalization process.
176. In reply, the representative of India described the scope and context of India's economic and
trade reforms and reiterated the new Government's commitment to the reform process.  Trade,
investment, tax and exchange reforms were all important elements in the process.  The removal ofinfrastructural bottlenecks was a priority commitmen t, being addressed by streamlining procedures for
foreign investment and decentralizing decision-making.  The problem of the fiscal deficit was being
addressed, inter alia , by efforts to increase public sector savings and better targeting of domestic
subsidies.
177. The new Government was committed to liberalization within an open, equitable multilateral
trading system.  The new Export-Import Policy, oriented to enabling India to maximize its
international trade, provided for further liberalization, greater transparency, and simplification of
import procedures. Domestic deregulation, tax reform and foreign investment reforms complemented
the trade reform process.
(ii) Import and export policy issues
178. Members complimented India for its tariff reform, under which the simple average rate had
fallen from 71% in 1993/94 to 35% in 1997/98, with a weighted average of 20%.  However, concernswere raised regarding the complex structure of the ta riff system;  the distinction in treatment between
capital goods and inputs, on one hand, and consumer goods on the other;  and remaining tariff
escalation in several industries.  Some Members sought clarification about the time-table for
elimination of the special rate of 5 percentage points.  Noting significant gaps between WTO bound
rates and MFN applied rates in some areas, several Members asked if there were plans to bind closer
to applied rates;  they also raised concerns about India's proposals to renegotiate some of its bindings.
Members noted that import duties constituted a large share of Government revenues and thatcontinued tariff reductions, complemented by tariffication of import licensing, could contribute to
raising revenue.
179. Members noted that, since the previous review, the number of items subject to import
licensing had decreased;  some restricted items had also been liberalized by permitting theirimportation through freely transferable Special Import Licences (SILs).  However, this liberalization
was mainly applied to capital and intermediate goods, while most consumer goods remained subject
to import licensing.  Some members noted that the SI L, which can be sold at a premium of some 15%,
may be perceived as an export subsidy.  Details on the phase-out plans for quantitative restrictions
negotiated with several WTO Members were sought.
180. Information was requested on plans to reform India's various export assistance schemes
(including exemption from income tax, export finance at below-market interest rates, guaranteed
access to a minimum of 10% of commercial bank net credit, export insurance and guarantees, access
to a wide range of export promotion and marketing assistance schemes, and import access to restricteditems).  The WTO consistency of the income tax exemption was questioned.
181. Some members noted that India had become an  active user of anti-dumping procedures, and
was even strengthening its capacity to conduct anti-dumping investigations.  In addition while noWT/TPR/M/33
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safeguard measures had been enforced up to the end of 1997, India had recently initiated several such
investigations;  Members asked if it was the new Go vernment's intention to continue using safeguard
measures.
182. Some members requested information regarding India's state trading system, including
reasons for the increased coverage of products subject to state-trading, and concerning plans to
modify or remove privileges granted to state-trading agencies.
183. Some delegations noted that India's industries could benefit from more effective intellectual
property protection, and asked about the time-table for bringing intellectual property legislation into
line with the TRIPS Agreement.
184. In reply, the representative of India noted that the phasing out of QRs was proceeding
according to a six year programme;  he gave an explanation of the import licensing system and the use
of SILs.  Items recently added to the free list included 99 textile items, 49 agricultural items, 26
marine products, with most of the balance in co nsumer goods.  All capital goods, assemblies, etc.
were already in the free list.  Reduction and rationalization of tariffs was also an integral part ofIndia's trade liberalization.  The simple average tariff had fallen to 35%, but the import-weighted
average had declined from 87% in 1990-91 to 20% today, even taking into account the temporary
duty of 5%.  Applied tariffs were maintained well within bound rates.  He described the tariff-setting
process, including the recent establishment of the Tariff Commission.  The new Export-Import Policy
facilitated imports of capital goods at zero duty as well as raw materials for export production.  Thenumber of exemptions had been substantially reduced and the simplification of tax laws was an
ongoing process.  Negotiations for revised bindings under Article XXVIII were related to tariffs
bound at historically low levels.  Liberalization of industrial licensing and administered pricing,
decontrol of banking and capital market reforms were important domestic complements to trade
policy reforms.
185. India remained committed to a rule-based multilat eral trading system;  in this context, India
regarded safeguard and anti-dumping measures as an integral part of the WTO system.  The Customs
Tariff Act had been amended in early 1997 to provide for GATT-consistent safeguard procedures;
there had been a surge of safeguard actions following this measure.  The Government had also set up
an independent Directorate of Anti-Dumping, primarily to provide transparency and independence to
the process and expedite cases.
186. India's investment policy was to encourage FDI in core areas, to overcome significant
bottlenecks;  such areas included infrastructure, fu el, fertilizers, cement and information technology.
Improvement of implementation was a clear priority and India's attraction for FDI was increasing.
187. He gave details of the standard-setting process in India and the extent of harmonization of
Indian with international standards, incl uding in health- and food-related areas.
188. The representative outlined India's traditions in knowledge-related areas and recalled that, as a
developing country, India had until 1 January 2000 to bring its intellectual property laws intoconformity with the TRIPs Agreement, and until 1 January 2005 to extend product patents to areas of
technology not protected so far.  He gave details of licensing procedures under patents, "reasonable
price" conditions and protection of well known trademarks.
189. India had no export subsidies;  exports were disadvantaged by the wide range of national,
State and local taxes.  Policy sought to neutralize these handicaps through permissible means.
Minimum export prices for wheat and coarse grains had been abolished on 13 April 1998.WT/TPR/M/33
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190. The representative believed that state trading for a few items of mass consumption (such as
petroleum products, vegetable oils and cereals) was inevitable in view of the level of production,
seasonal variations, the size of the domestic market and social sensitivity.  The list of items under
canalization was shrinking, not expanding.  Canalizi ng agencies were independent corporate entities
with full authority to function as independent commercial organizations;  import or export ofcanalized items could also be effected by private businessmen in consultation with canalizing
agencies, and in some cases exceeded those of the agencies.
(iii) Sectoral issues
191. Some members stated that the agriculture sector in India had been almost unaffected by the
reform process.  It was suggested that the public distribution system, with minimum prices, was adisincentive to agricultural development and an ineffective means of poverty alleviation.  Some
delegations urged India to extend outward-oriented reform policies to agriculture.
192. While noting that important trade policy reforms had been pursued in manufacturing, some
members noted the continued wide application of import licensing in textiles and clothing, whichconstrained Indian producers in improving productivity and preparing for a more liberal world
market, as envisaged in the WTO Agreement on Textiles and Clothing.  Some members questioned
the consistency of India's export bans on leather, hides and skins with WTO provisions;  they also
noted that certain local-content measures and trade balancing requirements in the motor vehicles
sector included in recently concluded Memoranda of Understanding between the Indian Governmentand car manufacturers, could be inconsistent with India's WTO obligations.
193. The role of the services sector in supporting many economic activities was noted;  however,
Members took note of the uneven pattern of liberalization in this area.  While banking had been
gradually liberalized, insurance was still closed to foreign participation.  Members also noted thataccess for foreign suppliers in basic telecommunications services had been implemented more slowly
than planned and that many licenses awarded were being disputed in the courts.  Members asked
about plans for further liberalization of the services sector and welcomed India's active participation
in the recent negotiations.
194. In reply, the representative if India recalled that more than 70% of the population was directly
or indirectly dependent on agriculture for its livelihood.  Production had increased thanks, inter alia,
to improved use of fertilizers and increased access to credit.  The pace of reform had been, and had to
be, carefully calibrated;  however, the direction was clear and both liberalization and other reforms
had been introduced in agriculture, including frontloading of some agricultural products in the
proposed phase-out plan for quantitative restrictions, removal of restrictions on agro-processing units,
acceleration of infrastructural investment, improving the public distribution system and reforming thesupport price system to take into account the interests of both producers and consumers.  Agriculture
had also benefited from other reforms, including the reduction of high tariffs and controls on imports
of manufactures.  India's domestic support measures continued below the de minimis  levels and no
export subsidies were being provided at present.  India's draft agricultural policy resolution, currently
under finalization, sought to accelerate the process of liberalization and reform.
195. Regarding textiles and clothing, he noted that very few restricted items had yet been
integrated into GATT by developed country members, resulting in lower export earnings than
anticipated when India agreed to the ATC.  India had included textile and clothing items in its phase-
out programme for import restrictions;  99 tariff lines had been liberalized to date.
196. He stated that the MOU policy for automobile investment has been framed to create a level
playing field for all foreign investors;  import licensing procedures for CKD/SKD cars by foreignWT/TPR/M/33
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automobile companies had been liberalized to pr ovide the companies unlimited access to such imports
in return for certain minimum criteria.
197. Exports of hides and skins were restricted because of a domestic shortage owing to
socio-cultural and religious reasons.
198. The representative emphasised the importance of services in promoting economic growth.
Commitments were in line with the GATS provisions which seek to achieve progressively higher
level of liberalization of trade through successive rounds of multilateral negotiations, with flexibility
for members.  India's legislation for banking was liberal;  for non-banking financial services, foreign
investment up to 51% was allowed, and up to 49% for stockbroking.  In the field of insurance,
reforms proposed by the Malhotra Committee could not be passed by the previous Parliament:  thescope and pace of reform were yet to be examined by the new government.  The Government was
committed to rapid expansion of telecommunications;  six licences for basic telecom services had
been signed and cellular services were in operati on.  All such companies could have foreign equity up
to 49%.  The independent telecommunications st atutory regulatory authority (TRAI) was fully
operational.  To encourage the rapid development of trade in services, the Government hadautonomously undertaken greater liberalization of foreign equity participation in sectors such as
financial services and telecoms, than was reflected in India's schedule of specific commitments.  New
guidelines for private participation in ports, highways and civil aviation had been announced and
approval given for mass rapid-transit systems in Delhi and other major cities.  He gave details of
conditions for multi-modal transport and in shipping.  India was engaged in discussions with its majortrading partners regarding liberalization of profession al services;  at the same time, India felt that the
outcome of the negotiations on movement of natural persons left much to be desired.
* * * * * *
199. Overall, Members commended India for its continued programme of economic reforms,
including trade reforms which have constituted an integral part of the programme.  Members
appreciated the direction of reforms, welcomed the commitment expressed by India to further broad-
based trade liberalization, domestic deregulation, and encouragement of private investment and
looked forward to further concrete, well-co-ordinated implementation in these areas.  Members also
welcomed India's continued positive participation in the WTO and the importance attached by the
Indian delegation and authorities to a stable, liberal, rules-based multilateral trading system.Members looked forward to receiving written replies to major outstanding questions and clarifications
of various areas of interest.
__________