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PRESS/TPRB/195
21 June 2002
(02-3435)
TRADE POLICY REVIEW: INDIA
Indian reform contributes to growth: reforms need to continue to
achieve high growth and reduce poverty
The Indian economy has grown rapidly over the past decade, with real GDP growth averaging
some 6% annually, in part due to the continued structural reform, including trade liberalization,
according to a WTO Secretariat report on the trade policies and practices of India.
Social indicators, such as poverty and infant mortality have also improved during the last ten
years. In order to achieve further significant redu ctions in poverty, India is currently targeting
higher real GDP growth of between 7% and 9% (compared with 5.4% expected for 2001/02); tomeet this goal, it will be important, as stressed by the authorities, to continue, and even
accelerate, the reform process and increase competition in the economy.
The WTO Secretariat report, along with the policy statement by the Government of India, will
serve as a basis for the third Trade Policy Review (TPR) of India by the Trade Policy Review Body
of the WTO on 19 and 21 June 2002.
Recognizing the important linkages between trad e and economic growth, the Government has
simplified the tariff, eliminated quantitative restrictions on imports, and reduced exportrestrictions. It plans to further simplify and redu ce the tariff. However, the level of protection
through the tariff remains relatively high and the anti-export bias inherent in imports and other
constraints still remains. To help counteract this anti-export bias, export promotion measures havegained in importance. The Government has recently announced a further increase in these
measures and plans to continue reforms of the tariff and other taxes.
Tariff and tax reform are also crucial to address the problem of high fiscal deficits, which have
continue to grow despite efforts to reduce public spending. Moreover, with the customs tariff
accounting for some 30% of net government tax re venue, further reform of  the tariff may depend
on major tax reform.
The report notes that the authorities are firm in their view that improving the economic growth
rate requires further structural reform. As re strictions on trade and competition have been
reduced, constraints associated with infrastructure and regulatory bottlenecks have become
increasingly evident and need to be addressed urgently both through regulatory reform andPRESS/TPRB/195
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through increased investment. Despite further liberalization of the FDI regime, India’s record in
attracting investment remains disappointing, with FDI accounting for some 1% of GDP. Thegovernment has also taken various steps to impr ove enforcement of intellectual property rights
which should help to attract FDI.
A major development since the previous Review was the removal of all import restrictions
maintained for balance-of-payments reasons. Thus, the customs tariff has become the main form
of border protection. There have been significant recent efforts to rationalize the tariff, but, with
numerous exemptions based on end-use, it rema ins complex and applied tariffs, which averaged
some 32% in 2001/02, remains relatively high. As a result of additional bindings taken by India in
the WTO, the share of tariff lines that are bound  has increased since the previous Review, from
67% to 72%. The average (final) bound rate is 50. 6%, higher than the applied MFN rate; this gap
provided ample scope for applied rates to be ra ised recently on a few agricultural products.
While import licensing and tariff restrictions are generally declining, there appears to have been anincrease in other border measures such as anti-dumping, with some 250 cases initiated since
1995. Internal reforms have concentrated on improving efficiency and competition in the economy.
Thus, while industrial policy remains important, its scope seems to have been reducedsignificantly. In addition, since the previous review, there has been a reduction in the number of
activities reserved for the public sector and for the small scale industry. The need for increased
competition is being addressed by gradually reducing the degree of direct government involvementin economic activities, including through a programme to restructure and privatize state-owned
companies. The privatization programme has thus far had limited success and must also be
stepped up to address the fiscal deficit. In addition, price controls, currently maintained on severalproducts including fertilizers, petroleum products  and in agriculture, add to the fiscal burden of
subsidies. (implicit and explicit subsidies were estimated at some 14,5 % of GDP in the mid-
1990s).
Policy in the agriculture sector has been guided by domestic supply and self-sufficiency
considerations. Thus, the sector is shielded through import and export controls, including tariffs,state trading, export restrictions and, until recently, import restrictions. The result of this policy
has been a substantial increase in stocks to unsustainable levels and the costs associated with
maintaining these stocks.
In services, significant reforms have been pursued since the previous Review, especially in
telecommunications, financial services and, to some extent, in infrastructure services, such aspower and transport. Liberalization of telecommunication services has resulted in an increase in
availability and a reduction in tariffs. The reduction in telecommunication tariffs is also likely to
benefit the software sector, one of the major success stories in recent years.
Efforts have also been made to address transpor tation and power shortages although with mixed
results. Electricity, in particular, remains in short supply and constrained by the loss making stateelectricity boards (SEBs).
The report concludes that India’s economic reform  programme resulted in strong economic growth
throughout the 1990s. The recent slowdown, although partly due to the overall slowdown in the
world economy, also demonstrates the necessity of continuing these reform efforts. In particular,
difficult decisions are required to redress the fiscal imbalance, by reducing subsidies, completingthe process of tariff and tax reform, and steppi ng-up privatization of state-owned enterprises.PRESS/TPRB/195
Page 3 of 10
Note to Editors
Trade Policy Reviews are an exercise, mandated in the WTO agreements, in which member
countries’ trade and related policies are examined and evaluated at regular intervals. Significant
developments which may have an impact on the global trading system are also monitored. For
each review, two documents are prepared: a policy statement by the government of the member
under review, and a detailed report written independently by the WTO Secretariat. These two
documents are then discussed by the WTO’s full membership in the Trade Policy Review Body(TPRB). These documents and the proceedings of the TPRB’s meetings are published shortly
afterwards. Since 1995, when the WTO came into force, services and trade-related aspects of
intellectual property rights have also been covered.
For this review, the WTO’s Secretariat report, together with a policy statement prepared by the
Government of India, will be discussed by the Trade Policy Review Body on 19 and 21 June 2002.The Secretariat report covers the development of all aspects of India’s trade policies, including
domestic laws and regulations, the institutional framework, trade policies and practices by
measure, and developments in selected sectors.
Attached to this press release are the Summary Ob servations of the Secretariat report and parts of
the government policy statement. The Secretaria t and the government reports are available under
the country name in the full list of trade policy reviews at
http://www.wto.org/english/tratop_e/tpr_e/tp_rep_e.htm . These two documents and the minutes
of the TPRB’s discussion and the Chairman’s summing up, will be published in hardback in duecourse and will be available from the Secretariat, Centre William Rappard, 154 rue de Lausanne,
1211 Geneva 21.
Since December 1989, the following reports have been completed:  Argentina (1992
and 1999), Australia (1989, 1994 and 1998), Austria (1992), Bahrain (2000) Bangladesh (1992
and 2000), Benin (1997), Bolivia (1993 and 1999), Botswana (1998), Brazil (1992, 1996 and2000), Brunei Darussalam (2001), Burkina Faso (1998), Cameroon (1995 and 2001), Canada
(1990, 1992, 1994, 1996, 1998 and 2000), Chile (1991 and 1997), Colombia (1990 and 1996),
Costa Rica (1995 and 2001), Côte d’Ivoire (1995), Cyprus (1997), the Czech Republic (1996 and2001), the Dominican Republic (1996), Egypt (1992 and 1999), El Salvador (1996), the European
Communities (1991, 1993, 1995, 1997 and 2000), Fiji (1997), Finland (1992), Gabon (2001),
Ghana (1992 and 2001), Guatemala (2002), Guinea (1999), Haiti (2002), Hong Kong (1990, 1994and 1998), Hungary (1991 and 1998), Iceland (1994 and 2000), India (1993, 1998 and 2002),
Indonesia (1991, 1994 and 1998), Israel (1994 and 1999), Jamaica (1998), Japan (1990, 1992,
1995,1998 and 2000), Kenya (1993 and 2000), Korea, Rep. of (1992, 1996 and 2001), Lesotho(1998), Macao (1994 and 2001), Madagascar (2001), Malaysia (1993, 1997 and 2001), Malawi
(2002), Mali (1998), Mauritius (1995 and 2001), Mexico (1993, 1997 and 2002), Morocco (1989
and 1996), Mozambique (2001), New Zealand (1990 and 1996), Namibia (1998), Nicaragua(1999), Nigeria (1991 and 1998), Norway (1991, 1996 and 2000), OECS (2001), Pakistan (1995
and 2002), Papua New Guinea (1999), Paraguay (1997), Peru (1994 and 2000), the Philippines
(1993 and 1999), Poland (1993 and 2000), Romania (1992 and 1999), Senegal (1994), Singapore(1992, 1996 and 2000), Slovak Republic (1995 and 2001), Slovenia (2002), the Solomon Islands
(1998), South Africa (1993 and 1998), Sri Lanka (1995), Swaziland (1998), Sweden (1990 and
1994), Switzerland (1991, 1996 and 2000 (jointly with Liechtenstein)), Tanzania (2000), Thailand(1991, 1995 and 1999), Togo (1999), Trinidad and Tobago (1998), Tunisia (1994), Turkey (1994
and 1998), the United States (1989, 1992, 1994, 1996, 1999 and 2001), Uganda (1995 and
2001), Uruguay (1992 and 1998), Venezuela (1996), Zambia (1996) and Zimbabwe (1994).PRESS/TPRB/195
Page 4 of 10
TRADE POLICY REVIEW BODY
INDIA
Report by the Secretariat — Summary Observations
The Indian economy has grown rapidly over the past decade, with real GDP growth averaging
some 6% annually. Despite external shocks, such as the Asian economic crisis and fluctuations in
petroleum prices, which resulted in a slowdown to 4.8% in 1997/98, the economy recovered to
grow at over 6% during the two subsequent years. Social indicators, such as poverty and infantmortality have also improved during the last ten years. Higher growth during this period is, in part,
due to continued structural reform, including trade liberalization, leading to efficiency gains. In
order to achieve further significant reductions in poverty, India is currently targeting higher real
GDP growth of between 7% and 9% (compared with 5.4% expected for 2001/02); to meet this
goal it will be important, as stressed by the authorities, to continue, and even accelerate, the
reform process and increase competition in the economy.
Recognizing the important linkages between trad e and economic growth, the Government has
simplified the tariff, eliminated quantitative restrictions on imports, and reduced exportrestrictions. It plans to further simplify and redu ce the tariff. To help counteract the anti-export
bias, inherent in import and other constraints, export promotion measures have gained in
importance. The Government has recently announced a further increase in these measures andpledged to reduce export restrictions. The policy has also suggested the creation and
strengthening of enclaves such as export processing and special economic zones, which would
“immunize” exporters from the constraints a ffecting the rest of the economy, such as
infrastructure and administrative problems. The Government estimates that annual export growth
of almost 12% is required in order to raise Indi a’s share of world trade from its present level of
0.67% to a target of 1% by 2007.
The authorities are firm in their view that improving the economic growth rate requires further
structural reform. As restrictions on trade and competition have been reduced, constraintsassociated with infrastructure and regulatory bottlenecks have become increasingly evident.
Investment also appears to have been deterred by high real rates of interest, which are in part
due to government borrowing to finance its fi scal deficit, which remains high. The Central
Government deficit has risen from 4.2% in 1995/96 to some 5.7% in 2001/02. This is
compounded by the states’ fiscal deficits; it is estimated that the combined central and state fiscal
deficit was over 10% of GDP in 2000/01.
In order to redress the fiscal imbalance, steps are being taken to rein in expenditure and to
improve tax collection. One recent measure is the introduction in Parliament of the Fiscal
Responsibility and Budget Management (FRBM) Bill; the Bill aims to reduce the deficit by at least
0.5% per year with a view to reaching a deficit of not more than 2% of GDP by 2005/2006.
Expenditure reductions are also being pursued, no tably through reform of the food subsidy (public
distribution system) and administered prices for petroleum. Steps are also being taken to reduce
government stakes in state-owned enterprises, which remain a drain on government resources
and a cause of inefficiency. To improve the revenue  base, attempts are being made to reform the
internal tax system. However, these attempts have met with limited success, especially with
respect to state taxes. Moreover, with customs revenue still a relatively high share of fiscal
receipts, further planned reductions in tariffs will probably require reform of the tax system.
There have been no major changes in India’s trade and investment policy formulation since its
previous Review in 1998. Trade policies are formulated and implemented by the Ministry ofCommerce and Industry in consultation with other relevant ministries. In this, it is assisted byPRESS/TPRB/195
Page 5 of 10
several autonomous bodies based in the Ministry as well as through regular consultations with
trade and industry groups. Advice is also solicited  from other government bodies such as the Prime
Minister’s Council on Trade and Industry and the ostensibly autonomous Tariff Commission, based
in the Department of Industrial Policy and Promotion (Ministry of Commerce and Industry), as well
as independent ad hoc groups appointed by the Go vernment from time to time. In addition, the
Planning Commission, in preparing goals for India’s Five Year Plans, sets up task forces to examine
trade and related policies.
India provides at least MFN treatment to all WTO Members. It has been a strong advocate of
multilateral, rather than regional, trade initiatives and is party to few regional trading agreements.
Efforts are nevertheless being made to strengthen regional agreements to which it is party, such
as the South Asian Association for Regional Cooperation (SAARC) and the Bangkok Agreement.
Under the South Asian Preferential Trade Agreement (SAPTA), the members of the SAARC have
completed three rounds of trade negotiations and expect to complete the SAPTA in 2002. Inaddition, India maintains bilateral trade agreements with several of its neighbours, including
Bangladesh and Nepal; under a free-trade agreemen t with Sri Lanka, in effect since 1 March 2000,
India grants duty-free access for over 1,000 tariff lines and a 50% margin of preference for the
rest of the tariff, except for a negative list. Negotiations to conclude bilateral trade agreements
with several other trading partners are presently under way.
India’s foreign direct investment (FDI) policy has been liberalized since its previous Review.
Investment is not only allowed in a greater number of sectors, but a larger number of sectors than
before are eligible for automatic investment procedures, involving registration with the ReserveBank; permission from the Government is still required for investment in some sectors, while
foreign investment is not permitted in a few sensitive sectors. Despite liberalization, India’s record
in attracting investment remains disappointing, with FDI accounting for some 1% of GDP; andthere appears to be no significant improvement in FDI inflows since the last Review, suggesting
perhaps that the policy and infrastructural environment are still constraints.
Since the previous Trade Policy Review of India, trade and related reforms have been pursued
although more gradually than during the early 1990s. However, a major change since the early
1990s appears to be the acceptance of the need for continued reforms in order to raise economicgrowth and reduce poverty. In this context, barriers to trade have been reduced and internal
structural reform has been pursued.
A major development since the previous Review was the removal of all import restrictions
maintained for balance-of-payments reasons. As a result, the customs tariff has become the main
form of border protection. There have been signif icant recent efforts to rationalize the tariff, but
with numerous exemptions based on end-use, it re mains complex. Tariffs are relatively high, but
the average applied MFN rate fell from 35.3% to 32.3% between 1997/98 and 2001/02 and is
expected to fall further, to 29% in 2002/03, as the “peak” rate of tariff is reduced from 35% to30%. The tariff shows substantial escalation in some sectors, especially for paper and printing,
textiles and clothing, and food, beverages and tobacco. The Government announced recently that
it intends to simplify and lower the tariff to two tiers by 2004/05; 10% for raw materials,intermediates and components, and 20% for final products. In addition to the tariff, importers
must pay additional and special duties on a number of products.
As a result of additional bindings taken by India in the WTO, the share of tariff lines that are bound
has increased since the previous Review, from 67%  to 72%; new bindings were made primarily in
textiles and clothing; India also renegotiated bi ndings in some agricultural items. The average
(final) bound rate is 50.6%, higher than the app lied MFN rate; this gap provided ample scope for
applied rates to be raised recently  on a few agricultural products.PRESS/TPRB/195
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While import licensing and tariff restrictions are generally declining, there appears to have been an
increase in other import measures. India has become one of the major users of anti-dumping
measures, with some 250 cases initiated since 1995. Certain imports, such as automobiles and
natural rubber, may enter only through specified ports. Similar restrictions relating to entrythrough certain ports have been removed on 300 sensitive items previously subject to import
restrictions; imports of these products continue to be monitored.
As part of its policy to encourage exports, the Government is planning to confine export
restrictions to a few sensitive items, as anno unced by the Export and Import Policy 2002-2007.
Export and import prohibitions are maintained mainly for health and security reasons.
Internal reforms have concentrated on improving efficiency and competition in the economy. Thus,
while industrial policy remains important, its scope seems to have been reduced significantly.Compulsory licensing now appears to be required mainly for environmental, safety, and strategic
reasons. In addition, since the previous Review, the number of activities reserved for the public
sector has been reduced from six to three and the number of sectors reserved for the small-scaleindustry has been reduced from 821 to 799; another 50 items are expected to be removed from
the list of items reserved for the small-scale sector. Price controls are maintained on several
products, including fertilizers, petroleum products , and some agricultural products; some of these,
including on petroleum and fertilizers, are gradually being phased out.
The need for increased competition is being addr essed by gradually reducing the degree of direct
government involvement in economic activities, including through a programme to privatize state-
owned companies. State-owned companies, which were used to implement industrial and
development goals, are a drain on government re sources. Attempts have been made since the
early 1990s to restructure those that are loss-making and, in some instances, to privatize them,
although, until recently, the privatization programme has met with limited success; annual targets
are not often met. The Government has redefined its privatization strategy recently and is willingto privatize all non-strategic companies; in strategic companies, including those involved in the
arms and ammunition, defence, atomic energy an d railway transport sectors, the Government will
reduce its equity to 26%, or lower in some cases.
Efforts are also under way to modernize India’s laws dealing with competition and industrial
“sickness”, while new measures have been taken to strengthen corporate governance. A newCompetition Bill, which would replace the current Monopolies and Restrictive Trade Practices
(MRTP) Act, is currently being examined in Parliament. The Bill aims, inter alia, to check the abuse
of dominant positions and establish procedures  dealing with mergers and acquisitions. When
enacted, the Bill will also establish a new Competition Commission. Amendments were also made
in 1999 and 2000 to the Companies Act, to improve corporate governance.
In view of the need to curb the fiscal deficit, tax reforms are being pursued. Complexities in theexcise tariff structure have gradually been reduced, with a view to moving to a standard rate of
16% and ultimately to a value-added tax system. However, attempts to convert the state sales tax
into a value-added tax have had less success; this has been postponed twice since the originaldeadline of 1 April 2001. Efforts are also being made to reduce explicit subsidies, which account
for some 1.2% of GDP in 2001/02 (explicit and implicit subsidies, however, are likely to be
considerably higher, estimated at some 14.5% of GDP at the time of the previous Review ofIndia).
Since its previous Review, India has introduced amending laws on intellectual property rights,
including for trade marks, and industrial designs; legislation to amend the Patents Act and on
Biological Diversity is currently in Parliament. Steps are being taken to educate the public on thePRESS/TPRB/195
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importance of compliance with intellectual prop erty rights laws, although enforcement seems
relatively weak.
Policy in the agriculture sector has been guided by domestic supply and self-sufficiency
considerations. Thus, the sector is shielded through import and export controls, including tariffs,state trading, export restrictions and, until recently, import restrictions. With the removal of
import restrictions, tariffs on several agricultur al products have been raised; as a result, the
overall average MFN tariff for agriculture has risen from 35% in 1997/98 to 41% in 2001/02, butis expected to fall to around 37.5% in 2002/03 with the passage of the Budget for 2002/03. To
encourage exports of agricultural products, the Government has set up agricultural export
processing zones.
Internally, despite some recent reforms, the sector remains subject to a wide range of price and
distribution controls. Price controls are maintained  for staples to ensure remunerative prices for
farmers. The Government also procures and subsidizes the sale of certain commodities through
the public distribution system (PDS), which is targeted at low-income families. The products
currently supplied through the PDS include wheat, rice, sugar, and edible oils. Over the years thePDS has become more targeted, while procurement by Government agencies has continued to
increase (in part due to a rise in minimum support prices). The result has been a substantial
increase in stocks, which greatly exceed the levels considered necessary to ensure food security,and in the costs associated with maintaining these stocks. Short-term measures, such as selling
excess grain below economic cost, have been undertaken, but longer-term policy changes would
seem necessary.
In manufacturing, which is dominated by textiles and clothing, there has been a decline in the use
of industrial policy, including industrial licensing and small-scale-sector reservations. In addition,the removal of import restrictions in 2001 has further opened the market to international
competition. Tariffs remain high, averaging 32.5% in 2001/02.
Textiles and clothing accounts for around 30% of India’s total merchandise exports. Exports go
mainly to the European Union and the United States, both of which maintain restrictions under the
Agreement on Textiles and Clothing (ATC). In preparation for the removal of such restrictions, andto improve the sector’s competitiveness, a number of measures have been taken recently. These
include removal of some textiles and clothing products from the list of items reserved for the
small-scale sector, and removal of foreign equity restrictions (with a small number of exceptions).The new Textile Policy also acknowledges the need to restructure, or close down, non-viable units,
while ensuring adequate compensation for displaced workers.
Significant reforms have been pursued since the previous Review, especially in
telecommunications, financial services and, to some extent, in infrastructure services, such as
power and transport. Liberalization in the tele communications sector began in the early 1990s,
with licences being issued to private investors for cellular telephone services. Since then, private
investment has been allowed in all telecommunication services. The resulting increased
competition from private service providers , as well as efforts by the regulator to rationalize tariffs
and reduce cross-subsidization between local and international rates, has contributed to a
significant improvement in India’s telecommunications service network and to a reduction in
tariffs.The reduction in telecommunication tariffs is likely to benefit the software sector, one of the major
success stories in recent years. This success is in part due to India’s abundant supply of relatively
high-skilled and low-cost labour; compared with other sectors, software has also been relativelyfree of barriers to trade and investment. The Government does, however, provide support to the
sector, including through tax and tariff exemptions , and software technology parks. RecognizingPRESS/TPRB/195
Page 8 of 10
the linkages between software and telecommunications, the Government recently merged the
Ministries of Information Technology and Communications and has introduced a newCommunications Convergence Bill in Parliament.
The banking sector has been subject to gradua l reform since the early 1990s. The most recent
developments include measures to reduce the level of non-performing loans, especially in public-
sector banks, and to restructure three public-sector banks. The Reserve Bank of India, which
regulates the banking sector has also strengthened prudential requirements, including raisingminimum capital and capital adequacy ratios. Su pervision of banking and non-bank financial
companies is based on both on-site and off-site monitoring on a regular basis. Key challenges
continue to be the high level of non-performing loans and the restructuring of weaker public-sectorbanks. The insurance industry has recently been opened to competition from the private sector
and new licences have been issued to private companies; foreign equity is restricted to 26% of the
total. The role of the regulator, the Insurance Regulatory and Development Authority (IRDA), hasbeen enhanced.
Infrastructure remains a major constraint on economic activity in India. Major shortages in the
supply of electricity have resulted in the use of captive generation. The main suppliers of
electricity, the state electricity boards (SEBs), have run losses, estimated in 2000 at around 1% of
GDP, partly as a result of subsidized tariffs to the agriculture sector. Recent reforms haveconcentrated on addressing the issue of cross-subsidization of tariffs, through the establishment of
regulators and reform of the SEBs; in addition, foreign investment restrictions in transmission
were removed. In transportation services, the current Railway Budget has revised the tariffstructure, reducing the cross-subsidy between freight and passenger transport; investment by the
private sector has also been allowed. The private sector has also been encouraged to invest in the
development and operation of national highways.
India’s economic reform programme resulted in  strong economic growth throughout the 1990s
despite external shocks. The recent slowdown, although partly due to the overall slowdown in theworld economy, also demonstrates the necessity of continuing these reform efforts. In its recent
annual Economic Survey, the Indian Government acknowledges the importance of “providing the
right environment” for Indian industry to compete internationally and to raise annual realeconomic growth rates. The appr oach paper for the Tenth Five Year Plan (2002-2007) argues that
the scope for efficiency improvement is large, but can only be realized if “policies are adopted
which ensure such improvement”.
While the process of dismantling some of India’s complex system of trade and domestic controls
has already yielded considerable results, there is a need for domestic structural reforms to bedeepened and completed. In particular, difficult decisions are required to redress the fiscal
imbalance, by reducing subsidies, completing th e process of tariff and tax reform, and stepping-up
privatization of state-owned enterprises. A reduced fiscal deficit is also likely to improve theinvestment climate and free resources for private and public investment, particularly in
infrastructure services, which have become a major bottleneck to economic growth. Important
steps have already been taken recently, including the introduction in Parliament of legislation oncompetition policy, changes in the Companies Act, and a decision to introduce changes in labour
laws. Continued efforts to open the economy to international competition are likely to result in
higher economic growth and a furt her rise in per capita incomes.PRESS/TPRB/195
Page 9 of 10
TRADE POLICY REVIEW BODY
INDIA
Report by the Government — Part 18
Impediments to the growth of India’s international trade
New tariff barriers faced by Indian products in various overseas markets are severely constraining
our exports. These barriers may broadly be enumer ated as: (i) restrictive import policy regimes
(import charges other than customs tariff, quantitative restrictions, import licensing, custom
barriers); (ii) standards, testing, labelling and certification (including phytosanitary standards),which are set at unrealistic high levels for developing countries or are scientifically unjustified; (iii)
export subsidies (including agricultural export subsidies, preferential export financing schemes
etc.); (iv) barriers on services (visible and invisible barriers restricting movements of serviceproviders, etc.); (v) government procurement re gimes; and (vi) other barriers including anti-
dumping and countervailing measures.
Quantitative restrictions, especially in the textiles area, are one of the most important of the non-
tariff barriers affecting India’s trade. The major trading partners of India have not made any
industrial adjustment nor have accorded any meaningful access to developing countries like India.The integration programme implemented by the impo rting countries has not been in line with the
spirit of the Agreement on Textiles and Clothing (ATC), though it may have conformed to the
narrow technical and legal requirements of the Agreement. In the first stage starting from
1 January 1995, major restraining countries integrat ed no product under restraint for India; and in
the second and third stages, integration of restraint products has been negligible. The result is that
even in the tenth year of the transition period, more than 95% of India’s apparel and yarn tradewould remain un-integrated with some of its major trading partners. Further, the integration
schedules have a greater concentration of low value added products. It is, thus obvious that the
major importing countries have continued to back  load the integration process and the bulk of
integration would take place only at the conclusion of the transition period.
Another problem in the area of textiles exports is unilateral changes introduced by certain trading
partners in their rules of origin. These changes have adversely affected exports of textiles and
India’s rights under the ATC including the full utilization of quota. Repeated anti-dumping
investigations on the textile products like cotton fabrics and cotton bedlinen, in which India enjoysa measure of comparative advantage, had a debilitating effect on the Indian textile industry and
exports. The export of textile products has also been affected because of ban on use of Azo dyes.
Another area of concern regarding market access for textile trade is an increasing tendency toenter into bilateral pacts for conferring selective liberalization of quotas. The tariff preferences
have also been extended bilaterally, which are otherwise meant to be provided to all developing
countries on a non-reciprocal basis. There is also a growing regionalization of textile trade onaccount of formation of Free Trade Areas and Pref erential Trading Arrangements. It is estimated
that 59% of world trade in textiles is presently taking place under RTAs. Such localization of world
textile trade is adversely affecting India’s textile trade.
In a number of other product sectors of export interest to India, market access has been affected
by several non-tariff measures (NTMs). In the ag ricultural product sect or, there are barriers to
export of mangoes and other fruit on account of insistence of some of our major trading partners
to use only the Vapour Heat Treatment (VHT) pr ocedure. In the floriculture sector, there are
certain plant quarantine procedures in some importing countries including zero tolerance for someinsects and pests, which affect our market access. The export of Indian milk product is affected on
account of certain conditions like proof of absence of TSE/Scrapie in India insisted upon by some
trading partners. There is continuing ban on import of Indian meat by some countries even thoughPRESS/TPRB/195
Page 10 of 10
India has been free from rinderpest for the last  three years and the same has been published in
the OIE bulletin released from Paris. There are different regulations on use of pesticides andpesticides residues by various importing countries, which has affected market access of Indian
products like grapes, egg produc ts, gherkins, honey, meat products, milk products, tea, and
spices. Non-harmonization of regulations for appr oval of exporting units of Indian egg products
and non-approval of Indian egg processing establishmen ts by one of our major trading partner is
another market access barrier. In the leather products sector, Indian exporters face NTMs like
chemical and dye content of leather, other standards (like different shoe size standards, more thanappropriate stringent standards for flex testing, tearing strength, colour fastness and flammability
testing), packaging and labelling requirements (like insistence on use of recyclable card boxes for
packing footwear, at times insistence on reshipping the packaging material back to the point oforigin), violation of MFN and national treatment (for instance testing, double certification and
standards compliance may not be mandatory or as strict for local manufacturers or for some other
exporting countries), visa restrictions and other import bans (like ban on use of Nickel in footwear,ban on use of colour pigments wi th additive base). Unreasonable social security requirements and
visa restrictions enforced by some of our major trading partners have affected the growth of our
software exports. The requirement of assembly of bicycles according to the security and safetynorms of a trading partner in a discriminatory manner and need for a certificate of compliance by
an authorized organization has severely affected market access of Indian bicycles to that country.
The illustrative examples of NTMs given in this paragraph indicate the significant financial and timecosts, which have adversely impacted on the market access for Indian goods and services.
ENDS