WT/TPR/S/182/Rev.1 Trade Policy Review 
Page 32 
 
 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
(1) OVERVIEW  
1. Since its previous Review in 2002, India has continued to reduce barriers to imports.  The 
tariff has become the main instrument of trade polic y and remains an important albeit declining source 
of tax revenue.  The Government has continued to reduce applied MFN tariffs on non-agricultural 
products to meet its goal of reaching ASEAN tariff le vels on these products by 2009.  As a result, the 
overall average applied MFN tariff has fallen from over 32% in 2001/02 to less than 16% in 2006/07, 
widening the already large gap between the averag e tariffs for non-agricultural products (12.1%) and 
agricultural products (almost 41%).1  When ad valorem  equivalents of non- ad valorem  rates are taken 
into account, the overall average tariff is around 17.5%, reflecting these relatively high tariffs.  
Analysis of effective protection is complicated by  the tariff exemptions granted for certain goods and 
uses.  These exemptions (together  with drawbacks) are aimed, inter alia,  at mitigating the adverse 
impact of tariffs on exports and have continued to be simplified during the period under review.  
However, the overall average applied tariff base d on customs duty collection rates is around 10%, 
suggesting that the effective rate is considerably lo wer, in great part due to these exemptions.  Such 
measures also render the administration of the tariff complex, thereby making it susceptible to 
administrative discretion although, the authorities state that administration is carried out within a framework of clearly laid down rules and regulations  and hence discretion is judiciously controlled.  
In addition to tariffs, additional dut y, in lieu of excise (a central tax on domestic manufacture) and a 
4% special additional duty to partly compensate for internal taxes such as value added tax, municipal 
tax, "market committee fees" etc., are charged to provide national treatment to the imported good.  
Under its growing regional trade agreements, India al so offers preferential tariff rates although, with 
the exception of Sri Lanka and LDC members of SAFTA, these are not substantial. 
2. As the overall applied MFN tariff declines, the gap between the bound and applied rates 
continues to grow.  India's bound tariff rates are  hi gh, especially for agricultural products.  As a result 
of completing implementation of its Uruguay Round commitments, India' s overall bound rate is 
currently at 48.6%.  The difference between the hi gh bound rates and considerab ly lower applied rates 
creates uncertainty for importers by giving scope to  raise tariffs within the bound rates.  During the 
period under review, the authorities have raised tariffs substantially on 27 agricultural products, 
contributing in part to the slight increase in th e overall average applied MFN rate (from 40.7% in 
2001/02 to 40.8% in 2006/07).   
3. The use of import restrictions, maintained  under GATT Articles XX and XXI has declined, 
with around 3.5% of tariff lines subject to such measures.  India also monitors imports of around 300 sensitive products and its use of state trading for food security, marketing, and domestic supply 
reasons is unchanged.  Imports of  second-hand cars over three-years old are also subject to licensing 
restrictions.   
4. Since 2002, India's use of anti-dumping and countervailing measures has declined, although 
it is still one of the largest users of these instrume nts.  Attempts are being made to harmonize national 
standards with international norms.  Some 73% of  Indian standards for which corresponding ISO/IEC 
standards have been issued are harmonized, while the total of Indian standards harmonized with 
international norms has risen from 17% to 22% since 2002 .  India is also trying to consolidate its large 
number of laws dealing with sanitary and phyto sanitary measures to streamline SPS standards and 
enforcement and a system to carry out pest/disease ri sk analysis has been in place since July 2001.   
                                                     
 
1 This gap is somewhat smaller if ad valorem  equivalents (AVEs) for non- ad valorem  rates (all but 
two specific rates found in textiles and clothing) are includ ed in the tariff analysis, raising the average tariff on 
non-agriculture to 14.1%.   India WT/TPR/S/182/Rev.1 
 Page 33 
 
 
5. Government procurement continues to be used as a policy instrument, although at the Central 
Government level significant efforts have been ma de to enhance transparency and competition in 
procurement procedures.  It seems, however, that preferences remain for products manufactured by 
the small-scale sector and state-owned enterprises.  India is not a party to the WTO's Agreement on 
Government Procurement.  
6. In contrast to barriers to imports, which have  been declining gradually, the export regime 
remains complex with numerous schemes aimed at reducing the anti- export bias inherent in India's 
trade and internal policies.  Since 2002, new schemes have been added, and some incentives  or 
schemes  have been removed.  The special economic zones (SEZs), to replace the existing export 
processing zones, offer investors a number of incentives, including tariff exemptions on imports of 
capital  goods and other inputs as well as income tax holidays of up to ten years.  The tax revenue 
forgone from the EPZ/SEZ schemes w as estimated at over Rs 280 billion in 2004/05 (around 0.9% of 
GDP)2;  there is considerable doubt as to the cost-eff ectiveness of SEZs in generating investment and 
employment.  Other export measures include prohi bitions and trade through designated agencies, 
which are essentially unchanged, and export taxes on a few lines pertaining to raw hides and skins and 
semi-finished leather;  such measures tend to depress the domestic prices of these products and 
therefore constitute assistance to their downstream processing.  
7. India's industrial policies, which include reser vations for the public and small-scale sectors, 
and industrial licensing requirements,  have, by and large, become less restrictiv e.  Currently, 
three industries (atomic energy, railways, and substances notified by the Department of Atomic 
Energy) are restricted to the public sector, and indu strial licensing is required for five industries;  
products reserved for manufacture by the small-scale sector have also declined from 799 at the time of 
the last Review to 326.  Less progress has been made in reforming subsidies, especially those 
regarded as "non-merit" subsidies, which account fo r 58% of total subsidies, and the public sector, 
which remains a drain on scarce government resour ces.  The largest share of direct subsidies 
continues to go to agriculture (including fertili zer and price support) and food, although petroleum 
(kerosene and liquefied petroleum gas) and the railway s also receive a significant share.  In addition, 
there are implicit subsidies, especially through subs idized prices of key services, like electricity and 
water.  With regard to state-owned enterprises (SOE s), efforts were made to identify those that could 
be restructured and made profitable, while others we re to be closed.  However, as of July 2006, the 
privatization programme has been paused, pending a review. 
8. Despite moderate tax rates, the pervasiveness of in centives is such that the tax system is also a 
major instrument of industrial policy as well as a source of revenue.  At the same time, it is 
susceptible to tax avoidance, if not evasion.  In recen t years, an effort has been made to rationalize the 
tax structure, including through the removal of incentives with the potential for causing resource 
misallocation.  Attempts to render the income ta x system more neutral (by reducing/removing some 
incentives and thereby broadening the income ta x base), while at the same time improving 
enforcement, have contributed to the increase in di rect taxes collected.  With regard to indirect 
taxation, a value-added tax was im plemented by most states in April 2005, replacing state-level taxes 
on purchase or sale of goods.  The Central Government levies "excise duty" on goods at the manufacturing stage and a 12% service tax on a number of services.  It also levies a central sales tax on inter-state sales of goods, which is collected and appr opriated by the states.  It is envisaged that the 
central and state taxes on goods and services will ev entually be combined into a goods and services 
tax (GST).    
                                                     
 
2 Nevertheless, according to the Receipts Budget, most  of these schemes "may not be termed incentive 
schemes since they largely represent input tax credit that has to be allowed in order to offer a level playing field to our exporters" (Budget 2006/07). WT/TPR/S/182/Rev.1 Trade Policy Review 
Page 34 
 
 
9. Implementation of the Competition Act 2002 has been delayed due to legal challenges to 
certain provisions;  certain amendments had to be made to the Act, and these are being processed after 
a detailed examination in Parliament.  When it becomes functional, the Act will permit the 
Competition Commission of India to take action ag ainst cartels and other anti-competitive practices, 
including those originating outside India but affecting the domestic market. 
10. Technological progress is one of the main engi nes driving growth in GDP and productivity 
(and thus competitiveness) in the long-run;  t hus, new technologies need to be nurtured and 
intellectual property rights protected adequately in th e domestic market.  In this regard, the Patent Act 
has been amended, ending the ten-year transition period for India to implement its obligations under 
the TRIPS Agreement.  The Act was also amende d to permit compulsory licences for exports of 
patented pharmaceutical products in exceptiona l cases (following the amendment to the TRIPS 
Agreement), although it appears that no compulsory  licences have been granted.  Efforts have also 
been made to step up enforcement, including th rough increased police raids and information and 
training campaigns.  However, the lack of data on civilian or criminal prosecutions, and long and 
cumbersome legal procedures (Chapter II) would sugg est that these are insufficient deterrents to IPR 
violations. 
11. An efficient capital market capable of mobiliz ing domestic savings and channelling them into 
the most productive investments is essential for improving India's competitiveness and thus its long-term development.  Recognizing that good corporate governance is essential for the 
establishment of such a market, the authorities have  been taking steps to improve the framework in 
this regard.  
(2) M
EASURES DIRECTLY AFFECTING IMPORTS  
(i) Procedures  
(a) Registration and documentation 
12. There have been no major changes in import and export procedures.  Under the Foreign Trade 
(Development and Regulation) Act, 1992, no pe rson may engage in import or export unless 
authorized to do so by the Director General of  Foreign Trade (DGFT) through an importer-exporter 
Code (IEC) number.3  However, under the Foreign Trade Po licy procedures, certain goods may be 
imported without an IEC number, including by Cent ral Government ministries, imports for personal 
use, and trade with Myanmar and Nepal va lued at under Rs 25,000 per consignment.4 
13. Three documents are required for most goods imports:  the invoice, packing list, and bill of 
lading or airway bill.  Import permits for products  subject to restrictions and health and sanitary 
certificates must be obtained prior to import from th e relevant Government departments and submitted 
along with the Customs declaration.  Additional docu mentation may be required, such as a country of 
origin certificate for goods imported under a prefer ential trade agreement or for goods entering under 
an export incentive scheme and qualifying for duty reductions.  
14. To speed up customs clearance,  the electronic data interchange (EDI) system was introduced 
in May 1995 and is applied at all major ports and ai r cargo complexes.  It is operational in 34 customs 
stations, and about 85% to 90% of import/export documents are pr ocessed electronically:  about 
0.25 million importers/exporters are using EDI facilities.   According to the authorities, the EDI and a 
risk management system at major customs ports h as significantly reduced the time taken for customs 
                                                      
3 Foreign Trade (Development and Regulation) Act, 1992 (Chapter III). 
4 The full list of exemptions is availa ble in Ministry of Commerce (2006b).  India WT/TPR/S/182/Rev.1 
 Page 35 
 
 
clearance (section (ii)(b) below).  Imports declared  under the EDI system do not require a formal bill 
of entry to be filed with Customs, but the impor ter is required to file a cargo declaration.  The 
importer must, however, submit the re quired documents at the time of examination of the goods.  For 
imports not filed under the EDI system, additional do cuments are required, including:  signed invoice, 
packing list, bill of lading, letters of credit,  and relevant import or industrial licences, etc.5 
(b) Preshipment inspection 
15. In October 2004, the Department of Commerce announced that imports of unshredded scrap 
required preshipment inspection and would be pe rmitted only through designated ports;  the list of 
ports has been gradually expanded to 26.6  Preshipment inspection is also required for imports of 
certain types of second-hand and defective items of  steel, as well as textiles and textile articles.  
Imports of certain types of second-hand and def ective steel products are permitted only through 
Mumbai, Kolkata and Chennai ports, while imports  of textiles and textile articles must be 
accompanied by a preshipment inspection certificate st ating that they do not contain hazardous dyes 
prohibited under the Environment (Protection) Act 1986.  Preshipment inspection certificates are provided by 99 recognized certifying agenci es, including several based outside India.
7 
(ii) Customs valuation and clearance 
(a) Valuation 
16. There have been no major changes to customs valuation procedures since India's last Review, 
in 2002.  The only statutory change for trade facilita tion purposes, was an amendment of Rule 9(2) of 
the Customs Valuation Rules 1988, which clarified that  the cost of moving freight from the port to an 
inland container depot or a container freight statio n before customs clearance, would not be included 
in the cost of transport as it would be considered pa rt of the post-import cost.  Valuation is determined 
under the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988, most recently amended in September 2001.  Under these Rules the va lue of imported goods is the transaction value 
defined as "the price actually paid or payable for the goods when sold for export to India", which should include costs and services in curred by the buyer as well as the cost of inputs, royalties, licence 
fees, etc. that are not included in the price pa id (Rule 9).  If the transaction value cannot be 
determined the value is based on:  the transaction va lue of identical goods sold for export to India and 
imported at or about the same time;  the transac tion value of similar goods;  deductive value;  
computed value;  or the residual method.
8  Customs valuation procedures have been improved through 
the use of online databases (see below).  India also  uses reference prices to value some agricultural 
imports (Chapter IV(2)). 
17. India continues to maintain reservations under Annex III, paragra phs 3 and 4 of the 
Agreement on Customs Valuation concerning the rever sal of the sequential order of Articles 5 and 6 
and the application of Article 5.2, whether or not the importer so requests.9  The Committee on 
                                                      
5 A full list of documentation required is provided in the Customs Manual.  Viewed at:  
http://www.cbec.gov. in/cae/customs/cs-manual/manua l_3.htm [24 April 2006]. 
6 DGFT Public Notice No. 39 (RE-2005)/2004-2009, 16 August 2005.  Viewed at:  
http://dgft.delhi.nic.in/ [7 February 2007]. 
7 Government of India, Press Information Bureau, "Preshipment Inspection Certificate for Import of 
Scrap Made Mandatory", 15 October 2004. 
8 Rules 5-8 of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988. 
9 WTO document G/VAL/2/Rev.22, 10 April 2006.  Under Article 4 of the Agreement on Customs 
Valuation, if the customs value cannot be determined under Articles 1, 2 and 3 of the Agreement, it can be determined under Article 5, and Article 6 if it cannot be determined under Article 5.  However, if the importer WT/TPR/S/182/Rev.1 Trade Policy Review 
Page 36 
 
 
Customs Valuation concluded its examination of  India's legislation on customs valuation in 
May 2006.10 
(b) Customs clearance 
18. With the introduction of the Risk Management System (RMS) in December 2005, routine 
assessment, audit, and examination of all imported goods/bills of entry has been discontinued.  The 
focus is now on quality assessment, examination and pos t clearance audit of bills of entry selected by 
the RMS.  Import declarations filed with Cust oms are processed electronically and produce an 
electronic output that determines whether the consignm ent needs to be appraised or examined or both, 
or be cleared after payment of duty.  Goods may also be examined before  assessing the duty liability 
at the importer's request, in case of incomplete information at the time of import, or, if deemed 
necessary by the Customs Appraiser/Assistant Comm issioner.  Where the RMS has identified a cargo 
as low risk, "self assessment by importer" and "no ex amination by Customs" is accorded.  Imports by 
clients accredited under the Risk Management Progr amme are facilitated through "no assessment" and 
"no examination" facilities.  A ccording to the author ities, customs clearance activities account for 
around 15-18% of the total cargo "dwell time" at ports of entry.  The introduction of the RMS in 
major customs locations, has reduced the time ta ken by Customs to eight hours (two hours for 
assessment and six hours for examination).  For accre dited clients, the clearance ranges from one to 
four hours. 
19. The mid-term review of the Tenth Five-Year Plan called for further trade reforms by, 
inter alia,  redoubling efforts to modernize customs, streamlining documentation requirements, and 
widening the coverage of EDI.  According to th e review, "the consequent reduction of transaction 
costs for exports would go a long way in improvi ng competitiveness and in achieving the country's 
target of doubling exports by 2008-09.  These measu res would also make the country more attractive 
for FDI".11  Since December 2002, the National Import Da taBase (NIDB) has been used by the 
Directorate General of Valuation to speed up valua tion procedures.  The NIDB permits a comparison 
with data gathered on the value of recent imports  of comparable goods and is used by all 34 EDI 
stations as well as non-EDI stations through electronic mail.  In addition, the RMS is due to be phased 
in at customs stations by March 2007.  The RMS us es a valuation risk assessment module (VRAM) to 
use a weighted average value of recent like im ports of sensitive goods.  The list of products 
considered to be sensitive was not provided as the specifics of risk assessm ent are confidential.  
According to Customs, the introduction of these el ectronic databases has facilitated quicker clearance 
of imported cargo on the basis of self assessment without requiring any intervention by Customs for 
"a considerable percentage" of the total cargo;  th e percentage could not be revealed for enforcement 
reasons. 
20. Under Chapter XV of the Customs Act, 1962, a ppeals against decisions taken by a Customs 
officer are heard by the Commissioner (Appeals).  A ppeals must be made within sixty days from the 
date of communication of the decision by Customs.   Decisions by the Commissioner (Appeals) should 
be made, where possible, within six months from the date the appeal is filed.  The Customs, Excise 
and Service Tax Appellate Tribunal hears judicial appeals against decisions by the Commissioner of 
Customs and the Commissioner of Customs (Appeals).12  Appeals must be filed within three months 
                                                                                                                                                                     
requests, the order of application of Articles 5 and 6 shall be reversed (Article 4 of the Agreement on 
Implementation of Article VII of the GATT, 1994). 
10 WTO document G/VAL/M/41, 24 May 2006. 
11 Planning Commission (undated), p. 481. 
12 The Tribunal does not have jurisdiction in cases involving goods imported or exported as baggage;  
goods that are not unloaded at their place of destination;  and paym ent of duty drawback  (Section 129A of 
Article XV of the Customs Act, 1962). India WT/TPR/S/182/Rev.1 
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from the date of receiving a communication from the Commissioner of Customs.  The Appellate 
Tribunal must reach a decision, where possible, within  three years from the date  on which an appeal is 
filed.  Data on the number of appeals were not provi ded.  Final appeals can be made through the High 
Court and the Supreme Court.  An alternative ch annel for final resolution of assessment disputes, 
avoiding prolonged litigation, has been created und er the Customs and Central Excise Settlement 
Commission. 
(iii) Tariffs13 
(a) Overview 
21. Despite the decline in the av erage applied MFN tariff from 32.3% to 15.8% (excluding 
AVEs), import duties remain a major source of ta x revenue for the Central Government, accounting 
for 17.5% of tax revenues in FY 2006/07, down cons iderably from 21.5% in 2001/02 (Table I.4).  
This 17.5% is not pure tariff revenues, however, as it includes additional duty (CVD) as well as special duty, which together account for roughly 60 % of total import duties.  Additional and special 
duties are, by and large, compensatory duties intended to ensure that imports are taxed at similar, if 
not identical, rates to domestically manufactured  goods, which are subject to Central Excises and 
other domestic taxes (Annex III.1).   
22. Both the MFN and bound tariffs are based on the Harmonized Commodity Description and 
Coding System (HS 02) and are applied at the HS ei ght-digit level.  The Government is bringing non-
agricultural tariffs down, inter alia,  to align them with ASEAN rates by 2009;  as a result, the current 
"peak rate" is at 12.5% although some 2.5% (8.8% including ad valorem  equivalents) remains above 
this peak rate;  the peak rate  was reduced to 10% in the tariff announced for 2007/08.  While both 
applied and bound tariffs have declined, they remain  high:  the applied tariff provides a major source 
of protection to certain sectors including agriculture , automobiles, and textiles and clothing.  The 
applied tariff is also complex:  in addition to being announced with the annual Budget, rates are 
changed on an ad hoc basis through gazetted notifica tions, with the approval of Parliament;  numerous 
exemptions render the system complex to administer , and therefore more susceptible to administrative 
discretion (Annex III.1).  A study based on 2001 da ta, found that India's high import tariffs are 
equivalent to a substantial export tax and thus a major impediment to its exports.
14  It is likely that the 
decline in average tariff protection since then has reduced this export tax burden. 
(b) Bound tariff 
23. Over 75% of India's tariff is bound, 100% fo r agricultural (WTO definition) and 71.6% for 
non-agricultural products.  In general, bindings ra nge from zero to 40% for non-agricultural products, 
and to 150% for most agricultural products;  some edible oils are bound at 300%.  India also renegotiated bindings on some agricultural products (mainly cereals) that were previously bound at 
0%;  the current average bound tariff for cereals (HS Chapter 10) is 86.3%, and ranges from 60% to 
100%.  India has not made any commitments in Chap ters 3, 42, 46, 64-67, 74, 76, 78-79, 82-83, 92-94 
and 97, while partial bindings are main ly in Chapters 48, 51-55 and 85. 
                                                     
 
13 During the course of this Review  the Secretariat received four versions of the applied MFN tariff.  
The most recent tariff, received in Ja nuary 2007, contained some 12,300 lines.  Some 600 of these are "ex" lines 
and have been counted only once in the tariff analysis presented in this report.  Changes to the applied tariff were announced with the Budget for 2007/08 at the end of February 2007.  However, these changes are not 
included in the tariff analysis presented here. 
14 Based on 2001 data, India's import tariffs were equivalent to an export tax of 31%, one of the highest 
among the 26 developing countries covered by the study (Tokarick, 2006). WT/TPR/S/182/Rev.1 Trade Policy Review 
Page 38 
 
 
24. Implementation of India's Uruguay Round commitme nts was completed in 2005.  As a result, 
the simple average bound tariff fell to 48.6% in 2006/ 07 (Table III.1).  The bound rate is particularly 
high in agriculture, averaging 117.2%, while the average for non-agricultural products is 34.7%;  textiles and clothing are bound at 29.2%.  These averages are also considerably higher than 
corresponding applied MFN rates, most of which have  been declining (Chart III.1).  The difference 
creates uncertainty for importers in India as it giv es considerable scope to the Government to raise 
tariffs;  this scope has been used to raise agri cultural tariffs in recent years (Table AIII.1). 
Table III.1 
Tariff structure, 2001/02 and 2006/07 
(Per cent) 
  MFN 
    2001/02 
tariff 
excluding 
AVEs 2006/07 
tariff 
excluding 
AVEs 2006/07 
tariff 
including 
AVEs Final bound 
excluding 
AVEsa 
1 Bound tariff lines (% of all tariff lines)  .. 75.2 75.2  75.2 
2. Simple average applied rate  32.3 15.8 (15.1) 17.5 (16.8)  48.6 
 Agricultural products (HS01-24)  41.7 42.7 (38.2) 42.7 (38.2)  117.6 
 Industrial products (HS25-97)  30.8 11.9 (11.8) 13.9 (13.8)  36.4 
 WTO agricultural products  40.7 40.8 (36.2) 40.8 (36.2)  117.2 
 WTO non-agricultural products  31.0 12.1 (12.0) 14.1 (14.0)  34.7 
 Textiles and clothing  31.3 12. 3 (12.3) 22.5 (22.5)  29.2 
3. Domestic tariff "peaks" (% of all tariff lines)b  1.3 2.7 (2.6) 3.9 (3.7)  7.4 
4. International tariff "peaks" (% of all tariff lines)c  93.9 13.8 (12.5) 19.1 (17.8)  72.2 
5. Overall standard deviation of tariff rates  13.0 17.4 (15.0) 20.7 (19.2)  39.1 
6. Coefficient of variation of tariff rates  0.4 1.1 (1.0) 1.2 (1.1)  0.8 
7. Duty-free tariff lines (% of all tariff lines)  1.1 2.6 (2.7) 2.6 (2.7)  2.2 
8. Non- ad valorem  tariffs (% of all tariff lines)  5.3 6.1 (6.1) 6.1 (6.1)  6.1 
9. Non- ad valorem  tariffs with no AVEs (% of all tariff lines)  5.3 0.0 (0.0) 0.0 (0.0)  0.0 
10. Nuisance applied rates (% of all tariff lines)d  0.0 0.5 (0.5) 0.5 (0.5)  0.0 
.. Not available.  
a Implementation of the U.R. was completed in 2005.  Calculati ons are based on 8,794 bound tariff lines (representing 75.2% of 
total lines), of which 8,580 (73.4%) are fully bound and 214 (1.8%) partially bound. 
b Domestic tariff peaks are defined as those exceeding three times the overall simple average applied rate. 
c International tariff peaks are defined as those exceeding 15%. 
d Nuisance rates are those greater than zero, but less than or equal to 2%. 
Note: Tariff analysis based on standard tariff rates.  The 2001/ 02 tariff schedule is based on the 6-digit HS96 nomenclature co nsisting 
of 5,113 lines;  the 2006/07 tariff schedule is based on the 8-di git HS02 nomenclature consisting of 11,695 lines.  Data in 
brackets include exemptions, applicable at  the full 8-digit tariff line.  AVEs for non- ad valorem  rates are provided by the 
authorities.  For calculations excluding AVEs the non- ad valorem  part of alternate rates has b een taken into consideration. 
Source : WTO calculations, based on data provided by the Indian authorities.  
 
 25. India notified the Committee on Market Access that it reserved its rights under 
Article XXVIII:5 of GATT 1994 to modify its Schedu le XII during the three-year period commencing 
1 January 2006.
15 
                                                      
15 WTO document G/MA/166, 2 November 2005. India WT/TPR/S/182/Rev.1 
 Page 39 
 
 
020406080100120140160
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21Calculations exclude specific rates and include the ad valorem  part of alternate rates.  Only section 2 is fully bound;  sections 12, 
19, and 21 are fully unbound.  All other sections include bound, partially bound, and unbound lines.
WTO Secretariat calculations, based on data provided by the Indian authorities.Per centChart III.1                       
Average MFN (standard) and bound tari ff rates, by HS section, 2006/07
Note:
Source :01   Live animals & prod.        
02   Vegetable products03   Fats & oils      04   Prepared food, etc.05   Mineral products06   Chemicals & products07   Plastic & rubber
08   Hides & skins09   Wood & articles10   Pulp, paper, etc.11   Textiles & articles12   Footwear, headgear13   Articles of stones
14   Precious stones, etc.15   Base metals and prod.16   Machinery17   Transport equipment18   Precision instrument19   Arms & ammunition
20   Miscellaneous manuf.21   Works of art, etc.Standard rate  
Bound rate
Average standard rate
(15.8%)Average bound rate
(48.6%)200220
 
(c) Applied MFN tariff 
Structure 
26. India's MFN tariff is applied at the 8-digit level of the Harmonized System.  Under the 
Customs Tariff Act, 1975, the MFN tariff is based on the standard rate, which is a statutory duty;  however, the "effective" tariff may be lower because of general- or industrial-use-based exemptions 
(Annex III.1 and below).  India's ta riff is announced in the annual B udget at the end of February;  
additional changes to individual tariff rates are made through notifications issued during the year.  In 
addition to customs duty, importers are required to  pay an additional duty (c ountervailing duty) and a 
special additional duty in place of local taxes (Annex III.1).   
27. The current applied MFN tariff has 11,695 lines, of which 93.9% are ad valorem ;  of the 
non-ad valorem  rates, two are specific rat es (for almonds, shelled and in shell) while 716 (6.1%) are 
alternate rates (in textiles and clothing).  India also provides a number of exemptions on imported 
inputs for certain sectors or importers depending on the industrial use of the import.  As a result of these exemptions, the effective applied tariff is cons iderably lower than the simple average standard 
rate.  However, because a large majority of the exem ptions relate to industrial use, they cannot be 
included in the tariff analysis.  To the extent that a tariff exemption is related clearly to a particular 
tariff line, the Secretariat has tried to incorporate th e exemption in the tariff analysis.  Both rates are 
reported (see Table III.1).  Ad valorem  equivalents provided by the authorities are also included 
(Annex III.1 describes the methodology used to calculate the AVEs). WT/TPR/S/182/Rev.1 Trade Policy Review 
Page 40 
 
 
28. In 2006/07, the standard rate of tariff ranged from 2% to 182% (up to 150% if exemptions are 
included) (from 2% to 354% including AVEs).  The largest number of lines (7,519 or 64.3%) are at the "peak rate" of 12.5%, followed by 10.4% of lines at 25-30% (Chart III.2);  300 lines are duty free (2.6% of the tariff).  The number of zero rated lines , with the exception of those relating to India's 
ITA commitments, is essentially unchanged since the previous Review, except the applied tariff on 
pulses and lentils, which was recently reduced to zero.
16 
 
(2.4%)
(1.4%)(2.2%)(10.4%)
(2.6%)(6.1%).(7.3%)(65.0%)
(0.8%) (1.9%)
02004006008001,0001,2001,4001,600
Duty free >0-5 >5-10 >10-15 >15-20 >20-25 >25-30 >30-55 >55-95 >95
Source:     WTO Secretariat calculations, based on data provided by the authorities of India.Number of tariff linesChart III.2
Distribution of standard tariff rates, 2006/07
Tariff rates 7,600
7,400
Note:          Calculations include AVEs provided by the authorit ies.  Figures in parentheses denote the share of total lines.
 
Tariff average, dispersion, and escalation 
29. In 2006/07, India's applied MFN tariff averaged 15.8% although the average is 17.5% when 
AVEs are included (Table III.1).  Average tari ff protection has declined from 32.3% in 2001/02 
(although, as the 2001/02 tariff was at the HS 6-digit le vel, with only 5,113 tariff lines, the two figures 
are not strictly comparable).  The average applied ra te for agriculture is considerably higher, at 40.8% 
(WTO definition), while the tariff for non-agricultural imports is 12.1%.  The tariff on non-agricultural products, especially, has declined as the "peak rate" of tariff has been cut in 
successive budgets, inter alia,  to meet India's goal of achieving ASEAN levels of tariff protection for 
non-agricultural products by 2009.  In the 2006/07 Bu dget, the peak rate for non-agricultural products 
was cut further from 15% to 12.5%.
17  Despite this, however, 254 tariff lines or around 2.5% (8.8% 
including AVEs) of the tariff on non-agricultural pr oducts (WTO definition) remain above the peak 
                                                      
16 Customs Notification No. 57/2006.  Viewed  at:  http://www.cbec.gov.in/cae/customs/cs-
act/notifications/notfns-2k6/cs57-2k6.htm [23 January 2007].  Tariff lines with rates at 12.5% but with part of 
the line at zero due to the ITA are not included. 
17 The peak rate was further cut to 10% in the 2007/08 tariff although this is not reflected in the tariff 
analysis. India WT/TPR/S/182/Rev.1 
 Page 41 
 
 
rate.  Rates above 12.5% are applied mainly to fi sh products (Chapters 3, 15, 16 and 23), natural 
rubber products (Chapter 40), textiles and clot hing (Chapters 51-52, 54-55, 57-58, 61-63), and 
passenger motor vehicles and motorcycles (HS 87).  In  agriculture (WTO definition), the highest rates 
are found, inter alia , in beverages and spirits, oil seeds, fats  and oils and their products, grains, and 
coffee, tea, cocoa, and sugar.  The overall average tariff for non-agri cultural goods is also higher, at 
14.1%, when AVEs are included (12.1% excluding AVEs).  Inclusion of the AVEs, which are found in textiles and clothing, raises the average tariff for these products from 12.3% to 22.5%.  
30. While the tariff on non-agricultural products has been falling, in part to meet the goal of 
reaching ASEAN tariff levels, a few agricultural tari ffs have increased;  India's high bound rates have 
permitted such increases (Table AIII.1).  Tariff rates have been increased, inter alia , for tea, coffee, 
pepper, cloves, cardamom, poppy seeds, garlic, cut fl owers, and honey.  Partly due to this, the overall 
average tariff on agricultural products rose slightly from 40.7% in 2001/02 (and from 35.1% in 1997/98) to 40.8% in 2006/07.  In addition, tariff rates for some products remain very high, notably 
some edible oils and alcohol products.  The result of these tariff changes is an increase in dispersion, 
which has more than doubled, from 0.4 in 2001/02 to  1.1 in 2006/07 (dispersion in the tariff, as 
measured by the coefficient of va riation (standard deviation as a shar e of the average tariff)).  The 
standard deviation has also increased from 13.0 at the time of the last Review to 17.4. 
31. The result, in part, of increased protection for agricultural and raw materials, seems to be 
higher protection for unprocessed than for se mi-processed products and in some cases for 
semi-processed than for final products.  While at the time of the last Review, the pattern of 
de-escalation from semi-processed to processed products was found mainly in paper, printing and 
publishing, the 2006/07 tariff also exhibits de-escalation from unprocess ed to semi-processed 
products for industries, including food, beverages and tobacco, and textiles and leather (Chart III.3).
18  
However, according to the authorities, there are very  few cases of de-escalation in MFN rates:  in a 
number of cases, tariffs on specified raw materials have been changed to rectify de-escalation arising out of preferential rates under free-trade agreements. 
(iv) Tariff exemptions 
32. While the average MFN tariff based on the standa rd rate is still relatively high, the effective 
applied tariff is likely to be considerably lower due to a wide range of tariff exemptions.  The 
exemptions are both product-specific and based on i ndustrial use.  In the Budget speech delivered in 
February 2006, the Minister of Finance acknowledge d the complexity of the tariff exemptions, which 
are made public through notifications issued throughout the year.  It was proposed that many of those 
that had outlived their usefulness would be remove d.  To reduce the multiplicity of these exemptions, 
most have been consolidated under one notifica tion (Notification 21, da ted 1 March 2002).  Some, 
nevertheless, continue to be base d on industrial use and therefore cannot  be included in an analysis of 
the tariff.  As a result, the Secretariat was only ab le to include exemptions on some 750 tariff lines at 
the HS 8-digit level (around 6.4% of the tariff). 
33. The inclusion of the tariff exemptions in th e current applied MFN tariff reduces the average 
rate to 15.1% (compared with an average based on the standard rate of 15.8%) (Table III.1).  The 
averages are 16.8% and 17.5%, respectively, when  AVEs are included.  The inclusion of the 
exemptions makes very little difference to the aver age for non-agricultural products (12.0% compared 
with 12.1%), while the average for agriculture dr ops from 40.8% to 36.2%.  However, the average 
tariff rate based on duty collection is  10%, suggesting that the exemptions play an important role in 
the economy. 
                                                     
 
18 See for example WTO (2002). WT/TPR/S/182/Rev.1 Trade Policy Review 
Page 42 
 
 
n.a.n.a.0510152025303540455055
Food,
beverages
and tobaccoTextiles and
leatherWood and
furniturePaper,
printing and
publishing Chemicals Non-metallic
mineral
products Basic metal Fabricated
metal
products and
machineryOtherChart III.3
Tariff escalation by 2-digit ISIC industry, 2001/02 and 2006/07
n.a.n.a.0510152025303540455055
Food,
beverages
and tobaccoTextiles and
leatherWood and
furniturePaper,
printing and
publishingChemicals Non-metallic
mineral
products Basic metal Fabricated
metal
products and
machineryOtherAverage standard rate in manufacturing
(32.5%)
Calculations are based on standard rates.   Excluding specific rates and including the ad valorem part of 
alternate rates.  AVEs are not included.
WTO Secretariat calculations, based on data provided by the Indian authorities.Note:
Source :Per cent
First stage of processing Fully processed Semi-processedPer cent
Average standard rate in manufacturing
(14.9)2001/02
2006/07
 India WT/TPR/S/182/Rev.1 
 Page 43 
 
 
(v) Tariff-rate quotas 
34. There has been no change in policy on tariff-ra te quotas, which are maintained on 14 tariff 
lines at the HS 8-digit level including:  milk powder;  maize;  crude sunflower seed and safflower oil;  
and refined rape, colza and mustard oil.  The quotas, which are allocated by the Directorate General of 
Foreign Trade, based in the Ministry of Commerce,  are:  up to 10,000 tonnes per year at the in-quota 
rate for milk powder;  up to 500,000 tonnes for maize;  and up to 150,000 tonnes for sunflower seed 
or safflower oil or fractions thereof and for rape, colza and mustard oil at in-quota rates of duty.19  
Tariff quotas for these products, which are issued on the basis of requests from designated agencies, 
are assigned pro rata when requests exceed  the quota for the year (to 31 March).20  In practice, 
however, no tariff quotas have been requested for ra pe, colza or mustard oil since 2002/03, while a 
quota of 10,000 tonnes was issued for milk powder only in 2003/04 (Table AIII.2).  According to the authorities, other than for sunflower seed or safflower  oil, there is no demand for the quotas.  No data 
are available on the extent to which the quotas issued  are filled.  While TRQs were not issued for 
some of these products for certain years, imports have occurred over recent years, presumably at 
out-of-quota rates.
21  India has not notified these tariff-rate quotas to the WTO but plans to do so as 
soon as possible.  Under its free-trade agreement w ith Sri Lanka, India also maintains tariff-rate 
quotas on clothing and tea imports (Chapter II).  No da ta were available on the extent to which these 
preferential tariff-rate quotas have been filled in recent years. 
(vi) Other charges affecting imports 
35. In addition to tariffs, imports are subject to an  additional duty (CVD) in lieu of an excise duty, 
which is a tax on domestically manufactured goods;  as  of 1 March 2006, all imports are subject to a 
special duty of 4% so that they are taxed at simi lar rates as domestically produced goods subject to 
internal taxes such as value-added tax, municipa l tax, "market committee fees", etc. (section (4) 
below);  the VAT, which has been implemented by a majo rity of the states, is not levied on imports or 
exports.  It appears that the nomenclature differen ce between the excise tax and the customs tariff at 
the time of the previous Review has now been r econciled, as the two schedules are now identical.  
However, there is still a difference between the sp ecial duty and other domestic taxes, which may 
have rates that are higher or lower than the 4% speci al duty rate and that vary from state to state for 
certain products (section (4) below). 
(vii) Tariff preferences 
36. India offers tariff preferences to selected countries under its regional trade agreements 
(Table III.2).  The agreements in force are:  SAFTA  (which replaced the SAPTA), Asia Pacific Trade 
Agreement (previously the Bangkok Agreement), prefer ential areas tariff (Seychelles, Mauritius, and 
Tonga) and the agreements with Sri Lanka and with  Singapore.  However, apart from the agreement 
with Sri Lanka and concessions for least develope d country members of the SAFTA, the tariff lines 
covered by these agreements are less than 50% of the tariff.  There is also very little in the way of 
tariff concessions, with the overall average ranging from 15.5% to 10.6% (the latter for SAFTA LDC 
members) compared with the overall MFN average of 15.8%;  the overall average for imports from 
Sri Lanka, in contrast, is 3%.  Tariff concessions  are especially low in sensitive sectors, such as 
agriculture, again with the exception of Sri Lanka, and in  textiles and clothing.  It appears that India is 
considering granting unilateral tariff preferences to least developed countries in Africa.22  T h e  
                                                      
19 Department of Commerce (2006b), pp. 45-46. 
20 The full list per product is given in Department of Commerce (2006b), pp. 46-47. 
21 For example, although no TRQs were issued for milk powder (HS040210) in 2004/05 and 2005/06, 
India imported 233,620 kg in 2004 and 243,798 kg in 2005. 
22 The Hindu online .  Viewed at:  http://www.thehindub usinessline.com/2005/10/27/stores/ 
2005102703050100.htm [24 November 2006]. WT/TPR/S/182/Rev.1 Trade Policy Review 
Page 44 
 
 
Secretariat was unable to obtain clarification on the a pplication and coverage of  such unilateral tariff 
preferences. 
Table III.2 
Summary analysis of the Indian preferential tariff, 2006/07 
(Per cent)  
 Preferential linesa  
(% of all lines) Overall 
average WTO 
agriculture WTO non-
agriculture Fish & fishery 
products Textiles & 
clothing 
Standard rate  15.8 40.8 12.1 30.0 12.3 
Preferential Agreements       
APTAb 10.8 15.3 40.6 11.6 10.4 12.2 
Preferential Areasc 2.7 15.5 38.8 12.1 30.0 12.3 
SAFTA Id 23.7 15.0 37.2 11.7 27.6 12.2 
SAFTA IIe 84.4 10.6 30.0 7.8 14.8 7.1 
Sri Lanka FTAf 88.5 3.0 7.6 2.4 0.0 9.8 
Singapore FTA 41.7 14.6 40.2 10.9 23.7 11.9 
Bangladeshg 83.6 10.5 29.9 7.7 5.3 7.3 
Sri Lankah 89.5 3.0 7.5 2.4 0.0 9.8 
a Only items corresponding to an 8-digit tariff line and inferi or to their respective standard rate are taken into account.  
b Asia-Pacific Trade Agreement:  preferential rates are applicable to Bangladesh, Chin a, the Republic of Korea, and Sri Lanka. 
c Seychelles, Mauritius, and Tonga. 
d South Asian Free Trade Area. 
e South Asian Free Trade Area tariffs for LDC memb ers (Bangladesh, Bhutan, Maldives, and Nepal). 
f Calculations include out-of quota rates and exclude in-quota rates. 
g Including South Asian Free Trade Agreement and APTA. 
h Including South Asian Free Trade Agreement, APTA, and Sri Lanka FTA. 
Note:  Calculations exclude specific duties and include the ad valorem  part of alternate rates. 
Source:   WTO Secretariat calculations, based on Arun Goyal (2006), Bigs Easy Reference Customs Tariff 2006-2007, 
Academy of Business Studies, New Delhi, and Indian G overnment tariff notificati ons No. 38/2006, No. 67/2006, 
No. 68/2006 and No. 89/2006;  and info rmation provided by the authorities. 
(viii) Rules of origin 
37. India generally applies preferential rules of origin under its bilateral and regional trade 
agreements through a combination of minimum local content and value addition, and a change in the 
HS tariff heading.  Minimum value addition requi rements under existing agreements range from 30% 
to 50% of the f.o.b. value of the finished good.  Under the SAFTA and the agreement with Singapore, 
there are also product specific-rules of orig in for some 180 and 380 products, respectively 
(Table III.3).  
Table III.3 
Preferential rules of origin 
Agreement Rules of origin 
Regional  
SAFTA Up to 40% of the f.o.b. value of the finished go od for India and Pakistan, 35% for Sri Lanka;  30% for LDCs 
with change in tariff heading (CTH) if produced in a single country and 50% for regional cumulation.  Product 
specific rules exist for 180 products. 
APTA Not less than 45% of the f.o.b. value of the finished  good for developing member countries, 35% for LDCs and 
60% aggregate content for regional cumulation 
Preferential Areas Not less than 50% of the ex-factory cost of the finished good 
GSTP Not less than 50% of the f.o.b. value of  the finished good, 60% for regional cumulation  
 Table III.3 (cont'd) India WT/TPR/S/182/Rev.1 
 Page 45 
 
 
Agreement Rules of origin 
Bilateral  
Bhutan No specific rules 
Nepal Twin criteria of change in four-digit tariff and 30% value addition at ex-factory price  
Myanmar No specific rules 
Singapore At least 40% of the f.o.b. value of the product must originate in parties to the agreement;  change in HS four-
digit code.  Product specific rules exist for some 380 pr oducts (including food products, chemicals, plastics, 
paper and paperboard, books, nuclear r eactors, boilers and machinery parts, electrical machinery and parts, 
railway or tramway locomotives, photographic a nd cinematographic produc ts, and apparatus).  
Sri Lanka Minimum local value-added content of 35% with CTH (25% if the raw material or inputs are sourced in either 
country subject to the condition that the aggregate value addition in the contracting pa rties is not less than 35% 
of the f.o.b. value of the product  
Afghanistan Not less than 50% of the f.o.b.  value of the finished product and CTH  
Source:  Department of Commerce online information.  Viewed  at:  http://commerce.nic.in/ [13 June 2006];  and 
WTO (2002), Trade Policy Review:  India.  
(ix) Import prohibitions, restrictions, and licensing 
(a) Import prohibitions 
38. Import prohibitions are maintained under Sec tion 11 of the Customs Act 1962.  Under the 
Act, the Government may, by notification in the Official Gazette, impose absolute or conditional 
import (or export) prohibitions.  Such measures can be maintained for, inter alia,  security, public 
order and standards of decency or morality, prev ention of smuggling or shortage of goods, foreign 
exchange and balance of payments reasons, pr evention of agricultural surpluses, standards, 
intellectual property, and the con servation of exhaustible resources.23   
39. The main change since India's previous Review  is the introduction of import prohibitions on 
some livestock and livestock products, including dom estic and wild birds, meat and meat products 
from avian species, and live pigs and pig meat products (except processed pig products) 
(Table III.4).24 
Table III.4 
Import prohibitions, 2006 and 2001 
Product prohibited on 1 April 2006 Products prohibited on 1 April 2001 
Tallow, fat and/or oils, rendered or otherwise of any animal origin 
including: 
(i) Lard stearin, oleo stearin, tallo w stearin, lard oil, oleo oil and 
tallow oil not emulsified or mixed or prepared in any way 
(ii) Neats-foot oil and fats from bone or waste 
(iii) Poultry fats, rendere d or solvent extracted 
(iv) Fats and oils of fish/marin e origin, whether or not refined, 
excluding cod liver oil, squid oil containing Eicospentaenoic 
acid and De-cosahexainoic acid 
(v) Margarine, imitation lard and other prepared edible fats of 
animal origin 
(vi) Degras (residues from the tr eatment of fatty substances or 
animal or vegetable waxes)  Tallow, fat and/or oils, rendered or otherwise, of any animal origin 
including: 
(i) Lard stearin, oleo stearin, tallo w stearin, lard oil, oleo oil and 
tallow oil not emulsified or mixed or prepared in any way 
(ii) Neat's-foot oil and fats from bone or waste 
(iii) Poultry fats, rendere d or solvent extracted 
(iv) Fats and oils of fish/marin e origin, whether or not refined, 
excluding cod liver oil, squid oil containing Eicospentaenoic 
acid and De-cosahexaenoic acid 
(v) Margarine, imitation lard and other prepared edible fats of 
animal origin 
 Table III.4 (cont'd) 
                                                      
23 Section 11(2) of the Customs Act, 1962. 
24 Import of domestic and wild birds including captive birds (excluding poultry);  processed meat and 
meat products from avian species including wild birds (except poultry) and semen of domestic and wild birds 
was prohibited with effect from 11 August 2005.  This measure was taken in view of reported outbreak of Highly Pathogenic Avian Influenza (HPAI). WT/TPR/S/182/Rev.1 Trade Policy Review 
Page 46 
 
 
Product prohibited on 1 April 2006 Products prohibited on 1 April 2001 
Animal rennet Animal rennet 
Wild animals including their parts and products and ivory Wild animals including their parts and products and ivory 
Beef and products containing beef in any form Beef and products containing beef in any form 
Natural sponges  
Fish waste (HS 05119110, 05119120, and 05119130)  
Domestic and wild birds including captive birds; 
live pig and pig meat products (e xcept processed pig products); 
meat and meat products from avian species including wild birds (except processed poultry meat and poultry meat products); 
semen of domestic and wild birds; 
products from animal origin from birds intended for use in animal 
feed or for agricultural or industrial use Not prohibited 
Imports of the following products from countries reporting the 
outbreak of highly pathogenic avian influenza: 
(i) day-old chicks, ducks, turkey  and other newl y hatched avian 
species 
(ii) hatching eggs 
(iii) eggs and egg products 
(iv) meat and meat products from avian species including wild 
birds 
(v) feathers 
(vi) pig meat products (vii) pathological material and biological products from birds Not prohibited 
Source:  Ministry of Commerce and Industry  (2006), Department of Commerce, Foreign Trade Policy 2004-2009 ;  and 
information provided by the authorities. 
(b) Import restrictions and licensing 
40. Import restrictions can be imposed under the Customs Act, 1962 and the Foreign Trade 
(Development and Regulation) Act, 1992.  Some 415 tariff lines (around 3.5% of the tariff) at the 
HS 8-digit level are currently subject to import restrictions under Articles XX and XXI of the GATT.  The items are mainly in sections 19 (arms and am munition), 1 (live animals), 21 (works of art), 
5 (mineral products) and 2 (vegetable products) (Chart III.4).  
41. India also monitors imports of some 300 items that are considered to be sensitive.  The 
monitoring mechanism was set up after the removal of  quantitative restrictions on imports in 2002.  
The products, which are monitored by a committee chaired by the Secretary of the Department of Commerce, include edible oil, cotton, silk, milk  and milk products, cereals, fruit and vegetables, 
spices, automobiles, tea, coffee, alcoholic beve rages and products produced by the small-scale 
industry.  Imports of certain items, including sec ond-hand cars (over three-years old) and imports 
from Sri Lanka subject to preferential tariffs (such as tea), must be imported through specified ports 
(Mumbai for second-hand cars, Kochi and Kolkata for tea and Chennai, Mumbai and Jawaharlal Nehru Port Mumbai for garments).  
 
  
 India WT/TPR/S/182/Rev.1 
 Page 47 
 
 
051015202530
01
02
03
04
05
0607
08
091011
12
13
14
15
16
17
18
19
20
21
TotalChart III.4
Import restrictions/licensing  by HS section, 2006/07
Per cent of HS section
Source :  Ministry of Commerce and Industry (2006), Department of Commerce, Foreign Trade Policy 2004-09.85
01 Live animals and prod.        
02 Vegetable products03 Fats and oils      
04 Prepared food, etc.
05 Mineral products06 Chemicals and prod.07 Plastic and rubber
08 Hides and skins09 Wood and articles
10 Pulp, paper, etc.
11 Textiles and articles12 Footwear, headgear13 Articles of stones
14 Precious stones, etc.15 Base metals and prod.
16 Machinery
17 Transport equipment18 Precision instruments19 Arms and ammunition
20 Miscellaneous manuf.21 Works of art, etc.80
 
(x) Contingency measures 
(a) Anti-dumping and countervailing measures 
Overview 
42. There have been no changes in India's anti- dumping and countervailing legislation during the 
review period.  Anti-dumping measures may be  taken under the Customs Tariff Act, 1975, as 
amended by the Customs Tariff (Amendment) Act, 1995, and the Customs Tariff (Identification, 
Assessment and Collection of Anti-Dumping Duty  on Dumped Articles and for Determination of 
Injury) Rules, 1995.25  Under Article 5 of the Customs Tariff Rules, an anti-dumping investigation can 
be initiated by the Directorate General of Anti-Dump ing and Allied Duties (DGAD) in the Ministry of 
Commerce and Industry upon a written applicati on by, or on behalf of, domestic industry26, or on its 
own initiative if it is satisfied that there is justif ication to launch an investigation.  The DGAD must 
inform the government of the exporting country and issue a public notice containing details of the 
initiation and the time limits for inte rested parties to make their views known.  The public notification 
is usually issued within 45 days of receipt of pr oper documentation, and the time limit for interested 
                                                      
25 WTO documents G/ADP/N/1/IND/1, 15 August 1995;  G/ADP/N/1/IND/2/Corr.1, 9 January 1996;  
and G/ADP/N/1/IND/2/Supp l.1, 23 December 1996. 
26 No investigation can be initiated if the producers making the application accoun t for less than 25% of 
total domestic production of the like article.  The DGAD must also examine the accur acy and adequacy of the 
evidence provided and determine that there is sufficient evidence of dumping, injury, where applicable, and a 
causal link between the dumped imports and the alleged injury, where applicable, before initiating an investigation. WT/TPR/S/182/Rev.1 Trade Policy Review 
Page 48 
 
 
parties is a further 30 days.  A preliminary finding regarding export price, normal value, and margin 
of dumping would normally be issued in a public notice within 150 days of the initiation, following which the Department of Revenue in the Ministry of Finance may impose a provisional duty not exceeding the dumping margin.
27  The provisional duty may not be imposed until 60 days after the 
date of the public notice launching the investigati on, and may remain in place only for six months;  
this may be extended to nine months, upon the request of exporters representing a significant 
percentage of trade.  Final findings must be notifie d to the Central Government within one year of the 
investigation unless the investigation is extende d (by a maximum of six months) under special 
circumstances.  The dumping margin for each know n exporter or producer is determined by the 
DGAD, following which the Department of Revenue ma y, within three months of publication of the 
final findings, impose the anti-dumping duty by notification in the Official Gazette .  The 
anti-dumping duty would remain in place for five y ears unless extended (for five-year periods) by the 
DGAD.28 
43. Countervailing measures may be imposed under the Customs Tariff Act, 1975 (Part 9) and the 
Customs Tariff (Identification, Assessment and Co llection of Countervailing Duty on Subsidized 
Articles and for Determination of Injury) Rules, 1995.  The decision to initiate an investigation must 
be notified through a public notice, with relevant information to be provided by interested parties 
within 30 days of the notice.  Provisional duties may be imposed, but only after six months from the 
date of initiation of the investigation, and may rema in in force for a maximum of four months.  Final 
findings must be published by the DGAD within one y ear of the date of initiation;  the period may be 
extended by the Central Government in excepti onal circumstances for a further six months.  
Definitive countervailing measures must be imposed by the Central Government on the recommendation of the DGAD within three months of the final findings being published.  Final 
measures may stay in force up to five years. 
44. Appeals against anti-dumping and counter vailing measures imposed by the Central 
Government can be made under Chapter XV (Sectio n 129) of the Customs Act, 1962 to the Customs, 
Excise and Service Tax Appellate  Tribunal (CESTAT).  The CESTAT can only handle appeals made 
against measures taken by the Central Government.  Th e appeal must be filed within 90 days of the 
final duty being notified by the Central Government.  Since 2002, 54 appeals have been made to the 
Appellate Tribunal of which 32 cases had been settled by end December 2005.  In 19 of the 32 cases 
the measures imposed were upheld, in 8 cases they were modified, 3 cases were rejected and 2 cases 
referred back to the DGAD.  The CESTAT decisi on can be appealed to the Supreme Court. 
Measures 
45. Between January 2002 and D ecember 2005, India initiated 17 6 anti-dumping investigations 
and took final measures in 163 cases;  an additio nal 20 investigations were initiated in 
January-June 2006, with measures taken in 8 cases.   During 2002-05, the products involved included 
chemicals and products thereof (41.5%);  plastics and rubber and products thereof (16.5%);  base metals (13.1%);  and textiles and clothing (10.8%).
29  The majority of investigations were targeted at 
China (21.6%), the EC (13.6%), Chinese Taip ei (9.1%), and Korea (8%) (Chart III.5).30  A s  a t  
                                                      
27 The investigation can be terminated at any time:  if there is a written request  from or on behalf of 
domestic industry;  if there is insuffic ient evidence of dumping or injury or if the injury is negligible;  if the 
margin of dumping is less than 2% of the export price;  or if the volume of the dumped imports is less than 3% 
of imports of the like product unless the countries accounting for 3% individu ally account for over 7% 
collectively of imports of the like product (Article 14 of  the Customs Tariff (Identification, Assessment and 
Collection of Anti-dumping Duty on Dumped Articles and for Determination of Injury) Rules 1995). 
28 Any review of a measure must be concluded within 12 months of the date of initiation of the review. 
29 Up to June 2006, these percentages were:  39.3%, 18.9%, 12.8%, and 9.7%.   
30 Up to June 2006, these percentages were:  23.5%, 12.2%, 9.7%, and 7.7%. India WT/TPR/S/182/Rev.1 
 Page 49 
 
 
June 2006, 177 anti-dumping measures were in force.  India did not  take any countervailing actions 
during this period.  
(b) Safeguards 
Legislative and administrative framework 
46. Safeguard legislation is contained in Sections  8B and 8C of the Customs Tariff Act, 1975, 
with Section 8C relating specifically to imports from China.  The Customs Tariff (Identification and Assessment of Safeguard Duty) Rules 1997 and th e Customs Tariff (Transitional Products Specific 
Safeguard Duty) Rules 2002, describe the procedures to be followed for the application of safeguard 
measures.  Investigations on safeguards are carried out by the Director General of Safeguards, based 
in the Department of Revenue, Ministry of Finance.   A request for a safeguard investigation must be 
made in writing to the Director General, by, or on behalf of, the domestic industry.  The investigation 
must be completed and notified publicly within eight months of the date of initiation of the 
investigation, or within such extended period as th e Central Government may allow following which a 
provisional duty may be imposed for up to 200 days.  The final safeguard may be in place for four years, but can be extended by the Central G overnment, if deemed necessary, for a maximum of 
ten years.  A safeguard in place for longer than one year must be progressively liberalized at regular 
intervals. 
47. Although the Director General's decisions on safeguards cannot be appealed under the 
legislation
31, appeals  may be made to the High Court and the Supreme Court. 
Measures 
48. During January 2002 to December 2005, India initia ted four safeguard measures;  it imposed 
final measures in only one of these cases (Epichlorohydrin) for a period of one year (up to 29 October 2003).  In addition, one safeguard investigation was initiated on 13 August 2002 for 
industrial sewing machine needles imported from China.
32 
(xi) Standards and other technical requirements 
(a) Standards 
49. The Bureau of Indian Standards (BIS) (formerl y the Indian Standards Institution) established 
under the Bureau of Indian Standards Act, 1986, and operational since 1 April 1987, is responsible for 
formulating and enforcing standards for 14 sectors.33  It has also been d esignated by India as the 
WTO-TBT Enquiry Point, while the Ministry of  Commerce and Industry is responsible for 
implementing and administering the WTO Agreement on Technical Barriers to Trade.34  India 
accepted the Code of Good Practice on 19 December 1995.35  In addition to the standards developed 
by the BIS, these are sector-specifi c standards for the automobile industry, pollution, food, drugs and 
cosmetic, as well as atomic energy and civil aviation. 
                                                      
31 Directorate General of Safeguards online info rmation.  Viewed at:  http://www.dgsafeguards. 
gov.in/legal_framework_provisions.html [20 July 2006]. 
32 WTO document G/SG/N/6/IND/14, 10 September 2002. 
33 These are:  production and general engineering;  chemicals;  civil engineering;  electronics and 
information technology;  electrotech nical standards;  food and agriculture;  mechanical engineering;  
management and systems;  medical equipment and hospital planning;  metallurgical engineering;  petroleum, coal and related products;  transport engineering;  te xtiles;  and water resources (BIS online information.  
Viewed at:  http://www.bis.org.i n/sf/sfp1.htm) [19 May 2006]). 
34 WTO document G/TBT/2/Add.56, 22 October 1999. 
35 WTO document G/TBT/CS/N/26, 29 January 1996. WT/TPR/S/182/Rev.1 Trade Policy Review 
Page 50 
 
 
020406080100120140160180200220240
2002 2003 2004 2005
Source :  Notifications to the WTO.Other Asia
4.4United States
4.5
Malaysia
3.4Singapore
  4.5EC
13.6Base metals
 & products 
thereof
13.1
Korea, 
Rep. of
8.0China
21.6
Other
5.7
Chemicals & products 
thereof
41.5Pulp of 
wood, paper
3.4Machinery &
 mechanical/ 
electrical 
applicances 
4.5(b) Initiations by product
Per cent(c) Initiations by origin 
Per centChart III.5
Anti-dumping measures, January 2002 - December 2005
(a) Number of cases initiated and measures in force
South Africa  2.8Middle
 East
4.0
Plastics & rubber
 & products thereof
16.5Textiles & their 
articles 
10.8Other  3.4
Indonesia
5.1Thailand 
 4.5Chinese Taipei
9.1a    Anti-dumping measures in force on 31 December.
CISb
5.7Cases initiated 
Measures in forcea
Brazil  2.8Articles of
 stones, mica
4.0 Mineral products
2.8
b   See Table AI.3 for member countries.
 India WT/TPR/S/182/Rev.1 
 Page 51 
 
 
50. The BIS is a founder member of the Internati onal Organization for Standardization (ISO) and 
is an active participant in its standardization ac tivities.  It participates in the ISO's policymaking 
committees such as on Developing Country Matters (D EVCO), on Conformity Assessment (CASCO), 
on Consumer Policy (COPOLCO) and 62 technical comm ittees.  The BIS is also an active participant 
in the activities of the International Electrotechni cal Commission (IEC) and participates in 34 of its 
technical committees.   
51. As the national standards setting body, the BIS plays an important role in regional 
cooperation programmes such as the SAARC and th e BIMST-EC with regard to discussions on 
standards and conformity assessment.  In add ition, the BIS has signed bilateral cooperation 
agreements in the fields of standardization, c onformity assessment, quality assurance, and training 
with national standards organizations in several tr ading partners.  The bila teral cooperation covers 
exchange of information and personnel.  In some ca ses, there are provisions of mutual acceptance of 
inspection reports and test reports.  The agreement with the ISO covers the utilization of the National 
Institute of Training for  Standardization (NITS) as a Regional Training Centre of ISO.  The BIS has 
memoranda of understandi ng with, Cuba, Germany, Israel, Ma uritius, Russian Federation, Turkey, 
Bhutan, Nepal, Ukraine, Armenia, Sri Lanka, Af ghanistan, Brazil, and the United States (ANSI). 
52. To increase awareness of the importance of standards amongst domestic companies and 
consumers, the BIS provides training, both to industr y and government and also to its own staff.  BIS 
employees are also provided training on a regular  basis, while consumer awareness programmes are 
conducted to inform them about the BIS standard mark as well as penalties and grievance redressal 
mechanisms.36 
53. Standards are formulated through 14 Division Councils set up to oversee standards in each of 
the sectors.  The Standards Monthly Additions gives de tails of the status of new or draft standards or 
standards being withdrawn.  There have been no basi c changes to the process of formulating standards 
since 2002.  Proposals for establishing new standards, or modifying old ones, may be submitted in writing to the BIS by agencies of the central and state governments, industry and consumer 
associations and professional bodies and members of the BIS and of its technical committees.  Draft 
standards are published for comments on the BIS website  for not less than one month.  On average, it 
takes between 12 and 28 months to issue a new sta ndard or harmonize an existing national standard 
with an international one.  Some standards are fast  tracked and developed within 12 months to meet 
industry demands.  Standards are also reviewed a nd updated on a regular basis;  reviews generally 
take place at least once in five years. 
54. India currently has around 18,300 standards;  according to the authorities, 5,821 have 
corresponding ISO/IEC standards and  4,307 of these (around 73%) are harmonized with ISO/IEC 
standards (Table AIII.3).  Some 53% of standard s issued between July 2002 and October 2006 are 
harmonized with ISO/IEC standards.  According to the authorities, the process of reviewing identified 
standards where ISO/IEC standards exist, is being e xpedited.  In addition, a greater percentage of 
sectoral standards, for example, in chemicals, petr ochemicals, electrical and electronic industries, tend 
to be aligned with ISO/IEC standards. 
(b) Product certification 
55. The BIS operates a product certification scheme under the Bureau of Indian Standards Act, 
1986 and its accompanying regulations and rules.  Th e Bureau of Indian Standard Mark (ISI) is 
granted to products meeting the requi rements of relevant Indian standards.  Although ISI certification 
is voluntary, it has been made compulsory for 66  products related to hea lth and consumer safety 
                                                     
 
36 Bureau of Indian Standards (2005) . WT/TPR/S/182/Rev.1 Trade Policy Review 
Page 52 
 
 
(133 at the time of the last Review).37  It is not clear, which products have been removed from the list.  
Both imported and domestically produced goods on this list must conform to certification 
requirements.  The BIS has eight laboratories that provide conformity testing for imported and domestically produced goods.  In addition, a num ber of other accredited independent laboratories 
having a demonstrated system complying with ISO/IEC Guide 17025:1999 and laboratories under the 
control of central and state governments have been approved by the BIS, which uses them for conformity testing.
38  Product certification can also be gran ted outside India once the manufacturer's 
production facilities have been approved and licensed by the BIS.  More than 60 licences have been 
granted under this Foreign Manufacturer's Scheme in  some 15 countries.  The licence fees include the 
cost of the inspector's visit and stay, an annual f ee of Rs 1,000 (US$20) and an annual marking fee of 
US$2,000 to be paid by the manufacturer.  The li cence is initially valid for one year and can be 
renewed annually (at a fee of Rs 500 or around US$10).39  Indian importers may also be granted a BIS 
licence provided they have the required infrastructure to test each consignment when it reaches India.  
The BIS operates IEC international certificati on schemes and has been designated the national 
certification body for recognizing and issuing certificates under the IECEE-CB and IECQ schemes.40  
In addition to product certification, the BIS gr ants licences and ECO MARK to environmentally 
friendly products. 
56. The BIS also operates certification schemes for management systems, including quality 
management, environmental management, occupatio nal health and safety management and hazard 
analysis critical control point (HACCP).  The qua lity management systems certification scheme was 
launched in 1991 and covers a nu mber of industries and services.41  Over 20 major economic 
activities have been accredited by the Raad voor Accreditatie (RvA).42  The Environmental 
Management Systems (EMS) Certification scheme is  operated according to the ISO 14000 series of 
standards.  The BIS also operates the Food Safety  Management System (FSMS) according to IS/ISO 
22000:2005, launched in 2006, and Certification of P ublic Service Organizations for Service Delivery  
according to IS 15700:2005 (to be launched by 31 March 2007).   
(xii) Sanitary and phytosanitary measures 
57. SPS standards are governed and enforced thr ough a number of laws and agencies.  The 
Prevention of Food Adulteration Act, 1954 is the main law on food safety and quality.  Imports and quarantine are regulated through additional legisl ation such as the Livestock Importation Act, 1898 
                                                     
 
37 Appendix III of ITC(HS). 
38 For a full list of recognized laboratories, see BIS online information.  Viewed at:  
http://www.bis.org.in/lab/osladd1.htm [13 June 2006]. 
39 BIS online information.  Viewed at:  ht tp://www.bis.org.in/cert/fm.htm [13 June 2006]. 
40 IEC System for Conformity Testing and Certif ication of Electrical Eq uipment and IEC Quality 
Assessment System for Electronic Components, respectively. 
41 The sectors covered include engine ering;  chemicals;  pharmaceutical s;  cement;  ceramics;  food;  
textiles;  automobiles;  machinery; metallurgical indust ries;  electrical;  electronics;  aeronautics;  hospitals;  
financial services;  banking;  construction;  wholesale and retail trade;  education and training;  hotels;  power;  
printing;  telecommunications;  testing laboratories;  and information technology. 
42 Textiles and textile products;  chemicals, chemical products and fibres;  rubber and plastic products;  
non-metallic mineral products;  concrete, cement, lime, plaste r, etc.;  basic metals and fabricated metal products;  
machinery and equipment;  electrical and optical equipment;  other transport equipment;  wholesale and retail 
trade;  repair of motor vehicles, motorcycles, and personal and household goods;  food products, beverages and 
tobacco;  leather and leather products;  wood and wood products;  pulp, paper and paper products;  printing companies;  manufacturing not elsewh ere classified;  transport, storage and communication;  other services;  
hotels and restaurants;  electrical  supply;  pharmaceuticals;  manufactu re of coke and refined petroleum 
products;  and financial intermediation, real estate, ren ting (limited to NACE 65). (BIS online information.  
Viewed at:  http://www.bis.org.in/ce rt/qsintro.htm [13 June 2006].) India WT/TPR/S/182/Rev.1 
 Page 53 
 
 
most recently amended in 2001;  the import of pl ants and plant materials is regulated under the 
provisions of the Plant Quarantine (Regulation of Import into India) Order 2003, issued under the Destructive Insects and Pests Act, 1914.  Implementa tion of these Acts and subordinate legislation is 
carried out by different central government mi nistries, making the system relatively complex 
(Table III.5).  India's enquiry points under the SPS Agre ement are:  the Ministry of Health and Family 
Welfare for human-health-related issues;  and the Departments of Animal Husbandry, Dairy and 
Fisheries, and Agriculture and Cooperation in the Ministry of Agriculture, respectively, for animal 
health and plant health issues.
43 
Table III.5 
Principle SPS legislation a nd implementing agencies, 2006 
Legislation Subject Implementing agency 
Prevention of Food Adulteration Act, 
1954 Food safety and quality Ministry of Agriculture, Ministry of Food 
Processing, Ministry of Health 
- Fruit Products Order, 1955 Quality of processe d fruit products  Minist ry of Food Processing 
- Meat Food Products Order, 1973  Quality of processed meat products Ministry of Food Processing (up to 2004 
Department of Agriculture and Cooperation, 
Ministry of Agriculture) 
- Milk and Milk Products Order, 1973 
(last amended 1992) Quality of milk and milk products Depart ment of Animal Husbandry, Dairying and 
Fishing, Ministry of Agriculture 
Essential Commodities Act, 1955 Consumer protection State government agencies 
Livestock Importation Act, 1898 
(amended in 2001) Procedures for import of livestock Depart ment of Animal Husbandry, Dairying and 
Fishing, Ministry of Agriculture 
Destructive Insects and Pests Act, 1914  Procedures for import of plants and 
plant materials  Directorate of Plant Protection, Quarantine and 
Storage, Department of Agriculture and Cooperation, Ministry of Agriculture 
Drugs and Cosmetics Act, 1940 Regula tion of import, manufacture, and 
sales of drugs Ministry of Health 
Export (Quality Control and Inspection) 
Act, 1963 Regulation of quality control for exports  Exports Inspection Council, Ministry of 
Commerce and Industry 
Source:  WTO Secretariat, based on Government of India online in formation and information provided by the authorities. 
58. In an attempt to streamline SPS procedures and enforcement, the Food Safety and Standards 
Act was passed by Parliament in August 2006 although it is yet to be enforced;  this Act consolidates 
13 laws and establishes the Food Safe ty and Standards Authority (FSSA ).  The regulations and rules 
to implement the Act are currently being formulated.  
59. Imports of primary agricultural material require  a phytosanitary import permit, issued by the 
Department of Agriculture and Cooperation under th e Plants, Fruit and Seeds (Regulation of Import 
into India) Order, 2003.  The Plant Quarantine (Regulation of Import into India) Order was promulgated in 2003 (under the Dest ructive Insects and Pests Act, 1914).
44  It has been amended 
several times, most recently in July 2006.  Imports of plants or plant products into India (with the 
exception of those listed under Schedule VII of the Pl ant Quarantine (Regulation of Import into India) 
Order 2003) require a permit issued under this Order.   The permit is issued only after completion of a 
pest risk analysis.   The analysis is based on a comparison of pest profiles in the exporting country and 
India in line with the IPPC guidelines on pest ri sk analysis;  the Department of Agriculture and 
Cooperation is assisted by research institutes, su ch as the Indian Council of Agricultural Research 
                                                      
43 WTO document G/SPS/ENQ/19, 25 January 2006. 
44 The Plant Quarantine (Regulation of Import into India) Order, 2003 rep ealed the:  Rules for 
regulating the import of insects in India notified under notification No. F 193/40-A, 3 February 1991;  Rules for 
regulating the import of live fungi into India notified under notification No. F 16-5(I)/43-A, 10 May 1943;  
import of cotton into India Regulations, 1972;  and the Plants, Fruits and Seeds (Regulation of Import into India) Order, 1989. WT/TPR/S/182/Rev.1 Trade Policy Review 
Page 54 
 
 
(ICAR), in conducting this analysis.  Pest ri sk analysis has been carried out for some 
2,000 commodities since the process began in 2004.  A ll applications for a permit must be made to the 
relevant authority seven days  in advance of importation.45  The permit is valid for six months and 
permits multiple shipments of imports.  Import permits are ordinarily issued within two working days.  
Each consignment must also be accompanied by a phytosanitary certificate issued by the relevant 
authority in the originating country.  All imports of  plants, plant material, and other plant products 
must be carried out through designated sea and airports and la nd frontier stations.46 
60. Imports of livestock and meat  products are regulated, respectively, under the Livestock 
Importation Act, 1898 (amended last in 2001) and the Meat Food Produc ts Order, 1973 and require an 
import permit issued by the Department of Animal Husbandry, Ministry of Agriculture.  The livestock 
permit is valid for six months and can be used fo r multiple consignments.  All imports of livestock 
must enter through designated ports. 
61. Quarantine facilities for plants and seeds must  be established at the importer's cost 
following guidelines prescribed by the Plant Protection A dvisor.  The period of quarantine is stated in 
the permit issued under the Plant Quarantine (Regulati on of Import into India) Order.  Samples of the 
imported products are examined by the relevant in spection authority (as listed in Schedule XI of the 
Order), and if found to be free of pests and di seases, are cleared to be imported.  Any fumigation 
required must be carried out by an approved agen cy at the importer's cost.  Fumigation should 
normally take two days.  Appeals against decisions by the inspection authority may be made to the 
Plant Protection Advisor within seven days of comm unication from the inspection authority.  There is 
no prescribed limit for the disposal of an appeal by the Plant Protection Advisor.  A second appeal 
cannot be made.  However, the Plant Protection Division of the Department of Agriculture and 
Cooperation is allowed to relax c onditions in the Plant Quarantine (Regulation of Import into India) 
Order 2003 in the public interest. 
62. In the WTO Committee on Sanitary and Phyto sanitary measures, Members have raised 
several questions regarding India's policy on, inter alia,  restrictions on imports of live birds, fresh 
poultry meat, and meat products, due to avian influen za.  According to the authorities, this has been 
resolved amicably, as well as a ban on the u se of food grade wax under the Prevention of Food 
Adulteration Act.  With regard to the ban on th e use of food grade wax, India has consequently 
permitted two varieties of edible waxes to be used for coating fr esh fruits up to the level of GMP 
subject to labelling of the type of  wax used and the best before date.  Some Members also expressed 
concerns about the lateness of India's notifica tions on new fumigation requirements in place since 
January 2004, as this did not allow sufficient time  for comment;  there was also concern that the 
measures deviated from international standards.  Non-notification of various SPS measures was also 
raised by several Members.47  According to the authorities, all WTO Members were given sufficient 
time to comment on the Plant Quarantine (Regulation of Import into India) Order 2003 issued in 
February 2004 after it had been notified to the WTO-SPS Committee.  The Order was made 
operational only on 1 August 2004 after all comments received had been considered.  The authorities 
note, furthermore, that fumigation requirement s for preshipment quarantine are according to 
international standards and that all phytosanitary not ifications are being issued and adopted only after 
careful consideration by technical experts of co mments or suggestions received from WTO Members. 
63. The Drugs and Cosmetics Act, and its rules, which regulate the quality and safety of drugs 
(including those based on traditional Indian medicine ) and cosmetics, is administered by the Central 
Drugs Standard Control Organization (CDSCO) in the Ministry of Health and Family Welfare.  The 
                                                      
45 The issuing authority depends on the expected point of entry (see Schedule X of the Order). 
46 The full list is provided in Schedule I of the Order.  
47 WTO documents G/SPS/GEN/204/Rev.2 to Rev.6. India WT/TPR/S/182/Rev.1 
 Page 55 
 
 
overseas manufacturers' manufacturing sites and the drugs to be imported are registered under the 
provisions of the Drugs and Cosmetics Rules,  1945.  All merchant importers and domestic 
manufacturers of drugs require import licences issued by the CDSCO.48  It takes approximately 
2-3 weeks to issue an import licence,  which is valid for three years.49  For renewal of an import 
licence, a fresh application must be made three mont hs before the expiry of the existing licence;  the 
current licence is deemed to remain in force un til the renewal.  Appeals against CDSCO decisions 
may be made to the Secretary, Ministry of Health and Family Welfare within 30 days of receiving the rejection.   
64. All drug imports must enter through designated ports of entry
50 and must have a remaining 
shelf life of at least 60% from the date of import.  Upon import, the Customs official may, if he has 
reason, send a sample for testing to the CDSCO.   
(xiii) Labelling 
65. Packing and labelling of food products is regulat ed by the Prevention of Food Adulteration 
Rules (Part VII).  All food product labels should incl ude:  the name, trade name or description of food 
contained in the package;  the ingredients used, in  descending order of their composition by weight or 
volume;  name and address of manufacturer or im porter;  net weight or measure of volume of 
contents;  month and year of manufacture or pack aging;  date of expiry, which, for products 
containing aspartame, should not be more than th ree years from the date of packing;  purpose of 
irradiation and licence number where relevant;  and best before consumption date.  In addition, for 
products containing artificial flavouring the chemical names of the flavourings should not be used and 
for products containing natural fl avouring substances, the common name of the flavours should be 
mentioned on the label.  The label should also in dicate the animal origin of gelatine in products 
containing gelatine.  More specific labelling require ments are specified for other products, such as 
infant milk substitutes and infant foods, bottled mine ral water, and milk products.  Furthermore, the 
Ministry of Health and Family Welfare has recen tly notified the quantitative ingredient declaration 
(QUID) requirement as a percentage of the ingredient at the time of manufacture of the food.   
66. There appear to have been no changes to labelling requirements since 2002.  Mandatory 
labelling of quantities has been notified, but is to be implemented at a later date.  The  Ministry of 
Health and Family Welfare, has issued a comp rehensive labelling requirement for genetically 
modified food.  This proposed regulation (no tified as a draft (GSR 152(E), dated 10 March 2006)), 
broadly requires that all packages of food/food ingredients of GM origin, subject to the approval of 
the Genetic Engineering Approval Committee (GEAC), should be labelled indicating that they are of 
GM origin;  and that the product has been clea red for sale in the exporting country, so that 
verification, if needed, can be discussed with the exporting country without the need for testing.  
Documents supporting this approval must be provided at the time of import. 
(xiv) Government procurement  
(a) Introduction 
67. A transparent and competitive system of govern ment procurement is necessary to ensure 
value for money as regards public expenditure programm es, and to improve India's fiscal situation.  
                                                      
48 Under the Drugs and Cosmetics Rules, 1945, all licence applicants must pay a fee of Rs 1,000 for a 
single drug and an additional Rs 100 for each additional drug to be imported (Paragraph 24 of the Drugs and 
Cosmetics Rules, 1945). 
49 Paragraph 28 of the Drugs and Cosmetics Rules, 1945. 
50 Paragraph 43A of the Rules. WT/TPR/S/182/Rev.1 Trade Policy Review 
Page 56 
 
 
Such a system can bring important developmental bene fits, particularly in promoting the efficient use 
of scarce resources in the provision of infrastructure and other economically and socially important goods, services, and public works.  India has recently implemented significant reforms in its procurement procedures at the central government  level, including enhanced use of electronic 
technologies and other steps to increase transparency .  Similar reforms have been carried out in 
certain states.  Extension and deepening of  these reforms promises further benefits. 
68. The procurement system is decentralized in In dia, comprising a multiplicity of entities at the 
central, state, and local levels in addition to numer ous public sector enterprises.  Consolidated data are 
not available on the economic significance of govern ment procurement, including a breakdown of the 
value of contracts by tendering method.  Data  from cross-national studies suggest, however, that 
government procurement typically constitutes in the range of 10-15% of total economic activity or 
more.
51  In India, the percentage may be significantly higher given the role of public companies in key 
sectors such as railways, and in the economy generally. 
(b) Procurement procedures and institutional framework52 
Procedures and institutions at the central government level 
69. Central government procurement is governed by  the General Financial Rules (GFRs), which 
are promulgated by the Ministry of Finance.  Th ese rules were extensively overhauled in 2005, to 
enhance administrative flexibility and ensure fu ll accountability for the use of public funds and 
transparency mechanisms appropriate  to the scale of relevant activities.  They have the status of 
subordinate legislation.  Chapter 6 of the rul es deals with procurement of goods and services and 
Chapter 8 with contract management.  All gove rnment purchases must be in accordance with the 
principles outlined in the GFRs.  Organizations that  have their own website must publish their tender 
notices and enquiries on those websites.  Central govern ment organizations that do not have their own 
website must post the notices on the Nati onal Information Centre (NIC) website. 
70. The GFRs provide for purchases based on advertisem ents (open tender), direct invitation to a 
limited number of firms (limited tender), invitation to one firm only (single tender), and negotiation 
with one or more firms.  The normal procedure for procurement over Rs 2. 5 million is through open 
tender.  Department heads have di scretion in deciding whether to a dvertise tenders abroad.  The GFRs 
also provide for purchase of goods without quota tion (up to Rs 15,000) and purchase of goods by 
local purchase committee (up to Rs 100,000).  Limite d tendering is allowed for procurement up to 
Rs 2.5 million and above only in cases:  of urgenc y and where justification is provided by the 
Ministry/Department;  where it is considered not to be in the public interest to procure goods through 
open tender;  and where the possibility of additional suppliers being tapped is deemed to be remote 
(Rule 151 GFR). 
71. Commonly used goods required by central government entities on a recurring basis typically 
are purchased under rate contracts administered by the Directorate-General of Supplies and Disposals 
(DGS&D) in the Department of Commerce.  These contracts are intended to allow the procurement of 
goods from reliable sources without the need for recurrent  tenders.  In principle, there is no preference 
for domestic as opposed to imported goods for such  procurement.  Foreign manufacturers may be 
registered, with or without Indian agents.  Howeve r, both Indian and non-Indian suppliers must be 
                                                      
51 OECD (2001). 
52 This section draws on insights and material contained in Hoda (2006);  ADB/OECD (undated);  
various materials prepared for a "National Seminar on Government Procurement".  Viewed at:  
http://www.unctadindia.org/displa ymore.asp?Gr=&chkey=&subitemkey=771&itemid=378&subchnm=Past& 
subchkey=56&chname=Events;  and information provided by the Government of India. India WT/TPR/S/182/Rev.1 
 Page 57 
 
 
able to provide after sales support in India, and th e products purchased must be "suitable for use" in 
India. 
72. Tender notices are generally publicized through the Indian Trade Journal , a monthly bulletin 
issued by the DGS&D, and are available on the NIC-NET of the National Informatics Centre (NIC). 
For global tenders, notices may also be published or  disseminated through Indi an embassies.  Tender 
specifications are drafted on the basis of national or international standard specifications.  The 
DGS&D registers interested firms as approved contractors.  It has a comprehensive website, which provides, inter alia:   specifications of products on rate contracts;  notices, agendas, and minutes of 
consultative meetings with stakeholders;  downloa dable tender notices and enquiries;  complete text 
of parallel rate contracts;  DGS&D manual;  impor tant circulars;  and the names of registered 
suppliers. 
73. Recently, the Central Government has entrusted to the DGS&D a mandate for a project on 
e-government procurement under the National e-G overnance Plan (NeGP).  This reflects the 
government's determination to implement electroni c tools to ensure transparent and competitive 
procurement processes across all government entities. 
Preferential policies at the central government level 
74. India retains preferential policies for central public-sector and micro and small enterprises.  
Central public-sector enterprises are permitted to submit fresh bids in response to private sector bids.  
For tenders valued between Rs 50 million and Rs 1 billion, a central public-sector enterprise whose 
bid is within 10% of that of a large private unit is allowed to revise its pric e downward and is eligible 
for a contract or parallel-rate contract.  This  system has been extended until 31 March 2008.   
75. Micro and small enterprises (MSEs) receive purchase and price preferences in procurement 
by central government ministries and departments and public-sector enterprises.  Under the purchase-preference system, 358 specified items must be procured exclusively from MSEs.  The price 
preference system provides that if the price offered by the micro or small enterprise is not more than 
15% above the price offered by a large enterprise, the product must be purchased from the  former.  
MSEs are also assisted by way of:  (i) issue of tender sets free of cost;  (ii) exemption from payment 
of "earnest money" (deposits);  and (iii) waiver of security deposits up to the monetary limit for which 
the unit is eligible, based on certain transparent cr iteria.  The National Small Industries Corporation 
(NSIC) serves as a single point of negotiati on for eligible MSEs for government purchasing 
preference schemes. 
Procurement at the state government level 
76. For the most part, the state GFRs that govern  procurement are based on the old GFRs of the 
Central Government, which were updated in 2005.  State governments make extensive use of procurement systems as an instrument of industria l policy, and tend to make less extensive use of 
electronic procurement tools.  There are, however, important exceptions:  the state government of 
Andhra Pradesh has pioneered the use of electronic procurement tools
53;  and Karnataka, Uttarakhand, 
and Chattisgarh have also moved ahead in this area.  Efforts are under way to encourage similar 
reforms in other states.54 
                                                      
53 See Aggarwal, R.P. (undated), e-Procurement in GoAP, slide presentation.  Viewed at:  
http://www.unctadindia.org/displa ymore.asp?Gr=&chkey=&subitemkey=771&itemid=378&subchnm=Past&su
bchkey=56&chname=Events. 
54 See Gupta, M.P. (2006), New Procurement Policy of Government of India:  State Government 
Policies and Tasks Ahead, slide presentation.  Viewed  at:  http://www.unctadindia.org/displaymore.asp? 
Gr=&chkey=&subitemkey=771&itemid=378&subchnm=Past&subchkey=56&chname=Events. WT/TPR/S/182/Rev.1 Trade Policy Review 
Page 58 
 
 
Procurement in the railway and other specialized sectors 
77. Procurement in the railway, postal system, telegraph, and defence sectors is subject to 
specialized procedures developed by the responsible ministries, within the overall framework of the 
GFRs.  In general, competition from foreign suppliers  is allowed in respect of high technology or high 
value items.  For procurement in the railways sector, foreign firms are free to participate in tenders 
advertised in India only, but payment against such c ontracts must be made in Indian rupees at par with 
indigenous suppliers.  Global tende ring is frequently used in procurement of rolling stock, wheels, 
machinery and plant equipment, including technology transfer. 
(c) Anti-corruption measures in public procurement 
78. Recently, a number of initiatives have been ta ken by the Central Government (and certain 
state governments) to promote greater transparen cy and accountability in public procurement and 
thereby deter corruption.  For example, central government procurement procedures are covered by 
the Right to Information Act, 2005.  Under this le gislation, information on any decision by public 
authorities, including on procurement, can be  accessed within a prescribed time frame.  All 
procurement decisions are also subject to audit by the Comptroller and Auditor-General of India, and 
to legislative review and judicial scrutiny.  I ndia is a signatory to the United Nations Convention 
against Corruption.  The ratification of the Conve ntion will proceed once implementing legislation is 
in place.  A joint working committee is considering the requisite legislation to be framed in this 
regard.  India is also participating in the ADB/O ECD Anti Corruption Action Plan for the Asia Pacific 
and has made a commitment to develop "appropria te transparent procedures for public procurement 
that promote fair competition and deter corrupt activity, and adequate simplified administration 
procedures".55 
(d) Agreement on Government Procurement 
79. An issue for the future is whether and/or at what stage it might be to India's advantage to 
consider participation in the WTO Agr eement on Government Procurement (GPA).56  Traditionally, 
India has firmly rejected such participation on vari ous grounds, including the extent of changes that (it 
was perceived) might be required in its domestic  procurement systems and scepticism regarding the 
extent of benefits to its suppliers from GP A-ensured access to foreign procurement markets.57  
However, the reforms to date have moved I ndia towards a more transparent and competitive 
procurement framework.  Another factor to be cons idered is that other major developing countries 
such as China and Saudi Arabia have made commitm ents eventually to seek accession to the GPA, in 
their WTO accession protocols.58  
(xv) State trading 
80. India's last notification to the WTO on state tr ading was made in October 2001.  According to 
this notification, the reasons for maintaining stat e trading include food security and to enable better 
marketing and pricing of state traded products, en sure steady domestic supply, and conservation and 
                                                      
55 ADB/OECD (undated). 
56 The Agreement on Government Procurement provides a vehicle for the progressive opening of 
parties' markets to international competition through legally enforceable provisions on non-discrimination, 
which apply to procurements "covered " by the Agreement (i.e. those set ou t in each party's schedules).  In 
addition, various provisions of the Agreement relating to the provision of information to potential suppliers, contract awards, qualification of suppliers and other elements of the procurement process aim to ensure 
transparency and non -discriminatory conditions of competition between suppliers. 
57 Srivastava, Vivek (2003), pp. 235-267.   
58 WTO document GPA/89, 11 December 2006. India WT/TPR/S/182/Rev.1 
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proper utilization of some metal ores and rare earths for export.59  The major change since 2002 is the 
removal of ammonium sulphonitrite from the list of  products subject to state tendering;  these 
currently include petroleum products, urea, coconut o il and products, and some cereals (Table III.6).  
Data on the share of imports of these products by state-trading enterprises are not available. 
Table III.6 
Imports subject to state trading, 2001 and 2006 
October 2001 1 April 2006 Agency 
Wheat 
Rye 
Oats Maize Rice Grain sorghum Buckwheat, millet, canary seed, jawar, bajra, ragi, other cereals Unchanged 
Unchanged 
Unchanged Unchanged Unchanged Unchanged Unchanged Food Corporation of India 
Copra 
Crude coconut oil (coconut oil and its fractions) 
Other Unchanged 
Unchanged 
Unchanged State Trading Corporation of India Limited and 
Hindustan Vegetable Oils Corporation Limited 
All types of motor spirit (gasoline) All types of aviation spirit 
All types of spirit type (gasoline type) jet fuel 
Kerosene type jet fuels (aviation turbine fuel) Diesel gas oil 
Other gas oil Unchanged 
Unchanged 
Unchanged 
Unchanged Unchanged 
Unchanged Indian Oil Corporation Limited 
Urea, whether or not in acqueous solution Unchange d Minerals and Metals Trading Corporation of 
India Limited; Indian Potash Limited;  and State 
Trading Corporation of India Limited 
Ammonium sulphonitrite Not subject to 
state trading Minerals and Metals Corporation of India 
Limited 
Source:  WTO document, G/STR/N/7/IND, 8 October 2001;  and Ministry of Commerce Foreign Trade Policy.  
(xvi) Other measures 
81. There has been no change in the policy on countertrade during the period under review.  At 
the time of India's last Review in 2002, it was stated that while no law required Indian exporters to 
enter into countertrade agreements, global tenders  sometimes provided preference to companies who 
agreed, ceteris paribus, to countertrade operations.  The main SOEs involved in countertrade in the 
past were the MMTC and the STC.60 
(3) MEASURES DIRECTLY AFFECTING EXPORTS  
(i) Procedures 
82. Exporters must register with the Directorate General of Foreign Trade (DGFT) and obtain an 
IEC number to be eligible to carry out commercial imports or exports.  If goods are to be exported 
under an export promotion scheme this must be declared on the shipping/export bills filed with Customs at the time of export. 
83. The shipping bill must be filed with supporting documents (including invoice, packing list, 
etc.) at Customs.  Once it has been processed, good s are examined by Customs before they can be 
exported.  Goods subject to export restrictions  and quotas must also be accompanied by licences 
issued by the relevant Government departments.  Shipping bills can be filed seven days in advance of 
the presentation of goods to Customs (15 days in advance for exports by sea).  Upon presentation of 
                                                     
 
59 WTO document G/STR/N/7/IND, 8 October 2001. 
60 WTO (2002). WT/TPR/S/182/Rev.1 Trade Policy Review 
Page 60 
 
 
goods for export, a "let export" order is given, on an average within 2-3 hours, for exports by air and 
within 8 hours for 90% of exports by sea.  
(ii) Quality control and preshipment inspection  
84. Since its previous Review in 2002, India h as not made any major changes to its quality 
control and preshipment inspection measures for exports.  Under the Export (Quality Control and 
Inspection) Act, 1963, the Export Inspection Counc il of India (EIC) carries out quality control and 
preshipment inspection to ensure minimum standa rds for exports.  The Act empowers the Central 
Government to notify commodities along with minimu m standards for their export.  Although more 
than 1,000 products have been notified, export certi fication is mandatory for fish and fish products, 
dairy, poultry, egg, meat and meat products, and honey.  No new products have been notified 
since 2002.  The EIC has five export inspection agen cies (EIAs) located across major cities in India, 
supported by 38 sub-offices and laboratories to carry out the preshipment inspection and certification.  
They also issue preferential certificates of orig in for exports, as required.  In addition, other 
preshipment inspection agencies have been approved fo r inspection of minerals and ores, mainly iron 
ore, manganese ore, etc. under the EIC Inspection Agency Recognition Scheme, 2002, which is based 
on ISO/IEC 17020;  35 such agencies have been notified. 
85. The EIC's main systems of export inspection and certification include:  consignment-wise 
inspection (CWI), a systems-based approach for in-process quality control (IPQC), self-certification 
(SC) and food safety management systems based ce rtification (FSMSC).  Residue monitoring plants 
(RMPs) are being set up in various sectors including dairy, poultry, marine, egg products, and honey.  
Over 98% of certified exports, by value, were c overed in 2005/06 by mandatory export certification 
under the FSMSC system.61  The FSMSC is based on international standards of food safety 
management, such as HAACP/GMP/GHP, and involv es approval and surveillance of food processing 
units.  Currently, around 450 units are approved unde r the FSMSC.  The EIC, through the EIAs, also 
issue certificates, inter alia,  for health, non-GMOs, and authenticity of basmati rice.  A scheme for 
issuing non-GMO certificates commenced in 2006/07.  The EIC's certification has been recognized 
for a range of food and non-food products. 
(iii) Export taxes  
86. With the exception of tanned and untanned hides,  skins and leathers (except manufactures of 
leather), all other exports otherwise subject to tax have been exempted through notifications.62  The 
export tax rates for leather range from 10% to  25% of the f.o.b. value of the product.63  An export cess 
applied to various products including coffee, spi ces, tobacco and other agricultural commodities has 
been repealed by the Cess Laws (Repealing a nd Amending) Act, 2005 enacted in 2006.  No 
information was provided to the Secretaria t on which exports remain subject to cess.64  
(iv) Minimum export prices 
87. The authorities state that no minimum export prices are imposed under the current Foreign 
Trade Policy. 
                                                      
61 Department of Commerce (2005), Chapter 11. 
62 Customs Notifications 100 of 1989, amended by Notifications 48 of 1990, 133 of 1992, 91 of 1993, 
68 of 1995, and 135 of 2000. 
63 Customs Notification No. 133/2000, 17 October 2000.  Viewed at:  http://www.cbec.gov.in/cae/ 
customs/cs-act/notifications/cs133-2k.htm. 
64 It appears from the Customs onlin e information that cesses continue to apply for exports of shellac 
and lac based products, manganese ore,  chrome ore, mica, and iron ore. India WT/TPR/S/182/Rev.1 
 Page 61 
 
 
(v) Export prohibitions, restrictions, and licensing 
(a) Export prohibitions 
88. Export prohibitions, which are maintained under the Foreign Trade Policy, are in place for 
environmental, food security, marketing, pricing, and domestic supply reasons, and to comply with 
international treaties.  Since 2002, a few products ha ve been added to the list of prohibited exports 
(Table III.7).  In addition to these export prohibitions , India also issues ad hoc prohibitions on exports 
of sensitive products;  for example, export prohibitio ns have recently been issued for wheat, pulses, 
and sugar (Chapter IV(2)(ii)). 
Table III.7 
Export prohibitions, 2002 and 2006 
Description (status on 1 April 2002) Reason for prohibition Status in 
March 2006 
All wild animals, animal articles includ ing their products and derivatives excluding 
those for which ownership certificates ha ve been granted and those required for 
transactions for education, scientific research, and management under the Wild 
Life (Protection) Act, 1972, in cluding their parts and productsa Protection of wildlife under 
the Wild Life (Protection) 
Act, 1972 Unchanged 
Special chemicals, organisms, material s equipment and technologies (SCOMET) 
goods as specified in Appendix 3 of th e book titled "ITC(HS) Classifications of 
Export and Import Items"b Dual use items Unchanged 
Live exotic birds except albino budgeri gars, budgerigars, Bengali finches, white 
finches, and zebra finches, which ma y be exported subject to preshipment 
inspection, and java sparrows, which are subject to export restrictions Protection of wildlife under 
the Wild Life (Protection) 
Act, 1972 Unchanged 
Beef and offal of cows, oxen and calves  Social and religious reasons Export of buffalo 
meat was not 
prohibited on 1 April 2002 
Undersized rock lobsters and sand lo bsters (HS 0306 11 00, 0306 2100) and sand 
lobsters (HS 0306 12 10, 0306 12 90 and 030 6 22 00) (Notification No.16 dated 
17.7.2003 for prohibition) Ecological reasons Added 
Human skeletons Social reasons Unchanged 
Peacock tail feathers including handicrafts and article s of peacock tail feathers Control of poaching and 
illegal trade in wildlife and 
its products Unchanged 
Shavings and manufactured items of shed antlers  of Chital and Sambhar Control of poaching and 
illegal trade in wildlife and 
its products Unchanged 
Tallow, fat and/or oils of any an imal origin excluding fish oil Soci al and religious reasons Unchanged 
Chemicals under the Montreal Protocol when exported to a country that is not party 
to the Montreal Protocol on Substa nces that Deplete the Ozone Layer Ecological and 
environmental reasons Unchanged 
Condomsc (certain brands)   Added 
Wood and wood products in the form of logs , timber, stumps, roots, barks, chips, 
powder, flakes, dust, pulp and charcoal ot her than sawn timber made exclusively 
out of imported logs/timber Ecological and 
environmental reasons Unchanged 
Fuel wood in logs, in billets, in twigs, in faggots or in similar forms;  wood in chips 
or particles;  sawdust and wood waste and scrap, whether or not agglomerated in 
logs, briquettes, pellets or similar forms Ecological and 
environmental reasons Added 
Wood charcoal (including shell or nut charcoal),  whether or not agglomerated Ecological and 
environmental reasons Added 
Wood sawn or chipped lengthwise, sliced or peeled, whether or not planed, sanded 
or end jointed, of a thickness exceeding 6 mm, other than sawn timber made 
exclusively out of imported logs/timber Ecological and 
environmental reasons Added 
Table III.7 (cont'd) WT/TPR/S/182/Rev.1 Trade Policy Review 
Page 62 
 
 
Description (status on 1 April 2002) Reason for prohibition Status in 
March 2006 
Sandalwood in any form, but excluding finished handicraft products of 
sandalwood, machine finished sa ndalwood products, sandalwood oil Ecological and 
environmental reasons Unchanged 
Red sanders wood in any form, whethe r raw, processed or unprocessed but 
excluding value added products of red sanders  wood such as extracts, dyes, musical 
instruments and parts of musical inst ruments made from red sanders wood 
procured from legal sources Ecological and 
environmental reasons Unchanged 
Mechanical wood pulp To conserve natural 
resources Added 
Chemical wood pulp, dissolving grades To conserve natural 
resources Added 
Chemical wood pulp, soda or su lphate, other than dissolving grades To conserve natural 
resources Added 
Chemical wood pulp, sulphite, other than  dissolving grade To conserve natural 
resources Added 
a Including under Chapters HS 0106, 0208, 0210, 0300, 0407-0408, 0410, 0502, 0504-0511, 1504, 1506, 1516-1518, 1600, and 
3000. 
b Including under Chapters HS 28-29, 30, 35-40, 48-49, 59, 69-91, and 93. 
c Certain brands and those with certain markings /stamps as set out in the Export Policy Schedule. 
Source:  WTO (2002), Trade Policy Review:  India ;  and Ministry of Commerce (2006), Foreign Trade Policy (Schedule 2:  
Export Policy). 
(b) Export restrictions and quotas 
89. Export restrictions are largely unchanged since the last Review.  Some 171 lines at the HS 8-
digit level (excluding special chemicals, organism s, materials, equipment, and technologies) are 
currently subject to restrictions;  products may only be exported if a licence is issued by the 
Directorate General of Foreign Trade (DGFT), on th e approval of its Export Facilitation Committee.   
90. Onions may be exported throug h 13 designated state-trading enterprises (without quantitative 
ceiling) subject to conditions of quality laid out  by NAFED from time to time.  In addition, 
quantitative ceilings are notified by the DGF T for sandalwood oil and sandalwood chips, 
recommended by the Ministry of Environment and Fo rests to conserve natural resources.  All the 
quotas are allocated by the DGFT.  Quotas for wheat and wheat products, grain and flour of barley, 
maize, bajra, ragi and jowar, butter, non-basma ti rice and lentils, gram, beans and flour made from 
them were removed in March 2002.65  
(vi) Measures maintained by importing countries 
91. Between January 2002 and December 2005, Members initiated 52 anti-dumping 
investigations against imports from India;  final measures were taken in 25 cases.  Members also 
initiated 12 countervailing actions against India and imposed final measures in 12 cases during the period.  During January-June 2006 in vestigations were initiated for th ree products and final measures 
were taken in six cases.  India has also identified a number of sanitary and phytosanitary restrictions 
maintained by Members as potential barriers to its  exports.  Issues raised during the period under 
review in the WTO Committee on Sanitary and Phyt osanitary Measures include:  maximum levels for 
certain aflatoxins in food stuffs, residual pesticide tolerance and inspection methods for tea, MRLs in 
animal products for imports into the EC, and geographical BSE risk assessment requirements 
maintained by the EC, import requirements on meat and eggs maintained by Switzerland, as well as 
                                                     
 
65 DGFT online information.  Viewed at:  http://164.100.9.245/exim/2000/not/not01/not4901.htm 
[12 June 2006]. India WT/TPR/S/182/Rev.1 
 Page 63 
 
 
Japan's restrictions on imports of mangoes.66  India also believes that SPS measures maintained on 
mango imports into the United States, Australia, a nd New Zealand, cereal a nd cereal product imports 
into the United States, and cut flower and grape imports into Japan are a barrier to its exports. 
(vii) Duty and tax concessions 
92. In an attempt to mitigate the impact of, if not re move, the anti-export bias inherent in the tariff 
and other indirect taxes, India has established vari ous schemes for exporters to obtain tax rebates or 
remissions.  The schemes include drawbacks for cu stoms duty paid, and exemptions from payment of 
import duty.  They render the export regime rather complex. 
(a) Drawback 
93. The system of duty drawback and its rates are reviewed and revised every year.  Drawback is 
available under the Customs Act, 1962 for re-e xports of goods on which import duty was paid 
(Section 74) and for imported material used in th e manufacture of exports (Section 75).  Drawback 
rates are drawn up annually and released soon after the Budget is introduced in Parliament.  The rates 
are based on parameters including the prevailin g price of inputs, standard input-output norms 
published by the DGFT, share of imports in total input s, and the applied rates of duty;  in most cases, 
the drawback is less than 100% of the import duty paid.  According to the authorities, although the 
rates are based on a mixed classification, they are fully aligned with the HS nomenclature at the HS 4-digit level.
67  The rates are expressed as a percentage of the f.o.b. value of the export.  
(b) Other duty and tax concessions 
94. In order to offset the incidence of import duties and internal taxes India provides tax 
exemptions and rebate/remission to exporters throug h various schemes (see section (4)(ii) below) and 
on customs duty.  While barriers to imports have declined and the indirect tax system has been 
rationalized over the years, the number of these schemes renders the export regime increasingly 
complex.  In the latest Foreign Trade Policy, announced in March 2006, the Duty Free Import Authorization (DFIA) scheme was announced to re place the DFRC scheme, the agriculture scheme 
was expanded to include village industry products , while the Target Plus scheme introduced in 2004 
was discontinued (Table AIII.4). 
95. In addition to introducing new programmes and replacing others, changes have been made to 
existing programmes.  The Duty Free Import Author ization (DFIA) scheme offers exemptions in 
respect of customs duty, additional duty, educati on cess, and any anti-dumping or safeguard duties in 
force for inputs used in exports.  The main difference between the DFIA and the Advance 
Authorization scheme seems to be that the A dvance Authorization scheme requires positive value 
added in exports, and the DFIA requires minimum value added of 20%.  The export obligation period 
for the EPCG has been extended to 12 years in certa in cases (Table AIII.4).  Changes to the "Served 
from India" scheme, include a reduction in duty-fr ee imports from 20% to 10% of foreign exchange 
earned by restaurants in the previous financial year. 
                                                     
 
66 WTO documents G/SPS/GEN/204/Rev.2 to Rev.6. 
67 Ministry of Finance, Circular  No. 22/2005-Cus., 2 May 2005.  Viewed at:  http://www.cbec.gov.in/ 
cae/customs/dbk-schdule/dbk-2005-06/c ircular0506.doc [24 May 2006].  The authorities also state that a 
complete alignment with the customs tariff at the 6- and 8-digit levels is not required as the objectives of the 
customs tariff and the drawback schedule are different.  The 6-digit and 8-digit sub-headings of the drawback 
schedule have been devised keeping in view the composition of Indian exports, just as the 8-digit level sub-headings in the customs tariff have been devised keeping in view the composition of imports into India. WT/TPR/S/182/Rev.1 Trade Policy Review 
Page 64 
 
 
96. The Government has estimated revenue forgone from these schemes at Rs 537.7 billion in 
2006/07, up from provisional figures of Rs 375.9 billion for the previous year;  the largest shares are accounted for by the Advance Authorization Scheme (32.8%) and the EOU/EHTP/STP Scheme 
(25.4%).
68 
(viii) Free-trade zones 
97. India's first export processing zone was establis hed in Kandla in 1965, followed by the Santa 
Cruz Electronics Export Processing Zone in 1973.  A lthough they were set up to counter the anti-
export bias inherent in India’s policies of import su bstitution, research has sugg ested that they were 
not particularly successful due to continued restri ctions on their operations and on foreign direct 
investment.69  In 1980, the export oriented unit (EOU) scheme was introduced.  The EOUs were set 
up outside the EPZs, but were managed by the De velopment Commissioners of the EPZs and had 
access to the same ince ntives.  Further EPZs and specialized processing zones (for software, 
electronic hardware, and agriculture) were set up in the following years.  In 2001, the Government 
further expanded the network by establishing Speci al Economic Zones (SEZs).  The degree of success 
of these zones is not clear.  A recent study, fo r example, found that exports from the EPZs and SEZs 
as a share of total exports have been almost stagnant since the early 1990s.70  Data provided by the 
authorities for 2001/02 to 2005/06, show that the shar e of total exports from EOUs has remained at 
between 8% and 10% and from the SEZs (i ncluding EPZs) at between 4% and 5%.71  There also 
appears to be considerable sectoral variation, w ith exports of gems and jewellery and electronics 
faring better than other industries. 
98. Of the seven EPZs in India, one is exclusivel y for exports of electronic products and gems 
and jewellery.72  In addition to income tax relief and ho lidays (Table AIII.4), the incentives provided 
for investing in the EPZs include exemption from import licences, single window approval process, 
and exemption from customs duty for industrial inputs;   imports from the domestic tariff area (DTA) 
are also exempt from payment of excise duty.  There are also around 2,334 EOUs in the country receiving the same incentives initially as firms esta blished in the EPZs although the EPZs have now 
become SEZs (see below).  
99. The multi-product SEZs, which can be set up by government or private entities over a 
minimum contiguous area of 1,000 hectares (at least 200 hectares in selected states)
73, are self-
contained parks providing advanced infrastructure,  and all units operating in the SEZs are offered 
simplified customs and other administrative procedures, and facilities such as electricity, and water.  
In contrast to EPZs and EOUs, there are no mini mum export requirements for SEZs although they are 
required to be net foreign exchange earners.  In a ddition to the tax incentives already provided to the 
EPZs and EOUs, investors in the SEZs are eligible for other incentives, including:  exemption from 
the service tax and minimum alternate tax;  up to 1 00% FDI in most activities;  and a relaxation of 
                                                      
68 Ministry of Finance (2007). 
69 Aggarwal (2005). 
70 Aggarwal (2004). 
71 Data provided by the authorities show that expor ts from EOUs grew from Rs 187 billion in 2001/02 
to Rs 377 billion in 2005/06, and from SEZs from Rs 92 billion to Rs 223 billion during the same period. 
72 Kandla Free Trade Zone;  Falta Export Processing Zone;  Santa Cruz Electronics Export Processing 
Zone;  Vishakhapatnam Export Processing Zone;  Chennai Processing Zone;  Cochin Export Processing Zone;  and Noida Export Processing Zone. 
73 SEZs proposed in the states of Assam, Meghalaya, Nagaland, Arunachal Pradesh, Mizoram, 
Manipur, Tripura, Himachal Pradesh, Uttaranchal, Si kkim, Jammu and Kashmir, Goa or in a Union Territory 
(Chapter II of the Special Economic Zones Rules, 2006). India WT/TPR/S/182/Rev.1 
 Page 65 
 
 
certain requirements including environmental im pact assessment, labour laws, and residence 
requirements for foreign managing directors of companies (Table AIII.4).74 
100. Thus far, approval has been given for around 237 SEZs across 19 states and 3 Union 
Territories;  all of the existing EPZs have been  converted to SEZs.  Like the EPZs, each SEZ is 
administered by a Development Commissioner.  App lications for establishing a unit in a SEZ must be 
made to the Development Commissioner of the SEZ along with supporting documents.  The  
Approval Committee must provide its decision to the applicant within 15 days of receipt of the 
application;  for applications re quiring an industrial licence, approval must be given within 45 days by 
the SEZ's Board of Approval in the Ministry of Commerce and Industry.75  Sector-specific 
considerations based on, inter alia , export potential and product sensitivity, apply for high grade iron 
ore, coffee, polyester yarn, and some textiles and clothing products.76  A large share of the industries 
approved to operate in the SEZs seem to be info rmation technology based industries.  The cost-
effectiveness of these SEZs in generating increm ental investment and employment is open to 
question.  As these are fairly capital-intensive activities,  it is not clear that this is the most effective 
way to create additional employment opportunities, especially for the less-skilled labour force.  The 
Ministry of Finance estimates that forgone taxes from the SEZs will amount to some Rs 1,750 billion 
(US$39.6 billion) by 2011, while the Ministry of  Commerce estimates that the SEZs will bring in 
US$13.5 billion in investment and 890,000 jobs by 2009.77  Duty forgone from the SEZs was 
estimated at Rs 21.5 billion in 2006/07.78  These figures suggest that the amount of investment 
generated by SEZs falls far short of the associated tax revenues forgone and that the average cost of 
the jobs created is very high, all of which cast s doubt on the cost-effectiveness of SEZs.  The Reserve 
Bank of India has also noted that the revenue loss in providing incentives may be justified only if the 
SEZs ensure forward and backward linkages with the domestic economy.79  
(ix) State trading 
101. There has been further liberalization in state tr ading in exports since 2002.  The main changes 
concern onions, which can be freely exported by  a number of state cooperatives, while some 
petroleum products (LPG and kerosene) can be exported subject to obtaining a "no objection" 
certificate from the Ministry of Petroleum and Natura l Gas (Table III.8).  Indi an exports of sugar are 
subject to tariff rate quotas in the United States a nd the EC and are exported through the Indian Sugar 
Exim Corporation Limited, which is a sugar producers cooperative.80 
                                                      
74 In certain cases, labour laws have been delegated by states to the SEZs, and specific legislative 
amendments have been passed by some states to introduce flexibility in labour and environmental requirements 
applied to the SEZs (SEZ online information.  Viewed  at:  http://www.sezindia.nic. in/lab.asp [30 June 2006]. 
75 SEZ online information.  Viewed at:  http://sezindi a.nic.in/howapply_enterprise.asp [16 June 2006]. 
76 Rule 18 of the SEZ Rules 2006.  Viewed at:  http://www.sezindia.nic.in/sez-rules2006.pdf 
[16 February 2007]. 
77 The Economist , 27 January 2007. 
78 Ministry of Finance (2007). 
79 RBI (2006b). 
80 Quantitative ceilings are notified by the DGFT from time to time (ITC(HS), Schedule 2:  Export 
Policy). WT/TPR/S/182/Rev.1 Trade Policy Review 
Page 66 
 
 
Table III.8 
Exports subject to state trading, 2001 and 2006 
October 2001 1 April 2006 Agency 
Onions (all varieties other than Bangalore 
rose onions and Krishnapuram onions) Under notification 20 of 8 Oc tober 2003, all varieties 
of onions (including Bangalore rose and 
Krishnapuram) can be exported;  in addition to the 
agencies previously authorized, onions can be exported by the Karnataka State Cooperative 
Marketing Federation Ltd. (KSCMF);  the North 
Karnataka Onion Growers Co-operative Society (NKOGCS);  the West Bengal Essential Commodities Supply Corporation (WBECSC) Ltd.;  M.P. State 
Agro Industries Development Corporation 
(MPSAIDC);  Karnataka State Produce Processing and Export Corporation (KAPPEC);  Madhya Pradesh 
State Co-operative Oil Seeds Growers Federation Ltd.;  
and the Andhra Pradesh Marketing Federation (AP MARKFED). National Cooperative Consumers' 
Federation of India Ltd.(NCCF);  
National Agricultural Cooperative 
Marketing Federation of India Ltd. (NAFED);  Gujarat Agro 
Industries Corporation Ltd. 
(GALC);  Maharashtra State Agricultural Marketing Board (MSAMB);  Andhra Pradesh 
State Trading Corporation;  and 
Spices Trading Corporation Ltd. (STCL) 
- Bangalore rose onion Not subject to state trading (see above)  
- Krishnapuram onion Not subject to state trading (see above)  
Niger seeds Not subject to state trading   
Gum karaya Unchanged Tribal Cooperative Marketing 
Development Federation of India Ltd. 
Preferential quota sugar to the EC and the United States Unchanged Indian Sugar Exim Corporation 
Limited subject to quantitative ceiling notified by DGFT from 
time to time 
Mica scrap Not subject to state trading   
Iron ores concentrate prepared by 
beneficiations and or concentration of 
low-grade iron ore containing 40% or less 
of iron produced by Kudremukh Iron Ore Company Ltd. Unchanged Kudremukh Iron Ore Company 
Ltd. 
Iron ore pellets manufactured by Kudremukh Iron Ore Company Ltd. out of 
concentrates produced by it Unchanged Kudremukh Iron Ore Company 
Ltd. 
Manganese ores below 46% Mn Uncha nged Minerals and Metals Trading 
Corporation (MMTC);  and 
Manganese Ore India Ltd. (MOIL) 
Chrome Ore lumps with Cr2O3 not exceeding 40% Unchanged Minerals and Metals Trading 
Corporation (MMTC). 
Low silica, friable/fine ore with Cr2O3 not exceeding 52% and silica exceeding 4%;  
and low silica friable/fine chromite ore 
with Cr2O3 in the range of 52-54% and silica exceeding 4% Unchanged Minerals and Metals Trading 
Corporation (MMTC) 
Crude oil Unchanged  Indian Oil Corporation 
Liquefied petroleum gas Free subject to obtaining NOC from Ministry of 
Petroleum and Natural Gas  
Kerosene Free subject to obtaining NOC from Ministry of 
Petroleum and Natural Gas  
Rare earths (including yttrium) ores, 
concentrates and compounds thereof Free although monazite is a prescribed substance 
subject to the provisions of the Atomic Energy Act, 
1962  . 
Other materials containing the following 
substances as accessory ingredients, including: 
- Samerskite - Uraniferrous allanite radium ores and 
concentrates Free but subject to the provisions of the Atomic 
Energy Act, 1962   
Source:  WTO document G/STR/N/7/IND, 8 October 2001;  and Ministry of Commerce and Industry (2006), Foreign 
Trade Policy 2004-2009;  Schedule 2:  Export Policy. India WT/TPR/S/182/Rev.1 
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(x) Export finance, insurance, and guarantees 
102. Export finance is provided primarily by the E xport-Import Bank of India (Exim Bank) as well 
as through mandatory annual lending targets for commercial banks.  The Exim Bank was established 
in 1982 under the Export Import Bank of India Act, 1981.  Its primary responsibility is to finance, 
facilitate, and promote India's exports .  It is wholly owned by the G overnment of India and its Board 
of Directors includes representation from the Minist ries of Commerce and Industry, and Finance, as 
well as the Reserve Bank of India, banks, and the private sector. 
103. The Exim Bank provides a range of fina ncing products, support programmes, and 
value-added services to promote two-way trade and investment.  It provides credit to governments and 
to overseas financial institutions to enable buyers  in those countries to purchase capital/engineering 
and manufactured products and related services from India on deferred payment terms negotiated 
between the Exim Bank and the overseas agency.81  The export credit can be provided to Indian 
companies, commercial banks or overseas entities.82  The bank also provides various export guarantee 
schemes and fee-based services to support internati onal trade and investment, and conducts related 
research.83  The bank is wholly owned by the Government of India (GOI), which has subscribed to its 
equity capital.  The Government has also subscr ibed to an issue of long-term subordinated bonds, 
which qualify as Tier I capital of the bank.  Th e bank also raises resources from the domestic and 
international capital markets.84  Under the Act, the bank is required to act on business principles and is 
also liable to tax under the Income Tax Act.  The bank usually lends on a cost-plus basis at 
market-related interest rates.  In certain cases, it may (at the behest of and on behalf of the 
Government) extend a line of credit to an overseas gove rnment or institution.  The top five industrial 
sectors to which the bank had exposure, on 31 Ma rch 2006, were textiles a nd garments, metals and 
metal processing, engineeri ng goods, construction goods a nd services, and capital goods.  
104. Under the current guidelines on le nding to the priority sector, 12% of net bank credit (within 
the overall target of 32% of net bank credit stipulat ed for priority sector lending) must be loaned to 
the export sector by foreign banks having offices in I ndia.  The loans may be provided in domestic or 
foreign currency and are at concessional rates of inte rest.  As at March 2006, 19.4% of net bank credit 
by foreign banks went to the export sector:  out of  29 foreign banks, 26 have achieved the 32% target. 
105. Export insurance is provided by the Export Credit Guarantee Corporation of India Limited 
(ECGC).  The ECGC is under the administrative c ontrol of the Ministry of Commerce and Industry, 
and its Board of Directors includes representation from the Central Government, the RBI, and the 
banking, insurance, and exporting sectors.  It provid es:  credit risk insurance for exporters of goods 
and services;  pre- and post-shipment cover to banks and financial institutions, to enable exporters to 
obtain adequate and need-based financing;  and ove rseas investment insurance to Indian companies 
investing in joint ventures abroad either thro ugh equity or loans on a "liberal basis".85  According to 
                                                      
81 Export-Import Bank of India online information.  Viewed at:  http://www.eximbankindia.in/ 
services-1a.html [20 July 2006]. 
82 Export-Import Bank of India online information.  Viewed at:  http://www.eximbankindia.in/ 
faq.html [24 July 2006].  
83 The guarantees include:  bid bond guarantees; advance payment guarantees; performance guarantees; 
guarantees for release of retention money;  and guara ntee for raising borrowings overseas for execution of 
project export contracts (Export-Import Bank of India online information.  Viewed at:  
http://www.eximbankindia.in). 
84 Instruments used by the bank for raising short-term finances include commercial paper and 
certificates of deposit;  instruments used for raising medium- and long-term funding include syndicated loans 
and bonds.  Resources are ra ised on the strength of the bank's own balance sheet. 
85 ECGC online information.  Viewed at:  http s://www.ecgcindia.com/Portal/aboutus/aboutus.asp#q1, 
24 July 2006;  and Department of Commerce and Industry (2006), pp. 37-40. WT/TPR/S/182/Rev.1 Trade Policy Review 
Page 68 
 
 
the authorities, "liberal basis" implies that the EC GC cover is expected to provide increased comfort 
to exporters to enhance their exports and to the ba nks for financing the exporters, but does not imply 
concessional rates of premium or terms.  In additio n, in March 2006, the Government approved the 
establishment of a National Export Insurance Account  (NEIA), to ensure the credit-risk cover for 
medium and long-term exports, which are commerc ially viable and are desirable from a national 
interest point of view, but which ECGC cannot underwrite without affecting their competitiveness.86  
Funding for these programmes will be provided by the Central Government or through the Tenth Five 
Year Plan.87  The ECGC will only administer the NEIA, the risk will be borne by the Government.  
Furthermore, the authorities note that the ECGC is  guided in its decisions solely by commercial 
judgement and does not receive a subsidy from the Government. 
(xi) Export promotion and marketing assistance 
106. In addition to the tariff concessions and ex emptions and export programmes mentioned 
above, the Department of Commerce encourages expor ts indirectly through the Assistance to States 
for Development of Export Infrastructure and Allied Activities (ASIDE) scheme, which provides 
assistance for setting up new export promotion park s and zones and complementary infrastructure 
such as road links to ports, container depots,  and power supply;  the Marketing Development 
Assistance (MDA) scheme, to suppor t efforts by the export promotion councils (EPCs) in their export 
promotion activities;  the Market Access Initia tive (MAI) scheme, which provides assistance for 
research on potential export markets;  as well as ot her incentives to improve quality, infrastructure, 
etc. related to agriculture throug h the commodity boards and councils.88  India's EPCs and commodity 
boards also continue to promote exports of specific products.  The India Trade Promotion 
Organization (ITPO) also continues its promotion act ivities by organizing trade fairs and exhibitions 
in India and abroad.89 
(4) MEASURES AFFECTING PRODUCTION AND TRADE  
(i) Industrial policy 
(a) Overview 
107. The Statement of Industrial Policy, issued in  1991, which started the process of economic 
liberalization in India, sets the basis for current industrial policy.90  Licensing requirements are in 
place for a number of industries, although these have  been substantially reduced since 1991.  As a 
result of gradual reform, there are now three industries reserved only for the public sector, compulsory industrial licensing is required for five industries, 326 products at the HS 8-digit level are reserved for 
the small scale sector, and there are locational r estrictions under urban zoning and environmental 
regulations  for non-Small-Scale Industry (SSI) units subject to industrial licensing. 
                                                     
 
86 Projects include high risk with re spect to a single country;  high value of a single transaction;  and 
large value projects involving unusual or unconventional credit terms, which are beyond the normal, 
risk-bearing capacity of the ECGC  (Department of Commerce, 2006). 
87 This includes Tenth Plan expenditure of Rs 17.25 billion for the ASIDE programme (Rs 14.9 billion 
had been released by end December 2005);  and Rs 660 million for the financial year 2005/06. 
88 Department of Commerce (2006). 
89 Other organizations affiliated to the Ministry of Commerce and Industry include the Federation of 
Indian Export Organizations (FIEO), the Indian Diamond Institute, and the Indian Council of Arbitration, 
which, inter alia,  provides arbitration facilities to settle trad e disputes (Department of Commerce, 2006). 
90 India's policy on industrial licensing is based on the Industries (Development and Regulation) Act, 
1951.  India WT/TPR/S/182/Rev.1 
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(b) Public sector reservation 
108. As at April 2006, three industries (atomic energy , substances specified in the schedule to the 
notification 212(E) issued by the Department of  Atomic Energy (15 March 1995), and railway 
transport) are reserved exclusively for investment and manufacture by public sector companies.  At 
the time of the last Review, defence aircraft and warships were also reserved for the public sector. 
(c) Compulsory industrial licensing 
109. India continues to require compulsory industrial licensing for a few industries for security, 
safety, strategic, social, and environmental reasons;  the main change since the previous Review is the 
removal, on 23 September 2005, of the drugs and pharmaceuticals industry as it seems these are 
already subject to licensing under the Drugs Control Order (Table III.9).91 
Table III.9 
Industries for which industria l licensing is compulsory 
 Industry 
1. Distillation and brewi ng of alcoholic drinks 
2. Cigars and cigarettes of tobacco  and manufactured tobacco substitutes 
3. Electronic aerospace and defence equipment:  all types 
4. Industrial explosives, including detonation fuses, sa fety fuses, gun powder, nitrocellulose, and matches 
5. Specified hazardous chemicals i.e. (i) hydrocyanic acid and its  derivatives, (ii) phosgene and its derivatives and (iii) iso cyanates 
and diisocyanates of hydrocarbon, not elsewh ere specified (example methyl isocyanate) 
Source:  Information provided by the authorities. 
110. Potential investors in industries subject to co mpulsory industrial licensing must submit an 
application to the Secretariat for Industrial Approva ls (SIA) in the Department of Industrial Policy 
and Promotion (DIPP) of the Ministry of Comme rce and Industry.  Decisions are made within 
4-6 weeks of receipt of the application.  The Licensing Committee takes into account the location and 
pollution/environmental impact of the proposed industrial unit.  For industries exempt from the 
industrial licence requirement, applicants must subm it an "Industrial Entrepreneur Memorandum" to 
the SIA.  A "carry on business" (COB) licence is required for micro and small manufacturing enterprises that exceed the investment limits (in plant and machinery, excluding land and buildings) 
prescribed for them (section (d) below);  if th e unit exceeds the investment limit indicated on the 
COB, it must obtain an industrial licence;  follo wing the granting of the COB the unit loses its SSI 
status.
92  
111. Environmental clearance is also required separately for 39 categories of developmental 
projects, from the Central Government or, as the case may be, from the State level Environmental Impact Assessment Authority, under notifications issu ed by the Ministry of Environment and Forests, 
under the Environment (Protection) Act, 1986.
93  Applications for environmental clearance must be 
made to the authorities prescribed by the notifi cation.  The authority must grant or refuse 
environmental clearance within 105 days of receipt of the final environmental impact assessment 
(EIA) report (incorporating environmental con cerns arising from public consultations, where 
applicable).  The main change since the previous Re view of India, is a new EIA notification issued on 
14 September 2006, which seeks to rationalize and re -engineer the EIA process and to decentralize 
                                                      
91 Department of Industrial Policy and Promotion Notification, Gazette of India , 23 September 2005. 
92 Department of Industrial Policy and Promotion (2005). 
93 These categories include: manufacturing and chem ical industries, river valley and hydroelectric 
projects, infrastructure, nuclear an d thermal power plants, mineral extraction, and large construction. WT/TPR/S/182/Rev.1 Trade Policy Review 
Page 70 
 
 
decision making in most cases to the state author ities in order to render the process faster and 
transparent.94 
112. Locational restrictions continue to apply to se tting up industrial units in 23 cities (21 cities at 
the time of the previous Review) with a popu lation of over one million (according to the 
1991 census).  Manufacturing enterprises must obtain an industrial licence to invest within a radius of 
25 kilometres of the Standard Urban Area limits of these cities, unless the unit is to be established 
within an area designated as an "industrial area" befo re 25 July 1991, or if the industry is designated 
as "non-polluting" such as electronics, computer software, and printing.95  Data provided by the 
authorities on industrial licences granted indicate that most applications since 2002 have been 
approved (out of 698 applications received up to Oc tober 2006, 471 or 67.5% have been approved, 
and 26 or under 4% rejected).  The main sectors in which the licences were approved are textiles, 
chemicals (other than fertilizers), metallur gical industries, and defence industries. 
(d) Small-scale enterprises 
113. Under the Micro, Small and Medium Enterp rises Act (MSMED), 2006, enterprises are 
classified as micro, small and medium enterprise s according to the amount of investment.  For 
enterprises involved in manufacturing, micro enterpri ses are defined as those with investment of up to 
Rs 25 million;  small as those with investment be tween Rs 25 million and Rs 50 million;  and medium 
enterprises as those with  investment between Rs 50 million and Rs 100 million.  In services, micro 
enterprises are defined as those with investment of up to Rs 1 million;  small as those with investment 
between Rs 1 million and Rs 20 million;  and medium  enterprises as those wi th investment between 
Rs 20 million and Rs 50 million. 
114. According to estimates, the SSI/MSE sector accounted for around 40% of gross industrial 
value added in India and almost 44% of manufactured exports in 2005/06.  It is estimated that at the 
end of 2005/06, there were around 12.3 million MSEs providing employment to 29.5 million people.96  
The sector's contribution to the economy in terms of output and employment has grown steadily, with 
output growth at 9.2% (at constant prices) and em ployment growth at 4.3% annually during 2002/03 
and 2005/06.97 
115. To promote the development and enhance th e competitiveness of MSEs, the MSMED Act, 
2006 entered into effect on 2 October 2006.  Th e Act provides a legal framework to recognize the 
concept of "enterprise" (in manufacturing and services) and to integrate the three tiers of micro, small and medium-sized enterprises.  The Act also provi des for a statutory consultative mechanism at the 
national level with stakeholders, particularly the th ree classes of enterprises, and with a wide range of 
advisory functions.  It also establishes, inter alia,  specific funds and schemes /programmes to promote, 
develop, and enhance the competitiveness of these enterprises;  credit policies and practices;  
preferences in government procurement for products  and services of micro and small enterprises;  
more effective mechanisms for mitigating the prob lems of delayed payments to micro and small 
enterprises;  and simplified procedures to close poorly  performing firms.  The legislation also defines 
medium-sized enterprises for the first time and mi cro enterprises for the first time under law.  
According to the authorities, some nine notifications /model rules (the latter to be adopted by state 
governments) have been issued in this connection. 
                                                     
 
94 Ministry of Environment and Forests online information.  Viewed at: http://envfor.nic.in/legis/ 
eia/so1533.pdf [8 February 2007]. 
95 Department of Industrial Policy and Promotion (2005). 
96 RBI (2005). 
97 Ministry of Finance (2006). India WT/TPR/S/182/Rev.1 
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116. A number of products have been reserved for production only by SSI/MSE in order to 
encourage their development.98  Over the years, however, recognizing that reservation did not 
necessarily help SSI units to develop and expand, the Government has gradually reduced the number 
of products.  The policy on reservation, including a re view of products on the list, is implemented by 
the Advisory Committee on Reservation created in 1984 .  The review is base d on consultations with 
all stakeholders, followed by a recommendation to the Government.  Since the previous TPR of India, 
the number of products reserved exclusively for SSIs has declined from 799 to 326.  The products 
removed from the list include:  textiles, rubber, leather, plastics, chemicals, and mechanical 
engineering products (Table III.10).  It is estim ated that in 2001/02 these products accounted for 
around 8.4% of the total output of the SSI sector.99  In certain cases, non-SSI units can manufacture 
items reserved for SSIs, including:  where the undertak ing existed prior to the reservation of the item 
being manufactured by it and has a COB licence;  when a SSI becomes too large and has a COB licence;  if a non-SSI obtains a letter of intent with an obligation to export a minimum of 50% of its output;  where a non-SSI has been granted a licence prio r to the reservation of an item, it can continue 
to produce that item to the extent of the prescribed  licensed capacity;  and when a unit is established 
in a special economic zone (SEZ).   
Table III.10 
Items reserved for the small-scale sector, 2001 and 2006 
Product 2001 May 2006 
Food and allied industries 12 9 
Textile products including hosiery 16 0 
Articles of silk and man-made fibre hosiery 15 0 
Wood and wood products 14 9 
Paper products 30 19 
Leather and leather products including footwear 9 0 
Rubber products 21 0 
Plastic products 15 13 
Injection moulding thermo-plastic products (1) 42 37 
Injection moulding thermo-plastic products (2) 7 3 
Chemicals and chemical products labor atory chemicals and reagents 62 7 
Natural essential oils 7 2 
Organic chemicals, drugs and drug intermediates 37 12 
Other chemicals and chemical products 76 20 
Glass and ceramics 3 3  
Ceramic table wares and allied items in st one wares semi-vitreous wares and earthen 
wares 24 24 
Mechanical engineering excluding transport equipment 193 61 
Electrical machines, appliances and other apparatus including electronics and 
electrical appliances 47 17 
Electronic equipment and components 9 1 
Transport equipment, boats and truck body building 3 3 
Auto parts components and ancilla ries and garage equipment 47 0 
Bicycle parts, tricycle s and perambulators 42 41 
Miscellaneous transport equipment 4 4 
Miscellaneous:  mathematical and survey in struments;  sports goods;  stationary 
items;  clocks and watches 52 20 
Others 22 21 
Total 799 326 
Source: Data provided by the Small Industries Development Organisation, Ministry of  Small Scale Industries. 
                                                      
98 In 1967, when reservation for the SSI was introduced, 67 products were reserved;  the number 
peaked at 836 products in 1989 and has progressively declined since then. 
99 Information based on the Third All India Census of Registered SSI Units and sample survey of 
unregistered SSI units and provided by the authorities. WT/TPR/S/182/Rev.1 Trade Policy Review 
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117. In addition to the list of items for exclusive manuf acture by the SSI, restrictions are in place 
on investment in SSI/MSEs:  any non-MSE enterpri se that has no interest in another industrial 
undertaking can hold up to 100% equity in MSEs.  However, if the unit or enterprise has an interest in any other industrial undertaking, it may invest a maximum of 24% equity (including FDI).  These 
issues, based on the Industries (Development & Regulation) Act, 1951, as well as the list of items 
reserved for manufacture by the SSI, are currently under review. 
118. In 1999, the Government established the Minist ry of Small Scale Industries (split into the 
Ministry of Small Scale Industries and Ministry of Agro and Rural Industries in 2001) to provide 
assistance to the states in developing small-scale indus tries.  The Ministry operates with the help of 
the Small Industry Development Organization (SID O) and the National Sma ll Industries Corporation 
Limited (NSIC), a public sector enterprise.  The SI DO (also known as the Office of the Development 
Commissioner (Small Scale Industries)), which was established in 1951, provides, inter alia , 
technology support services, and marketing assistance to SSI units through its offices across the country.  Assistance includes direct credit and credit through the banks under the priority sector 
lending targets as well as other forms of protec tion, such as government purchase of 358 items 
exclusively from the small-scale sector and a 15% pr ice preference for the SSI units (Table AIII.5) 
(section (2)(xiv)).  The National Small Industries Co rporation Limited (NSIC) is the single-point of 
registration for eligible MSEs for government purchase preference schemes. 
119. Despite these efforts to assist the SSI, industria l "sickness" appears to remain a problem.  The 
main reasons are inadequate and delayed credit, ob solete technology, infrastructural constraints, 
management deficiencies, and marketing problems.  Under the RBI's latest guidelines, an SSI unit is 
defined as sick when any of its loan accounts remain s ubstandard for more than si x months;  or if after 
at least two years of commercial production, there is an erosion in the net worth of the unit due to 
accumulated losses of up to 50% of its net worth during the previous accounting year.
100  According 
to the most recent survey conducted by the SIDO, 104,769 units (or 1% of all SSI units) were judged 
to be "sick".  "Incipient" sickness measured as continuous decline in gross output over three 
consecutive years was found in 750,922 uni ts (around 7.14% of all SSI units).101  To address these 
problems, the RBI issued detailed guidelines to banks  in January 2002 on detection of sickness at an 
early stage and remedial measures, and for rehab ilitation of sick SSI units identified as potentially 
viable.  These guidelines include, inter alia , changes in the definition of sick SSI units, norms for 
deciding their viability, and concessional finance.   The Government also announced the Policy 
Package for Stepping up Credit to Small and Medium Enterprises (SMEs) on 10 August 2005, while 
the RBI issued detailed guidelines on 8 September 2005 on a debt restructuring mechanism for all 
eligible SMEs (including SSIs).  These guidelines include, inter alia , viability criteria, prudential 
norms for restructured loan accounts, provision of a dditional finance, and time frame for working out 
the restructuring package and its implementation.  As at March 2006, the assets of 594 SME units had 
been subject to restructuring under the debt restructuring mechanism. 
                                                      
100 SIDO online information.  Vi ewed at:  http://www.s mallindustryindia.com/Print.jsp?filename=/ 
ssiindia/census/ch7.htm [4 July 2006]. 
101 Almost 60% of sick SSI units were found in the states of West Bengal, Kerala, Maharashtra, 
Karnataka, and Andhra Pradesh, while over 54% of in cipient sickness was found in the Kerala, Tamil Nadu, 
Andhra Pradesh, Karnataka and Mahara shtra (SIDO online information.  Viewed at:  http://www.smallindustry 
india.com/Print.jsp?filename=/ssiindia/census/ch7.htm [4 July 2006]. India WT/TPR/S/182/Rev.1 
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(ii) Taxation and non-tax assistance 
(a) Tax policy 
Overview 
120. India's tax system has moderate tax rates but  a narrow tax base, owing to an array of 
exemptions and incentives.  As a result, average effec tive tax rates (the ratio of taxes collected to the 
notional tax base) tend to be low, but marginal eff ective tax rates are high, thereby creating a potential 
distortion to both investment and financial decisions.102  Under the Indian Constitution, taxation is a 
shared responsibility, with both the central and state governments raising revenue through certain 
taxes.  The main taxes levied by the Central G overnment are income tax (personal and corporate), 
customs duties, excise duties, and service tax.  The Central Government also levies a central sales tax 
(CST) on inter-state sales of goods, but this is colle cted and appropriated by the states.  The states 
raise most of their revenues through the sales tax (replaced by the VAT in most states), although there are also other taxes like state excise duty on alcohol, stamp duties, octroi/entry tax, tax on professions, tax on agricultural income, etc. 
121. Since 2000/01, the Central Government's total tax revenues have ranged between 5.9% and 
8.4% of GDP (between 8.2% and 11.4%, if transfers to the states are included (Table I.4)).  (Revenues 
including state taxes rose from 14.5% of GDP  in 2000/01 to 16.6% in 2005/06.)  Excises and 
corporate income tax accounted for the largest shar es of tax revenues in 2006/07.  Whereas the share 
of import duties in the Central Government's total tax revenues has declined substantially, owing to 
reductions in tariff rates, the combined share of  corporate and personal income taxes has risen 
considerably, mainly as a result of improvements in tax administration and compliance.
103 
122. Despite the gradual increase in total tax revenue, India's tax to GDP ratio is relatively low, 
and services, which make up over half of India's GDP, are not taxed appropriately.104  Moreover, the 
tax base is relatively narrow due to the many exemp tions granted for both direct and indirect taxes, 
resulting in poor buoyancy.105  Despite statements to the contra ry by successive Governments, it has 
been suggested that the number of exemptions have increased rather than fallen over the years.106  
Other problems include the cost of tax compliance, which is high, and the low probability of violators 
being caught, leading, according to a recently establis hed Taskforce, "to an endemic culture of tax 
avoidance" as well as tax evasion.107  Reforms necessitated by the Fiscal Responsibility and Budget 
Management Act, 2003, which requires the Governme nt to eliminate its revenue deficit by 2008/09, 
have to further address some of these deficiencies in the tax system (Chapter I). 
Indirect taxes 
123. The main indirect taxes (in terms of their sh are of tax revenue) are excise duties, customs 
duties, and service tax for the Central Government;  and state sales tax (now replaced by VAT), CST, 
and excise duties on alcohol for th e states.  During 2005/06, indirect taxes accounted for about 70.7% 
of total tax revenue of central and state governments.   Central indirect taxes have been declining as a 
share of total central tax revenue, from 62.9% in 2000/01 to 52.1% in 2006/07 (Table I.4).  According 
                                                      
102 Poirson (2006). 
103 Rao (2005). 
104 Despite being introduced in 1994, the service tax still only accounts for under 8% of total tax 
revenue and just over ha lf a percent of GDP. 
105 See for example, Ministry of Finance (2003). 
106 See for example, Mukhopadhyay (2006), pp. 1324-1326. 
107 Ministry of Finance (2003), p. 17. WT/TPR/S/182/Rev.1 Trade Policy Review 
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to the authorities, the tax revenue of VAT-implementing states registered an increase of 13.8% during 
2005/06 over 2004/05 under the earlier sales tax system (Box III.1). 
Box III.1:  Introduction of the value-added tax 
Reform of the state sales tax and introduction of a value-added tax began in 1994, when a conference of 
Chief Ministers of the States and Union Territories and the Ministry of Finance was held.  An Empowered 
Committee of State Finance Ministers was constituted on 17 July 2000 to discuss details of the introduction 
of a new state-level value-added tax as well as the relevant rates.  Its terms of reference included:  monitoring 
the implementation of uniform floor rates across all states and union territori es, and the phase-out of 
incentives linked to the sales tax;  and determining steps to be taken to implement a value-added tax to 
replace the sales tax.   
The Empowered Committee agreed to prepare for the in troduction of a uniform, nation-wide state VAT by 
1 April 2001, with assistance from the Central Government.  The date was later changed to 1 April 2002 and 
then to 1 April 2003.  One State adopted the VAT on 1 April 2003 and another 19 states and union territories 
on 1 April 2005.  Currently 30 states and union territories have implemented the VAT.  Of the remaining 
five, two union territories do not have a sales tax, one state declared that it would implement the VAT from 
1 January 2007, and one union territory from 1 April 2007.  The remaining State has yet to take a decision on 
implementing the VAT. 
In the states that have implemented the VAT, most goods are subject to rates of 4% or 12.5%, while gold and 
silver ornaments are taxed at 1%;  some 550 goods ar e covered by the VAT, while 46 commodities including 
natural and unprocessed goods produced by the unorganized sector, like fresh fruit and vegetables, fresh 
milk, salt, bread, unprocessed meat and fish, organic ma nure, etc., are exempt for social reasons.  Around 
270 goods, including medicines and drugs, agricultural a nd industrial inputs, and cap ital goods, are taxable at 
4%;  all other products are subject to the rate of 12.5%.  A few items, like petrol, diesel, liquor, etc. are 
subject to a minimum rate of 20%.  The Committee decided to exclude sugar, textiles, and tobacco products 
because they were subject to additional excise duty in  lieu of sales tax by the Central Government, against 
which the states received a share of central tax revenues. 
The authorities note that the initial experience with the VAT has been encouraging.  The new system has 
been well received and the transition smooth.  The ta x revenue of implementing states increased by 13.8% 
during 2005/06 (compared with the sales tax revenues during 2004/05), which is higher than the growth rate 
for these states during the previous five years.  During April-November  2006, there was significant further 
improvement, with an increase of  about 25.5% over the corresponding period of the previous year. 
Source:   Empowered Committee of State Finance Ministers (2005), A White Paper on State-Level Value 
Added Tax , 17 January;  Press Information Bureau "Implementation of State VAT" 21 August 2006;  
WTO (2002), Trade Policy Review:  India ;  and  information provided by the authorities.  
124. Central excise taxes (CENVAT), which are essentially taxes on manufactures, are imposed 
only on domestically produced goods.  They remain the most important indirect tax for revenue 
purposes, although their share declined from over 35% of total central tax revenue in 2000/01 to 25% 
in 2006/07, mainly due to rationalization and reduc tion of rates.  As a result of several years of 
reform, the rate for many goods was unified at 16% .  However, in the 2006/07 Budget, a large number 
of products (mostly textiles and clothing) were made subject to the lower rate of 8%;  further products 
were added to the list in the 2007/08 Budget.  A scheme was introduced in March 1986 to enable 
manufacturers to receive a credit for excise duty paid on raw materials and for components used in the manufacture of final products.  The modified VAT (MODVAT) is now applied to most excisable 
goods.
108  According to the authorities, the excise duty is a value-added tax wherein the tax paid on 
inputs is credited against the duty paid on fina l products, thus reducing the cascading effect of 
taxation at different stages of manufacture.  Some products are also subject to an additional excise 
                                                      
108 Goods excluded included  tobacco and tobacco products, matc hes, cinematographic films, motor 
spirits, high speed diesel, and some woven fabrics. India WT/TPR/S/182/Rev.1 
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duty under the Additional Duties of Excise (Goods of  Special Importance) Act of 1957, which is 
imposed on all types of fabrics except silk fabrics,  in lieu of sales tax.  The Additional Duties of 
Excise (Textiles and Textil es Articles) Act 1978 was abolished in the 2004/05 Budget.109  The tax 
schedule is complicated by the presence of many exemptions, including for production based on 
geographical location, for small-scale industries, and fo r certain activities.  It has also been suggested 
that while the CENVAT is levied on manufactured goods, services (which have grown in importance 
over the years), are not adequately taxed and that a larger number of services should be covered by the 
service tax (see below).110 
125. The service tax, which was introduced in 1994, is  currently levied by the Central Government 
on some 99 services;  a number of services were a dded to the list in the 2007/08 Budget.  Initially 
imposed at 8% of the value of services provided, th e rate has been increased gradually over the years.  
The 2006/07 Budget raised the rate from 10% to 12% .  The inter-state sales tax is levied by the 
Central Government at a rate of 4%.  There are al so wealth taxes, state taxes on agricultural income, 
and others such as stamp duty, taxes on motor vehicles, and octroi. 
126. The state VAT is levied at 4% or 12.5%, excep t for gold and silver items, which are taxed at 
1% (Box III.1).  Traders with turnover up to Rs 50 0,000 are exempt from payment of tax.  Traders 
with turnover between Rs 500,000 and Rs 5 million ha ve to register under VAT, but are allowed to 
opt for a simplified tax on total turnover at a nomi nal rate not exceeding 1%.  These traders do not 
receive input tax credits and cannot issue tax invoices .  Traders with turnover above Rs 5 million must 
pay VAT.  Certain items, such as alcoholic bevera ges and petroleum products, are subjected to a 
higher floor tax rate of 20%.  The VAT is zero-rate d on exports.  The input tax credit is allowed in 
respect of input taxes paid within the same State.  Central sales tax on inter-state sales of goods is not 
rebatable against VAT. 
Direct taxes 
127. Corporate and personal income taxes account fo r 31.3% and 17.6%, respectively, of total 
Central tax revenue.111  While the share of personal income ta x has remained relatively stable since 
2002, there has been a substantial in crease in the contribution of corporate tax to total revenue.  Both 
the top personal tax and statutory corporate tax rates (for Indian companies) are currently 30% (the threshold for the 10% surcharge on personal inco me tax was raised in the 2005/06 Budget to 
Rs 1 million).
112  The Government minimum alternate tax (MAT) on company book profits, was 
raised from 7.5% to 10% in the 2006/07 Budget, par tly in response to the erosion of the tax base 
resulting from a large number of exemptions and incentives (see below). 
128. While the statutory rates are relatively hi gh compared with neighbouring countries and 
particularly south east Asia, a large number of exemptions and concessions and tax holidays are 
offered to investors, likely making the effective rate  of corporate tax significantly lower (estimated at 
21% in 2002).113  Over the years, reviews of tax policy ha ve suggested a reduction or removal of the 
activity-based or sector-based exempti ons available through the tax system.  The Tenth Five year Plan 
calls for, inter alia,  a reduction in unnecessary exemptions in  order to raise sufficient resources to 
                                                      
109 Revenues from this additional excise duty are sh ared between the Centre and states.  The present 
share of state governments under the Award of the Twelfth Finance Commission (2005/06 to 2009/10) is 30.5%. 
110 Government of India (2002), Chapter 8. 
111 Provisional figures for 2006/07.  The respective figures for 2005/06 are 28% and 17.9%. 
112 All companies incorporated in In dia, whether domestic or foreign owned, are regarded as domestic 
companies.  For foreign branches, the tax rate is 41.82% , which includes 40% tax rate + 2.5% (x40%) surcharge 
and 2% (x41%) education cess. 
113 Based on a report by the Planning Commission cited in WTO (2002). WT/TPR/S/182/Rev.1 Trade Policy Review 
Page 76 
 
 
implement the Plan.114  A review of tax policy carried out in 2002 also suggested a removal or 
reduction of exemptions, which render the tax syst em complex and susceptible to tax evasion and 
"rent seeking".115  The MAT adds further complexity to the tax structure. 
129. The Government appears to have accepted most of the suggestions made by the Task Force.  
These include:  moderation of tax ra tes, reduction of depreciation ra tes, elimination of standard 
deduction, filing of annual information returns by th ird parties, exemption for long-term capital gains 
and dividend income from listed equity.  Othe r recommendations, according to the authorities, are 
taken into consideration while making legislative amendments from time into time, and implementing 
them, wherever considered appropriate.  Most of  the recommendations relating to reform of tax 
administration, notably to reduce the compliance co st by simplification of forms and procedures for 
filing taxes, have also been implemented.  Some ac tion also appears to have been taken on the Task 
Force recommendations to remove exemptions gran ted under Sections 10A a nd 10B (for export) and 
Sections 80IA and 80IB (infrastructure, industrial  and regional development) , although new measures 
have also been added since the previous Review (see below). 
Tax incentives 
130. India's last notification to the WTO Committee on Subsidies and Countervailing Measures 
was made in October 2001.  According to that no tification, tax incentives are provided mainly under 
Sections 10A, 10B and 80 HHC of the Income Tax Act 1961.  However, incentives under 80HHC 
have been phased out since then and no deduction under this section is available as from assessment 
year 2005/06.  The incentives are provided "with a view to improving the foreign exchange reserves 
of the country".116  India plans to notify changes to its in centives to the WTO as soon as possible.    
131. Direct tax incentives to exporters are provide d under Sections 10A, 10AA, 10B and 10BA of 
the Income Tax Act.  Under Section 10A of the Ac t, a 100% tax deduction for ten years is available 
for export profits of manufacturers of goods or comput er software located in a special economic zone, 
export processing zone, free-trade zone, electronic ha rdware technology park, or software technology 
park.  Section 10B provides similar incentives for EOUs.  Export profits under this section were 
excluded from the minimum alternate tax (MAT)117;  however, an extension of the MAT to include 
tax relief claimed under sections 10A and 10B was proposed in the 2007 Budget.  The provisions of 
Section 10B were amended in 2002 to reduce the tax deduction to 90% for the financial year 2002/03 
and to provide a five-year 100% tax deduction for undertakings commencing operations in SEZs on or 
after 1 April 2002, followed by a partial tax de duction of 50% for the two subsequent assessment 
years.   
132. Under the Finance Act, 2003, undertakings commencing operation in SEZs on or after 
1 April 2002, were given a further deduction of 50%  of profits credited to a Special Economic Zone 
Re-investment Allowance Reserve Account to be u sed for acquiring new plant or machinery, to be 
                                                      
114 Planning Commission (2002), Chapter 3. 
115 The Report on Direct Taxation suggests that the exemptions "promote rent-seeking behaviour and 
contribute to the complexity in tax laws.  In terms of administration, exemptions more often than not lead to tax leakage and tax abuse thus increasingly making the system counter productive and dysfunctional" (Government 
of India, 2002, p. 11). 
116 WTO document G/SCM/N/71/IND, 19 October 2001. 
117 The provision permitting 25% of domestic tariff area (DTA) sales to be included in the tax 
deduction available under this section was removed as of  2001/02 and it was clarified that profits from on-site 
development of computer software (including software development services) outside India would qualify for a tax holiday. India WT/TPR/S/182/Rev.1 
 Page 77 
 
 
used within three years118;  deductions under Section 10A to the business of cutting and polishing 
precious and semi-precious stones were extended;  business losses or unabsorbed depreciation from 
financial year 2000/01 of undertakings receiving deductions under Section 10A were extended;  and 
restrictions on eligibility for deductions under this section on account of changes in ownership were 
removed.  These changes became effective from 2003/04, except for the carry-forward of business 
losses (permitted from 1 April 2001). 
133. The SEZ Act, 2005, which entered into effect on 10 February 2006, introduced a new 
section 10AA in the Income Tax Act.  It provid es for a deduction of an SEZ unit's export profits 
derived from the manufacture of goods or from provid ing services.  The deduction is available on 
100% of profits for the first five years and 50% of profits for the following five years.  A further 
deduction, of up to 50% of profits re-invested in the business, is available for the next five years.  A 
new section 10BA was inserted in the Income Tax Act by the Taxation Laws (Amendment) Act, 2003 
with effect from 2003/04.  This provides for a 100% deduction of export profits up to 2008/09 from 
the manufacture or production of hand-made articles  or items of artistic value that use wood as the 
main raw material, provided at least 90% of the sales during the previous year are exports of such 
wood-based articles and the undertaking employs at least 20 workers in the manufacturing process 
during the year.  The purpose of this tax concession is to promote exports of traditional artistic products, which would keep alive traditional skills. 
134. Under Section 80IA, tax incentives are availabl e for infrastructure facilities, including the 
development of roads, water supply projects, tr eatment systems, irrigation, sanitation, ports, 
telecommunication services, power, and the developm ent and maintenance of special economic zones 
and industrial parks.  With the exception of tel ecommunications services, the incentive comprises tax 
holidays for ten consecutive assessment years;  for telecommunications, the tax holiday is for 
five years, followed by a 30% deduction for the next five years, for an undertaking that started providing telecom services before 1 April 2005.
119  Section 80IB provides tax benefits to industrial 
undertakings in the state of Jammu and Kashmir and to companies engaged in:  scientific research and 
development;  commercial production or mineral oil refining;  developing and building housing 
projects;  processing, preserving, and packaging of fruits or vegetables or handling, storage, and 
transportation of foodgrains;  and operating and main taining a hospital in a rural area.  Most of these 
tax benefits were restricted to undertakings/c ompanies set up by 31 March 2007 or 31 March 2008.  
The eligibilities period for other tax benefits unde r section 80IB for new units is over.  The Task 
Force on Direct Taxes suggested that these ince ntives had not served their purpose and should be 
removed with immediate effect.120  Deductions under Section 80H, including general export 
incentives, construction abroad, and software e xports, were phased out by end 2004/05;  and  the 
deduction under Section 80P, to coope rative banks, was withdrawn in 2006. 
135. The Income Tax Act provides additional incentives, including for shipping (Section 33AC)121;  
and deductions for revenue and capital expenditure (other than for land) on scientific research (under 
Section 35).  
                                                      
118 However, until the acquisition of the new plant or machinery, the reserve may be used by the 
undertaking (other than for distribution through dividends or profits or for remittance outside India as profits, or 
for the creation of any asset outside India).  This deduction is available for three years. 
119 Government of India (2002), Tables 5.5 and 5.6. 
120 Government of India (2002), p. 147. 
121 The incentive is a deduction from profits of any sum of money transferred to a special reserve 
account and to be used for acquiring new ships to enab le shipping companies to  build up capital for new 
acquisitions (Government of India, 2002, p. 138). WT/TPR/S/182/Rev.1 Trade Policy Review 
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136. New tax incentives have also b een introduced since the previous Review of India in 2002.  
These include a ten-year tax holiday for an undertak ing owned by an Indian company and set up for 
reconstruction or revival of an  electricity generating plant122, and a tax exemption for the income 
flowing between a subsidiary company and its In dian holding company involved in generation, 
transmission or distribution of electricity, if the inco me is for reconstruction or revival of an existing 
electricity company (the transfer must have been  notified before 31 Decemb er 2005).  In addition, 
under the SEZ Act, a ten-year tax holiday has been  extended to a developer of a SEZ notified on or 
after 1 April 2005.  Other tax incentives introduced by the Central Government include deductions 
ranging up to ten years for companies involved in processing, preserving, and packing fruits and 
vegetables;  for hospitals in rural areas;  and for offshore banking units or a unit of the International 
Financial Service Centre establis hed in a SEZ under Section 80.  In addition, 100% de ductions of tax 
on profits have been granted for between five and ten years on profits from production of certain 
targeted activities in certain states.123  
137. Data on duty forgone from these incentives were  made available for the first time in the 
2006/07 Budget.  Under Section 10A revenue forgon e in 2004/05 was estimated at Rs 70.8 billion for 
software companies located in Software Technol ogy Parks and Rs 13.4 billion for SEZs including 
EPZs and free trade zones.  In 2005/06 and 2 006/07, revenue forgone was Rs 68.7 billion and 
Rs 99.4 billion under Sections 10A and 10AA;  Rs 17.9 billion and Rs 25.9 billion for EOUs 
(Section 10B);  Rs 108.9 billion and Rs 157.6 billion for Section 80IA;  and Rs 62.3 billion and 
Rs 90.2 billion under 80IB. 
(b) Subsidies 
138. Direct subsidies as reported in the Central Government's annual budgets declined from around 
1.9% of GDP in 2002/03 to around 1.4% of GDP in 2005/06 (Table III.11).  The largest subsidy 
continues to be provided for food (over half of direct subsidies budgeted for 2006/07);  additional 
agriculture-related support is provided in the form of  fertilizer subsidies and price support (the latter 
included under "other subsidies").  Other major di rect subsidies are provided for price support for 
petroleum products and for the railways.  These direct subsidies are not reported in India's 
notifications to the Committee on Subsidies and Countervailing Measures, which were last notified in October 2001 (see section (a) above). 
139. While there has been a declin e in direct subsidies, a recent paper commissioned by the 
Ministry of Finance suggests that they account for around 38% of total government subsidies 
including those "hidden" in the provision of social and economic services.  The paper also estimated 
that explicit and implicit subsidies accounted for around 4.2% of GDP in 2003/04.
124  Moreover, the 
share of "merit" subsidies (including education, h ealth care, soil and water conservation, research and 
development) in 2003/04 was only around 42% of tota l subsidies.  A more detailed examination of the 
major subsidies (food, fertilizer, and petroleum) reveal s the need for reform especially in the way food 
subsidies are targeted, the method of setting minimum support prices for certain agricultural products,  
and the costing and targeting of the fertilizer subsidy.125  The report suggests that the subsidies on 
kerosene and LPG for weaker sections of society do not meet the desired objectives and, in the case of 
                                                      
122 If it was formed before 30 November 2005, notif ied before 31 December 2005 and starts generation, 
transmission or distribution of electricity before 31 March 2007. 
123 Information provided by the authorities (Ministry of Finance). 
124 Government of India (2004). 
125 It seems that nearly half the fertilizer subsidy is collected by industry, while the remainder is shared 
equally between rich and poor farmers;   the former, because of their grea ter purchasing power, appropriate a 
larger share of the economic benefits than the poor fa rmers (National Institute of Public Finance and Policy, 
2003). India WT/TPR/S/182/Rev.1 
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LPG, should be gradually reduced a nd removed, while the availability of kerosene could be improved 
through an open and competitive market.  India l ast notified its aggregate measure of support for 
agriculture to the WTO in March and June 2002, respectively, for export subsidies and domestic 
support (Chapter IV(2)). 
Table III.11 
Explicit subsidies, 2002/03-2006/07 
(Rs billion and per cent of GDP) 
Type of subsidy 2002/03 2003/04 2004/05 2005/06 2006/07 
(budget) 
Total 456.9 459.4 478.5 478.6 472.9 
(% of GDP) 1.9 1.7 1.5 1.4 .. 
Of which:      
Food 414.7 252.0 258.0 232.0 242.0 
Indigenous urea fertilizer s 75.0 81.4 101. 4 104.1 104.1 
Imported urea fertilizers 0.1 0.01 4.7 11.0 11.0 
Sale of decontrolled fertilizer with 
concession to farmers 35.0 36.6 50.5 57.5 57.5 
Petroleum subsidy 62.7 65.7 35.5 29.3 30.8 
Subsidies to railways for dividend 
relief and other concessions 10.7 2.1 13.3 9.9 10.8 
Interest subsidies 7.7 9.3 5.7 21.8 4.9 
Other subsidies 23.8 9.3 9.4 13.1 12.0 
.. Not available. 
Source:  Government of India, Expenditure Budget , Vol. 1, various years. 
140. In addition to direct subsidies, transfers are made to state governments and by individual 
government ministries and agencies, including to state-owned enterprises and for research and development.  Assistance is also provided to utiliti es, such as power, mainly in the form of regulated 
prices, and to services such as transport (other than rail transport, which receives an explicit subsidy) 
and postal services.  In addition, although the admi nistered price mechanism (APM) for petroleum has 
been dismantled, complete pass-through of internatio nal prices does not take place (section (iii)).  In a 
period when prices of international crude oil an d petroleum products have risen sharply, the 
consequent higher cost is shared by the National Oil Companies, consumers, and through budgetary 
support from the Government.  Kerosene distributed as part of the targeted public distribution system 
(TPDS) and LPG for domestic use receive explic it subsidies through the budget, as comparatively 
cleaner fuels (see (iii) below).  The state governme nts also provide subsidies, especially for basic 
services such as education and health.
126 
(iii) Price controls 
141. Price controls continue for agricultural and pharmaceutical products and to some extent 
petroleum products.  In agriculture, the Government maintains minimum support prices (MSPs) for 
25 major agricultural commodities.  This policy (and  the products covered) is unchanged since the 
previous Review (Chapter IV(2)).  The Governme nt also provides a limited number of food products, 
such as rice, wheat, and sugar, and kerosene, at c ontrolled prices to a targeted population living below 
the poverty line, through the TPDS (Chapter IV(2)).  The price of urea (a nitrogenous fertilizer) is also 
controlled through a "group concession scheme", whic h replaced the retention price-cum-subsidy 
scheme (RPS) on 1 April 2003 (Chapter IV(2)).  Th e price of other phosphatic and potassic fertilizers 
                                                      
126 It is estimated that in the late 1990s around 90% of state revenues were spent on subsidies (National 
Institute of Public Finance and Policy, 2003). WT/TPR/S/182/Rev.1 Trade Policy Review 
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like di-ammonium phosphate (DAP), muriate of potash (MOP) and 11 grades of complex fertilizers is 
indirectly controlled through a concession scheme under which the indicative maximum retail prices 
(MRPs) are notified by the Government.  A producer/importer selling fertilizers at the indicative MRPs is compensated under the concession scheme.  The price of single super phosphate (SSP) is 
also fixed by the state governments and ad hoc concessions are provided by the Central Government 
for the sale of SSP. 
142. While the APM applied to certain petroleu m products, including petrol and diesel, was 
eliminated by March 2002, full price pass through do es not occur and price changes are still lagged 
(Chapter I).  In addition, prices of kerosene ( under the TPDS) and LPG remain subject to control. 
143. Prices of 74 bulk drugs and related formulati ons are controlled through the Drugs Price 
Control Order (DPCO) 1995, to ensure the availabil ity of quality drugs at "reasonable prices";  the 
controls cover approximately 20% of the market.  The Pharmaceutical Policy of 2002 was not put into 
effect because of a judicial order.  A new policy is being formulated. 
144. Prices of certain services, including electricity and water, are also fixed and subsidized at 
different rates by different state governments (Chapter  IV).  Price controls on seeds of cattle fodder, 
food crops, fruits and vegetables are scheduled under the Essential Commodities (Amendment) Bill, 
2006. 
(iv) Role of state-owned enterprises and privatization 
(a) Overview 
145. State-owned enterprises (SOEs) were set up to help develop infrastructure and industry, to 
create employment, to provide substitutes for impor ts and save on the use of foreign exchange, and 
for income distribution and regional development purposes.
127  Investment in SOEs grew from 
Rs 290 million in 1951 to Rs 2,741 billion at the end of March 2001, while the number of SOEs at the 
central level increased from 5 to 242128;  in 2004/05, there were 237 central SOEs, employing 
1.69 million people (down from 2 million five years earlier).129  The major sectors of activity are coal 
and lignite, power, defence, and railways.  The 2006/07 Budget announced additional equity support 
of Rs 169 billion and loans of Rs 27.9 billion to Central SOEs.  The Government has also infused 
non-financial support of Rs 25.7 billion to rest ructure ten SOEs in the last two years.130   
146. In addition, there are an estimated 831 state-level SOEs131, and 1,050 non-departmental 
commercial undertakings and companies in banking a nd insurance.  Official government figures put 
the share of the central public sector at around 11.2% of GDP in 2005/06, down from 12.6% in 
2002/03.  However, other estimates put the public sector at around one fourth of GDP in 2001.132  The 
return on investment in SOEs app ears to have been low:  post-tax profits of central SOEs did not 
exceed 5% of total sales or 6% of capital employ ed during 1986/87-1997/98.  The figures for SOEs 
competing with the private sector are significantly worse.133 
                                                      
127 Industrial Policy Resolution 1956. 
128 Ministry of Finance (undated), Chapter 3. 
129 Employment in PSEs is declining in part due to a voluntary retirement scheme.  
130 Non-financial support may involve "non-cash flow",  waiver of interest and interest penalties, 
government loans, guarantee fees, conversio n of loan into equity/debentures, etc. 
131 Ministry of Finance (undated), Chapter 17. 
132 Makhija (2006), pp. 1947-1951. 
133 Ministry of Finance (undated), Chapter 6. India WT/TPR/S/182/Rev.1 
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147. The State Electricity Boards (SEBs), the railw ays, and fertilizer producers appear to have 
been the worst drain on public finances and a sour ce of inefficiency.  The SEBs have incurred annual 
deficits as high as 1.5% of GDP, placing substantial constraints on state fiscal resources.134  It has 
been suggested that the SEBs poor performance has been  due, in part, to inade quate pricing of utilities 
and other infrastructure services, and poor recovery  of the cost of services (Chapter IV(power)).135 
148. In the absence of a bankruptcy law, compani es in financial difficulty may be referred under 
the Sick Industrial Companies (Special Provisions) Act (SICA), 1985, to the Board for Industrial and 
Financial Restructuring (BIFR), either for closure or  revival.  However, the BIFR has been widely 
criticized as ineffectual, as the SICA procedures laid down for the BIFR to follow have led to 
endemic delays.136  A Bill, introduced in Parliament in  2003, was passed but has not yet been 
implemented due to delays in setting up a Nationa l Company Law Tribunal to replace the Board for 
Industrial and Financial Restructuring (BIFR). 
149. In an attempt to recognize and reward public  sector enterprises (PSEs) that had performed 
well, the Government in 1997 identified 11 well pe rforming PSEs as "Navratnas" (nine gems).  The 
companies were selected on the basis of factors su ch as size, performance, nature of activity, and 
future prospects.  An additional 39 companies we re identified as "mini-ratnas" (mini-gems) in 1999 
and given greater financial, mana gerial, and operational autonomy.  Such companies, of which there 
were 50 on 31 March 2006, were gi ven power to incur capital expend iture of up to Rs 5 billion. 
(b) Privatization 
150. "Disinvestment" or privatization of India's SOEs , several of which are considered to be large 
and inefficient, has been hesitant and h as often fallen short of monetary targets.137  The decision to 
disinvest in selected SOEs was announced in the Industrial Policy Statement of 1991.  This was followed by specific recommendations on disinvestme nt by the Rangarajan Committee in April 1993, 
although no action was taken on these recommendations .  In 1996, a Disinvestment Commission was 
established and the Budget for 1998/99 announced a d ecision to reduce government shareholdings in 
selected "non-strategic" SOEs to 26% while maintaini ng majority shareholdings in "strategic sectors".  
In March 1999, the Government decided that stra tegic PSEs would be in:  arms and ammunition, 
defence equipment, defence aircraft , and warships;  atomic energy;  and railway transport.  Moreover, 
the reduction of the Government's stake in non-stra tegic industries to 26% would be considered on a 
case-by-case basis.  It was also declared that work ers' interests would be protected in all cases.  
Despite these statements of intent, little progress has b een made on privatization.  During the first ten 
years of the privatization programme, it is estimat ed that only around 19% of total equity in some 
40 SOEs was sold, with no majority shareholding sales.   Since then, there has been privatization in 
ten central SOEs, 19 hotels owned by India Tour ism Development Corporation Limited, and 
three hotels owned by Hotel Corporation of India Limited.  It seems that in 13 additional cases, 
privatization efforts are stalled.
138  At the State level, of 831 SOEs, 222 were identified for 
disinvestment, restructuring or closure.  Of the se, 68 have been closed down and 29 privatized;  
140 cases are pending.139 
                                                      
134 IMF (2005b). 
135 Nagaraj (2006), pp. 2551-2557. 
136 According to some estimates, it takes some 20 years on average to complete the process of 
rehabilitation or closure of a sick company under this structure ( The Hindu .  Viewed at:  
http://www.thehindu.com/thehindu/biz/2003/02/17/stories/2003021700140200.htm [5 July 2006]). 
137 During 1991/92-2004/05 (14 years), except during four years, sales were well below targets 
(Ministry of Finance, 2005, p. 163). 
138 Makhija (2006), pp. 1947-1951. 
139 Ministry of Finance (undated), Chapter 17. WT/TPR/S/182/Rev.1 Trade Policy Review 
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151. Since India's previous Review, in 2002, furthe r attempts have been made to rationalize and 
streamline privatization procedures.  In May 2004,  the Ministry of Disinvestment was renamed the 
Department of Disinvestment and moved into th e Ministry of Finance.  The Disinvestment 
Commission, set up in 1996, was reconstituted in July 2001 and all "non-strategic"  SOEs referred to it 
for restructuring or privatization.  In addition, in the 2004/05 Budget, a Board for Reconstruction of 
Public Sector Enterprises (BRPSE) was established in December 2004.  The Board is expected to 
advise the Government on restructuring PSEs, including disinvestment or closure. 
152. The privatization policy evolved from the sale of minority shares in public sector companies 
prior to 2000 to a preference for sales to a strate gic partner.  Thus, since 2001, the recommendations 
of the Disinvestment Commission have focused main ly on minority or majority sales to a strategic 
partner (Box III.2). 
Box III.2:  The process of disinvestment for strategic sales  
Following the recommendations of the Disinvestment Commission, there is a three-tiered mechanism by 
which decisions are made to implement the recommendations. 
The Disinvestment Commission's proposals are considered by the Cabinet Committee on Disinvestment 
(CCD).  The CCD is headed by the Prime Minister and consists of the Deputy Prime Minister, Ministers of 
Power, Law and Justice, Commerce and Industry, Ex ternal Affairs, Finance and Company Affairs, 
Petroleum and Natural Gas, Civil Aviation, and Disinvestment, as well as the Deputy Chairman of the 
Planning Commission and the Minister overseeing the company being considered for disinvestment.  Its 
functions include deciding the price band for the sale of government shares either through the domestic or 
international capital markets;  the final sales price and the strategic partner;  and approving the annual and 
three-year rolling plans of disinvestment. 
Following approval by the CCD, an Advisor is selected  through competitive bidding, to be responsible for 
the disinvestment process.  Strategic investors are se lected from a shortlist of bidders invited through an 
announcement in national newspapers and websites of the Department of Disinvestment, the Administrative 
Ministry concerned with the company,  and the company concerned.  In some cases announcements are also 
made in international newspapers.  The Expressions of Interest received are sc rutinized by the Advisor 
concerned and the short listing done by the Inter-Ministerial Group on the basis of recommendations of the 
Advisor.  There are no specific criteria in regard to nationality.  A foreign company, subject to the 
Government's sectoral policy on FDI, is eligible for co nsideration.  The Advisor is responsible for preparing 
draft share purchase and shareholder agreements, which must be approved by the Ministry of Law and the 
CCD before being sent to the prospective bidders for their final financial bids.   
The sealed bids are opened by an Inte r-Ministerial Group made up of officials of the Ministry of Finance, 
Departments of Public Enterprises, Legal Affairs, and Company Affairs, as well as the Administrative 
Ministry and the Director of the SOE being considered for disinvestment.  A final decision on the strategic 
sale is taken by the CCD.  At the third level, there is a Core Group of Secretaries on Disinvestment, which 
oversees implementation of the decision and makes recommendations to the CCD on disinvestment policy 
matters.  The Core Group is headed by the Cabinet S ecretary and includes the Secr etaries of the Ministries 
of Finance, Heavy Industries and Public Enterprises, Disinvestment, the Planning Commission, and the 
Administrative Ministry as well as any other relevant ministries or departments. 
Source:  Ministry of Finance (undated), Disinvestment Manual .  Viewed at:  http://www.divest.
nic.in/manual03/chap10.htm [6 July 2006].  
153. The present Government initially decided that a ll future privatization of SOEs would take 
place within the context of its Common Minimum Programme.140  It decided in principle to list large, 
profitable PSEs on domestic stock exchanges, selectively selling a minority stake (up to 49%) so as 
                                                      
140 Government of India (2004b). India WT/TPR/S/182/Rev.1 
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not to disturb the public sector character of the companies.141  The proceeds of such sales were to be 
channelled into a newly established National Invest ment Fund, constituted on 23 November 2005, and 
would be used for investment in:  social sector  projects promoting education, health care, and 
employment, and for capital in selected profitable a nd revivable PSEs that yield adequate returns to 
enable them to finance expansion or diversification.142  However, no funds ha ve been deposited with 
the NIF.  The Government also planned to devolve managerial and commercial autonomy to 
profitable SOEs operating in a competitive environment143;  according to the authorities companies 
operating in "a non-competitive envi ronment" would include those in the three remaining sectors 
reserved for the public sector.  Attempts would be made to restructure loss-making SOEs, failing 
which they would be closed down or sold.  Howe ver, on 6 July 2006 the Government announced that 
it had "decided to keep all disinvestment decisions and proposals on hold pending further review"144;  
it appears that some 16 recommendations for strategic sales made by Disinvestment Commissions are not being pursued, as the present Government's policy is not to continue privatizations.
145 
(v) Intellectual property rights 
(a) Overview 
154. Technological progress is one of the main long-term engines of growth in GDP and 
productivity (and thus competitiveness), therefore, ne w technologies need to be nurtured by adequate 
protection of intellectual property rights in India' s domestic market.  This is important for foreign 
innovators and enterprises, as well as for Indian inno vators and enterprises seeking to compete in an 
increasingly globalized economy.   
155. The administration and protection of intellectual property rights in India is divided between 
the Department of Industrial Policy and Promotion in  the Ministry of Commerce and Industry, which 
is responsible for industrial property through the Controller General of Patents, Designs and Trade 
Marks;  the Ministry of Human Resource Development, which supervises copyright protection;  and the Ministries of Agriculture and Communication an d Information Technology, which administer the 
protection of plant varieties and semiconductors and integrated circuits, respectively.  India is a 
member of most of the key international conventio ns and agreements on intellectual property rights.  
In addition, there are proposals to further amend th e Indian Copyright Act in light of the WIPO's 
WCT and WPPT treaties. 
(b) Industrial property 
Patents 
156. The Patents Act, 1970, governs the granting of patents.  During the period under review, the 
Act was amended twice (June 2002 and April 2005).  The Patents (Amendment) Act, 2002 extended 
the period of protection granted for all product and pr ocess patents to 20 years from the date of filing 
(Section 53);  previously, protection was for five ye ars for process patents for food or medicine and 
                                                     
 
141 Department of Disinvestment online information.  Viewed at:  http://www.divest.nic.in/ 
annrepo2004-05/mainreport.htm [6 July 2006]. 
142 Department of Disinvestment online information.  Viewed at:  http://www.divest.nic.in/ 
annrepo2004-05/mainreport.htm [6 July 2006]. 
143 Ministry of Finance (2005), p. 163. 
144 Prime Minister's Office Press Release 6 July  2006.  Viewed at:  http://pmindia.nic.in/ 
pressrel.htm [18 July 2006]. 
145 Department of Disinvestment online information.  Viewed at:  http://www.divest.nic.in/ 
annrepo2004-05/mainreport.htm [6 July 2006]. WT/TPR/S/182/Rev.1 Trade Policy Review 
Page 84 
 
 
14 years for other cases.  Other key changes intr oduced by the 2002 Act include a more detailed 
framework for the granting of compulsory licences a nd deletion of the sections dealing with "licences 
of right" (see below).  The Patents (Amendment) Act,  2005, by deleting  Section 5 of the Act, which 
excluded product patents for food, medicine or dr ug or products using chemical processes, ended the 
ten-year transition available to India and other developing countries under the TRIPS Agreement.  
The regime for exclusive marketing rights, introd uced under the 1999 amendment was also revoked.  
157. Under the current Patents Act, which became effective on 1 January 2005, patent protection 
may be granted to any invention relating to either a product or process that is new, involves an 
inventive step, and is capable of industrial applicati on (Article 2(1)(j)).  The Act also sets out products 
or processes that are not recognized as inventions and are therefore not patentable.146  P a t e n t s  o f  
addition for an improvement to a patented product can  be granted to the holder of the original patent 
for the same period as the validity of the original patent.    
158. Applications for patents may be submitted by nationals of any country, to the Controller 
General of Patents, Designs, Trademarks and Ge ographical Indications.  Under the 2005 amendment, 
applications will only be examined by the Patent O ffice if requested by the applicant or by another 
interested party within 48 months, failing which the application is deemed to have been withdrawn.  
The Act also provides for pre- and post-grant opposition under Chapter V.147  The patent rights accrue 
from the date of publication of the patent applicatio n, which is within one month after completion of 
18 months of its filing or at an earlier date, if request ed by the applicant.  On  average, it takes between 
10 and 60 months to grant a pa tent depending on the information provided by the applicant.  
However, the applicant is not entitled to institute  any infringement proceedings until the patent has 
been granted.  For patents relating to pharmaceuti cals filed before 1 January 2005 (the "Mailbox"), the 
rights of the patentee accrue from the date of grant of the patent, but the period of protection remains 
20 years from the date of filing.  Moreover, th e patent holder may not institute infringement 
proceedings against manufacturers already producing th e patented product when the patent is granted;  
in such cases, the patent holder is entitled to receive reasonable royalties.148  The law does not define 
"reasonable", which depends on the circumstances of each case, like royalty payment under 
Article 31 (h) of the TRIPS Agreement.  The law al so does not define the authority for determining 
the royalty.  However, according to the author ities, although some 8,000 applications were made 
through the Mailbox facility, there have been no dema nds for royalty payments from patent holders.  
It is not clear how many patents ha ve been granted under this facility. 
159. India currently has 16,419 patents in force, of  which 4,486 have been granted to Indians and 
11,933 to foreigners resident abroad (Table III. 12).  As a result of procedural improvements, 
including a time limit of three months for exam iners to complete examinations once complete 
documentation is received, efforts are being made to clear the Patent Office's large backlog of 
19,000 patent applications (around 30,000 at the time of the last Review).  
                                                      
146 These are:  inventions whose primary or intended use or commercial exploitation would be contrary 
to public order or morality or cause serious prejudice to human, animal or plant life or health or to the 
environment;  the process for the medicinal, surgical, curative, prophylactic or other treatment of human beings;  plants and animals or their parts (including seeds, varieties and species, and biological processes for the 
production or propagation of plants and animals) other than microorganisms;  mathematical or business methods 
or computer programs and algorithms;  and the topogr aphy of integrated circuits and traditional knowledge 
(Section 3). 
147 Pre-grant opposition must be made within four months of publication of the application, while the 
period for post-grant opposition is up to one year.  
148 Section 11A of the Patent Act. India WT/TPR/S/182/Rev.1 
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Table III.12 
Patents granted and in force, 2001-06 
 2001/02 2002/03 2003/04 2004/05 2005/06 
Patents granted      
- Indians 654 494 945 764 1,396 
- Foreigners resident abroad 937 885 1,524 1,147 2,924 
- Total 1,591 1,379 2,469 1,911 4,320 
Patents in force      
- Indians 1,578 1,479 2,075 2,200 4,486 
- Foreigners resident abroad 6,742 6,519 4,331 4,657 11,933 
- Total 8,320 7,998 6,406 6,857 16,419 
Source:  Data provided by the authorities. 
160. Compulsory licences can be granted under Chapter XVI of the Patents Act.  Under Section 84 
any person interested in working a patent can, after th e expiry of three years from the date of grant of 
the patent, apply to the Controller for grant of a compulsory licence.  The grounds for such a compulsory licence may include:  that the reasonabl e requirements of the public with respect to the 
patented invention have not been satisfied;  the pa tented invention is not available at a reasonably 
affordable price;  or that it is not worked in India.  The Controller may issue a licence upon terms and 
conditions outlined in the Act.
149  Two years after a compulsory licence has been granted, the Central 
Government or any other interested person may re quest the Controller to revoke the patent on the 
grounds that it has not been worked or that the reasonable requirements of the public have not been 
met, or that it is not available to the public at  a reasonable price.  The Controller would normally 
make a decision within one year of it being presen ted.  No compulsory licences have been granted 
under this provision.  The Central Government may also, if necessary, such as in the case of a national 
emergency,  provide for issue of a compulsory licence for a patented product through a notification in 
the Official Gazette  (Section 92) and may use a patented invention for government purposes 
(Section 100).  Following the amendment to the TR IPS Agreement in December 2005 to include the 
decision on patents and public health, a new section 92A was inserted in the Act to permit compulsory 
licences for exports of patented pharmaceutical produc ts in certain exceptional circumstances.  This 
provision has not been used to date.   
161. India also permits parallel imports, the de finition of which was changed in 2005 from 
"importation of patented products by any person from a person who is duly authorized by the 
patentee" to "importation of pate nted products by any person from a person who is duly authorized by 
the law". 
162. False representation of any article sold in Indi a as being patented in India or for which an 
application has been made are punishable by a fi ne of up to Rs 100,000.  Contravention of secrecy 
provisions relating to certain inventions or falsif ication of any information relating to the Patents 
Register is punishable by a fine or imprisonment of  up to two years.  Appeals can be made to the 
Appellate Board established under Section 83 of th e Trade Marks Act, 1999.  However, pending 
establishment of the Appellate Board, appeals are to the High Courts.  
                                                      
149 The terms and conditions stipulated in Section 90 include:  ensuring that the royalty or remuneration 
paid to the patent holder is appropriate;  that the licence is fully worked by the holder;  that the patented 
products are made available to the public at reasona bly affordable prices;  th at the licence granted is 
non-exclusive and non-assignable; that th e licence is granted for the balance of the term of the patent;  that the 
licence is provided for predominant use in the Indian ma rket;  in case of semi-conductor technology, the licence 
is to be used for public non-commercial use;  and in  case the licence is granted to remedy an anti-competitive 
process, the licensee is permitted to  export the product if necessary. WT/TPR/S/182/Rev.1 Trade Policy Review 
Page 86 
 
 
Trade marks 
163. Trade marks are protected under the Trade Ma rks Act, 1999 and the Trade Marks Rules, 2002 
(in force since September 2003), which repealed th e Trade and Merchandise Marks Act, 1958.  The 
changes introduced by the Act, include:  prot ection to well known marks, as well as service and 
collective marks;  extension of the period of protec tion from seven to ten years;  establishment of an 
Appellate Board;  and increased penalties for infringement of trade marks.   
164. Trade marks must be filed in writing at one of the offices of the Trade Marks Registry.  
Following examination to determine whether the trade mark is distinctive and does not conflict with 
an existing or pending trade mark, the Re gistry publishes the trade mark in the Trade Marks Journal .  
Opposition to the trade mark can be made within three months of publication (extendable by one 
month) to which the applicant must respond within two months.  Following a decision to register the 
trade mark a certificate of registration is issued.  Th e trade mark is registered for ten years, renewable 
for further periods of ten years on payment of the prescr ibed fee.  If the register ed mark is not used for 
a continuous period of five years and three months from the date it was registered, or if the renewal 
fee is not paid within the prescribed period, it can  be removed from the registry on grounds of non-
use.  Appeals against a decision by the Regi strar may be made to the High Court pending 
establishment of the Appellate Board. 
165. Under the Act, registration of a trade mark giv es the owner "the exclusive right to the use of 
the trade mark in relation to the goods or services a nd to obtain relief in respect of infringement of the 
trade mark" (Chapter IV, 28(1)).  Registration is not compulsory, but the owner cannot bring a legal 
case against an infringer if the mark is not registered .  The law also enables a suit for passing off to be 
filed for the use of any trade mark that is identical or deceptively sim ilar to the plaintiff's trade mark, 
whether registered or unregistered.  The Trad e Marks Act, 1999, preserves common law rights in 
respect of an unregistered trade mark.  Penalties for falsification of trade marks and selling or 
providing goods that infringe trade marks include a pr ison term of at least six months, extendable to 
three years, and a fine of between Rs 50,000 and Rs 200,000.  Second or subs equent convictions may 
lead to imprisonment of between one and thr ee years and a fine of between Rs 100,000 and 
Rs 200,000.  Falsely representing a trade mark as re gistered may lead to imprisonment of up to three 
years and/or a fine.  Other penalties include impr isonment of up to two years and/or a fine for 
improper description of a place of business as conn ected with the Trade Marks Office and for 
falsification of entries in the Register. 
Industrial designs 
166. Legislation governing industrial designs in India is the Designs Act, 2000 and the Designs 
Rules, 2001.  Under the Act, designs may be register ed by the Controller General of Patents, Designs 
and Trade Marks, provided that:  they are new or or iginal;  have not been disclosed to the public in 
India or another country by publication prior to th e filing or priority application date;  they are 
significantly distinguishable from known designs or co mbinations of known designs;  and they do not 
comprise or contain scandalous or obscene matter.  Following registration, the design is published in 
the Gazette of India  and made publicly available in a Register of Designs.  
167. Industrial designs are protected for ten years, extendable by five years, upon payment of the 
appropriate fee.  A design may be cancelled at any ti me by the Controller General if it is determined 
that it does not fulfil the requirements for registration defined in the Act.  Three design registrations 
have been cancelled since 2002.  Appeals against a decision by the Controller General may be made 
to the High Court within three months of the deci sion.  Four appeals have been made to the High 
Court since 2002 and are pending. India WT/TPR/S/182/Rev.1 
 Page 87 
 
 
168. The sale, import or imitation of any article in which the design is registered without the 
consent of the registered owner is punishable by a fine of up to Rs 25,000 (to be paid to the registered owner) or any other damages incurred of up to Rs 50, 000 if the owner begins legal proceedings.  The 
Act does not contain criminal penalty provisions. 
(c) Copyright 
169. Copyright is protected under the Copyright Act, 1957, most recently amended in 1999.  
Protection is granted to:  original literary, drama tic, musical and artistic works;  cinematographic 
films;  and sound recordings.  The term of protecti on is the lifetime of the author plus 60 years for 
literary, dramatic, musical and artistic works;  and 60 years after the year of publication for 
anonymous and pseudonymous works, photographs, cinematographic films, sound recordings, and 
works owned by the Government or by a public undertaking or an international organization.  
Broadcast reproduction rights are for 25 years from y ear of broadcast, and performers rights are for 
50 years from the date of performance. 
170. Compulsory licences may be issued for work s withheld from the public or for unpublished 
"Indian works"
150, where the author is dead or unknown.  In  such cases applications may be made to 
the Copyright Board, which after holding an inquiry, may direct the Registrar of Copyright to issue 
the licence under specified terms and conditions.  The Central Government may also, if it deems it to 
be in the national interest, require the heirs or executo rs of a work whose author is no longer alive, to 
publish the work.  Applications for licences to publish a translation of a literary or dramatic work in 
any language may be made to the Copyright Board seven years after publication of the work 
(three years if the translation is required for teach ing, scholarship or research).  Parallel imports are 
not permitted by the law.   
171. Both civil and criminal remedies are ava ilable for infringement of copyright.  Under 
Section 63, the penalties can be imprisonment for betw een six months and three years and/or a fine of 
between Rs 50,000 and Rs 200,000.  Repeat offe nces are punishable by imprisonment of one to 
three years and/or a fine of Rs 100,000 to Rs 200,000.151  Any person who knowingly makes use of an 
infringing copy of a computer program is punishable by imprisonment of seven days to three years 
and/or a fine of Rs 50,000 to  Rs 200,000.  The penalty for ma king or possessing plates for making 
infringing copies of protected works is imprisonment of up to two years and/or a fine.  Publication of 
a sound recording or a video film in contravention of  the Act is liable to imprisonment of up to three 
years and a fine.   
(d) Other intellectual property 
Geographical indications 
172. Geographical indications are protected unde r the Geographical Indications of Goods 
(Registration and Protection) Act,  1999 and the Geographical Indicati ons of Goods (Registration and 
Protection) Rules, 2002.  The Geographical Indications Registry was established on 
15 September 2003. 
173. Applications for registration of a geographical  indication must be made in writing to the 
Registrar of Geographical Indications who is the Controller General of Patents, Designs and Trade 
Marks.  Geographical indications can be registered for any or all goods in a territory of a country or a 
                                                      
150 "Indian work" is defined as an artistic work by a citizen of India or a cinematographic film or record 
made or manufactured in India (Article 31). 
151 In both cases, the penalty can be reduced if the infringement has not been made for gain in the 
course of trade or business. WT/TPR/S/182/Rev.1 Trade Policy Review 
Page 88 
 
 
region or locality in that territory (Section 8).152  Once the application is accepted, the Registrar issues 
an advertisement of application.  If there is no op position to the registration within three months, the 
GI will be registered.  If the application is not ac cepted by the Registrar, the grounds for the refusal 
must be given in writing.  Registration of trade marks containing geographical indications may be 
invalidated by the Registrar of Trade Marks (section 25).  Decisions by the Registrar may be appealed 
to the Appellate Board within three months from the date of notification of the Registrar's decision. 
174. Protection for the owner of the geographical indication and any authorized user is ten years, 
but may be renewed by the Registrar for a further period of ten years.  Currently, 28 geographical 
indications are registered in India.  Additional pr otection may be provided by the Central Government 
to certain goods or classes of goods by notification in the Official Gazette .  Registration guarantees 
exclusive use of the geographical indication by the owner or authorized user and protection in case of 
infringement.  Infringement is defined under the Act as:  use of the geographical indication to indicate 
or suggest that the goods originate in a geographical  area other than the true place of origin in a 
misleading manner;  use that constitutes an act of unfair competition, including passing off;  and use 
of a geographical indication to falsely indicate that  the goods are those to which the registered GI 
relates.  The penalty for falsifying or falsely applying geographical indica tions, or selling goods under 
false geographical indications is imprisonment for six months to three years, and a fine of Rs 50,000 
to Rs 200,000.  Repeat offences are subject to a pris on term between one and three years and a fine of 
Rs 100,000 to Rs 200,000.  The Geographical I ndication Registry has received two requests under 
Section 50 of the Act for the opinion of the Registra r, which has to be obtained before conducting 
search and seizure;  a suit was filed for infringem ent in the Delhi High Court by the registered 
proprietor of the GI;  the matter ended in a compromise. 
Plant varieties 
175. The Parliament passed the Protection of Plant Varieties and Farmers' Rights Act in 2001.  
Criteria for the registration of new plant varieti es include novelty, distinctiveness, uniformity, and 
stability.153  Applications must be made to the Registrar-G eneral of Plant Varieties;  applications that 
comply with the requirements of the Act, are adver tised.  Opposition to the registration must be made 
within three months of advertisement;  the app licant has two months to respond.  If there is no 
opposition, or if the opposition is rejected, the variety is  registered in the Plant Varieties Registry and 
an official certificate given to the applicant.  For registration of essentially derived varieties, the Registrar must forward the application and supportin g documents to the Protection of Plant Varieties 
and Farmers' Rights Authority for examination.  If the Authority is satisfied that the essentially 
derived variety has been derived from the initial variet y, it directs the Registrar to register the new 
variety.   
176. The term of protection is nine years for trees and vines and six years for other crops, 
renewable for a further nine years (for extant varieties of trees and vines, or a total of 15 years for annual crops from the date of notification under the Seeds Act 1966).  However, under Chapter VI of 
                                                     
 
152 Geographical indications will not be registered if their use:  will lik ely deceive or cause confusion;  
would be contrary to any law in for ce, and if they comprise or contain scandalous or obscene matter or any 
matter likely to hurt religious susceptibilities, which would otherwise not be entitled to protection in a court.  In 
addition, GIs determined to be generic names or indicatio ns of goods and therefore not protected in their country 
of origin, or that falsely represent that the goods or iginate in another country will not be registered.   
153 The variety is novel if, at the date of filing, the propagating or harvested material has not been sold 
or otherwise disposed of by or with the consent of its breeder for exploitation in India, earlier than one year 
before the date of filing of the application, or, outside India, earlier than six years for trees and vines and earlier than four years for other varieties. India WT/TPR/S/182/Rev.1 
 Page 89 
 
 
the Act, a farmer is entitled to save, use, sow, resow, exchange, share or sell his farm produce, 
including seed (except branded seed), of a variety protected by the Act.   
177. The Act also provides for benefit sharing.  On ce the certificate of registration is issued, the 
Authority publishes the contents of  the certificate and invites claims of benefit sharing in the 
registered variety;  claims are accepted only from I ndian citizens or institutions established in India.  
The breeder may submit an opposition to the claim.  Moreover, any person or group of persons may, 
on behalf of any village or local community in India, file a claim attributable to their contribution to 
any new variety (Section 41). 
178. Compulsory licences may be granted after three years from the date of issue of the certificate 
of registration.  A request may be made to the Authority on the grounds that the reasonable requirements of the public for seed or other propagati ng material of the variety have not been satisfied 
or that it is not available to the public at a reasona ble price.  The term of a licence will be determined 
by the Authority, who must ensure reasonable compensation to the breeder (Section 51).  The 
compulsory licence can also be revoked or modified  by the Authority at any time.  No compulsory 
licence has been granted so far. 
179. Appeals against decisions by the Authority or th e Registrar can be made to the Plant Varieties 
Protection Appellate Tribunal.   The Tribunal, which has not yet started functioning must, to the extent 
possible, reach a decision on an appeal within one year. 
180. Infringement is defined as:  the sale, export, import or production of a protected variety 
without the permission of its breeder or within the scope of a registered licence without the 
permission of the registered licensee or agent;  or  the use, sale, export, import or production of any 
other variety that is given an identical or decep tively similar denomination of a variety registered 
under the Act so as to cause confusion.  The penalty for applying a false denomination is 
imprisonment for between three months and two years and/or a fine of Rs 50,000 to Rs 500,000.  The 
penalty for selling varieties to which a false denom ination is applied is imprisonment of between 
six months and two years and/or a fine of Rs 50,000 to Rs 500,000.  The penalty for falsely 
representing a variety as registered is imprisonment of between six months and three years and/or a 
fine of Rs 100,000 to Rs 500,000.  Repeat offen ces are liable to imprisonment of between one and 
three years and/or a fine of Rs 200,000 to Rs 2 millio n.  No case of seizure or infringement has been 
reported . 
Semiconductor integrated circuits layout-designs 
181. The Semiconductor Integrated Circuits Layout -Design Act was passed in September 2000.  
There have been no changes to this legislation si nce the previous Review.  Applications should be 
made in writing to the Registrar and filed at the office of the Semiconductors Integrated Circuits 
Layout-Design Registry, although it appears that th e Registry is not yet functional.  Upon accepting 
the application, the Registrar must publish an advertisement within 14 days.  Opposition to 
registration must be made within three months of publication of the advertisement and the applicant is 
given two months to respond.  A registration certificat e will be issued to the applicant.  Registration is 
for ten years from the date of filing the applicati on or from first commercial exploitation in India or 
elsewhere, whichever is earlier.  Decisions by th e Registrar may be appealed to the Layout-Design 
Appellate Board. 
182. Infringement is defined as unauthorized repr oduction, whether by incorporating in a 
semiconductor integrated circuit or otherwise, a registered layout-design or any part of it, or unauthorized import, sale, or distribution for commercial purposes of a registered layout-design or a 
semiconductor integrated circuit incorporating a se miconductor integrated circuit with a registered WT/TPR/S/182/Rev.1 Trade Policy Review 
Page 90 
 
 
layout-design.  However, reproducti on is permitted for scientific evaluation, analysis, research or 
teaching.  In addition, if a person creates another original layout-design on the basis of scientific 
evaluation or analysis of a registered layout-design,  that person has the right to reproduce, sell or 
incorporate this layout-design in a semiconductor, wh ile if a person independent ly develops a layout-
design that is identical to a registered one, that  person may use it as desired without infringing.  The 
penalty for infringement of a layout-design is impr isonment for up to three years and/or a fine of 
Rs 50,000 to Rs 1 million.    
Trade secrets 
183. There is no specific legislation regulating th e protection of trade secrets nor enforcement 
measures/penalties for violations of trade secrets.  However, aggrieved parties can seek action through 
the Civil Courts. 
(e) Enforcement 
184. Enforcement of intellectual property rights in India is carried out by the police for domestic 
cases and by the police and customs for imports and exports.  Domestic enforcement, especially for 
copyright violations, appears to have been ste pped up, notably through the setting up of a Copyright 
Enforcement Advisory Council (CEAC).  The CEAC, h eaded by the Secretary (Higher Education) in 
the Government of India, has 28 other members incl uding the head of Police from some states as well 
as senior officers of related departments like Customs;   it meets twice a year.  In addition special IPR 
cells have been  set up, currently in 18 states, a nd nodal officers appointed to coordinate enforcement 
activities with industry.  Industry associations and copyright societies are also involved in supplementing and sometimes guiding the efforts of th e enforcement agencies.  A police officer (not 
below the rank of a sub-inspector)  has ex o fficio powers to seize goods suspected of infringing 
copyright.
154   
185. Under the Customs Act, Customs may seize and hold goods "for a reasonable period", 
including for suspected violations of intellectual property rights, following which, the goods must be 
released or a court injunction obtained to start infringement proceedings.  Under Section 53 of the 
Copyright Act 1957, the Registrar of Copyright has the power to order that copies of an infringing work cannot be imported and order a physical search  of any ship, dock or premises.  An amendment 
to this provision, to transfer the power of banning import of any infringing copy to the Commissioner of Customs, is currently under consideration. 
186. Enforcement by the police has been stepped up through increased raids since 2004.  As a 
result some 6,290 cases were filed in 2004 with th e National Crime Records Bureau (1,211 cases in 
2000).  According to information provided by the National Crime Records Bureau (NCRB), 
2,108 cases were registered under the Copyright Act be tween January and June 2005.  This resulted in 
the arrest of over 2,000 alleged offenders and over Rs 93 million in seized material.  Similarly, data 
made available by the IMI, an industry group, rev eals over 2,100 raids and 2,255 arrests in 2005/06 in 
music-related copyright violations.  The police al so have ex officio powers under the Trade Marks 
Act, 1999, which permits any police officer not belo w the rank of deputy superintendent of police or 
equivalent, to search and seize without warrant th e goods, die, block, machine, plate, and other 
instruments or goods suspected of infringing intell ectual property.  However, the police officer must 
obtain the opinion of the Registrar before any sear ch and seizure.  No data were provided to the 
                                                     
 
154 According to a ruling by the Supreme Court of India, such infringements would cover not only 
goods being imported for the Indian market but also goods transiting India for eventual export to a third country 
(Gramophone Company of India Ltd vs Bivendra Bahadur Pandey & ORS, AIR 1984 SC 667,  
21 February 1984). India WT/TPR/S/182/Rev.1 
 Page 91 
 
 
Secretariat on enforcement with regard to ot her IPR violations, nor on the number of IPR 
infringement cases that have been settled through the courts.155 
187. The Government has stepped up training to increase awareness of IPR enforcement.  The 
Intellectual Property Institute (IPI) provides training to government officials (including from the IP 
offices and from other government agencies), the priv ate sector, including management in companies, 
creators of IPRs, and academics, and to "potential users from the public at large".  A scheme of the 
copyrights division (the intellectual property educat ion, research and public outreach scheme) aims to 
create an IP culture and awareness at colleges and universities through grants for seminars, training, 
and discussions on IP, especially copyright.  Acti vities are also carried out in conjunction with 
industry organizations. 
188. Despite these efforts, however, according to NASSCOM, which represents India's software 
suppliers, it appears that much remains to be done to improve IPR enforcement.156  While the reported 
number of police raids appears to have increased in  recent years, it is unclear whether these are a 
sufficient deterrent to further violations of IPRs , given that there is very little information on the 
number of cases resulting in prosecutions through the justice system or civil or criminal penalties.157  
The authorities state that the courts are well awar e of the gravity of the problems and the legal 
provisions of the various IP laws and regul arly pronounce sound enforceable judgements.   Moreover, 
there  is a growing realization of the need to sensitize the judiciary on the role of IPRs and the impact 
of IP violations on the economic climate, and cr eativity and innovation, including through seminars 
for the judiciary. 
(vi) Corporate governance 
189. An efficient capital market capable of mobiliz ing domestic savings and channelling them into 
the most productive investments is essential fo r improving competitiveness and thus long-term 
development.  Recognizing that good corporate govern ance is essential for the establishment of such a 
market, the authorities have been taking steps to im prove the framework in this regard.  While the 
basic framework for governance of companies in gene ral is provided by the Companies Act, 1956, the 
Securities and Exchange Board of India (SEBI) Act 1992 and the Listing Agreement with stock 
exchanges contain requirements for governance of listed companies, and the Securities Contracts 
(Regulation) Act, 1956 cover tradeable government pa per, stocks, shares, bonds and other marketable 
securities.  In addition, corporate governance in ba nks and non-bank financial companies is regulated 
by the Reserve Bank of India (RBI).  
190. Schedule VI of the Companies Act outlines fi nancial reporting requirements for companies 
incorporated under the Act.  These include reporting of company balance sheets, and  profit and loss 
accounts.  The Act, most recently amended in 2002, is enforced by the Ministry of Company Affairs.
158  The 2002 amendment dissolved the Compan y Law Board replacing it with a National 
Company Law Tribunal and an Appellate Tribunal.   The Company Law Tribunal and the Appellate 
Tribunal are empowered to examine and pass judgement  with regard to all cases under the Companies 
Act.  Appeals against decisions by the Appella te Tribunal can be heard by the Supreme Court. 
                                                      
155 It is suggested that court proceedings are overl y burdensome, courts are severely backlogged and 
there are massive delays in bringing criminal and civil cases to final judgement (IIPA, 2006). 
156 The National Association of Soft ware and Service Companies states that, despite measures taken, 
software piracy in India remains high (NASSCOM onlin e information.  Viewed at:  http://www.nasscom.in/ 
Nasscom/templates/NormalPage.aspx ?id=6247 [22 November 2006]). 
157 IIPA (2006). 
158 World Bank (2004). WT/TPR/S/182/Rev.1 Trade Policy Review 
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191. The National Foundation for Corporate G overnance (NFCG) was established on 
1 October 2003 to improve awareness of the im portance of implementing good corporate governance 
practices.  It is a non-profit body and includes par ticipation from the Ministry of Company Affairs, 
the Confederation of Indian Industries (CII), the Inst itute of Company Secretaries of India (ICSI), and 
the Institute of Chartered Accountants of India (ICAI). 
192. The Companies Act, 1956, is currently being reviewed with an emphasis on transparency, 
accountability, and good corporate governance, along with  institutional arrangements to ensure that 
stakeholder rights are recognized and equitably and more speedily protected.  The proposed revisions 
are also expected to enable shareholders-based en forcement based on shareholders democracy, rather 
than a state-based enforcement regime, with more effective pr otection of investor/minority 
shareholder rights.  The revision will also address the issue of rehabilitation, including winding up and 
liquidation of companies including "sick industries" in a time-bound manner.  It is not clear when the revisions are expected to be subm itted to Parliament.  Other effort s to improve governance include the 
"MCA21 e-Governance Project", which began in Ma rch 2005, and has required all companies to 
submit their documents electronically to the Registrar of Companies since 16 September. 
193. While the Companies Act addresses corporat e governance issues among companies in 
general, corporate governance requirements for listed companies, are also provided in clause 49 of the 
Listing Agreement.  Clause 49, which has been am ended and updated periodi cally, contains details 
about the composition of boards of directors, board procedures, code of cond uct of board members, 
and composition and powers of an independent audit committee.  Companies are also required to 
submit a report on corporate governance.  Clause 49 w as most recently amended on 1 January 2006 to 
incorporate recommendations made by another committee on corporate governance set up by the 
SEBI in 2003.
159  Clause 49 details mandatory and non-mandatory provisions.160  In order to improve 
disclosure standards applied by the SEBI, the Committee on Disclosures and Accounting Standards 
was constituted in September 2006.  It has memb ers drawn from various segments of the capital 
market and advises the SEBI on issues related to, inter alia , initial and continuous disclosure 
requirements of companies;  disclosure requirement s for intermediaries;  operational and systemic 
risks, if any, in the primary securities marke t;  smooth implementation of accounting standards 
developed by the ICAI;  as well as inputs to IC AI for reviewing accounting standards and bringing 
them into line with internationally accepted standards. 
194. Good corporate governance in banks is important as they are the major source of capital in the 
economy.  The Advisory Committee on Corporate Governance was set up by the RBI in 2000 to 
examine the state of corporate governance and to s uggest ways in which to improve standards and 
levels of compliance.  Among its various recomme ndations were suggestions  to improve corporate 
governance in public sector banks by transferring gove rnance from the administering ministries to the 
banks' boards and by streamlining the appointment  of directors.  The Advisory Group also 
recommended the strengthening of the Companies Act a nd the role of independent directors.  This 
was followed by a report by a Consultative Group of Directors of Banks and Financial Institutions in 
2002, which made recommendations with  regard to the role of the board of directors of banks.  As a 
result, the RBI has issued 'fit and proper' criteria fo r directors of banks, including the constitution of a 
                                                      
159 The Narayan Murthy Committee on Corporate Governance. 
160 The mandatory provisions include, inter alia,  strengthening the definition of independent directors;  
clarifying the role/responsibilities/powers of audit commi ttees;  improving quality of financial disclosures 
including related party transactions and proceeds from public/r ights/preferential issues;  requiring Boards to 
adopt a formal code of conduct;  requiring CEO/CFO certification of financial statements and improving 
disclosures to shareholders.  Certain non-mandatory clauses, like whistle-blower policy and restriction of the 
term of independent directors, along with other non-mandatory provisions, have also been included in the revised Clause 49. India WT/TPR/S/182/Rev.1 
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Nomination Committee of the Board to scrutinize declar ations made by the directors, and the exercise 
of due diligence to determine the suitability of pers ons being appointed or renewed as directors.  The 
Banking Companies (Acquisition and Transfer of U ndertakings) Act, 1970/80 has been amended to 
ensure "fit and proper" criteria are applied to the elected directors on the Boards of Public Sector 
Banks (PSBs).  The Government has also implem ented the RBI's suggestions on due diligence in 
respect of nominated directors on the boards of PSBs. 
195. The RBI, through its Board for Financial Supervis ion, inspects and monitors banks using the 
CAMELS approach (Chapter IV).  However, it app ears that the RBI cannot insist that directors 
nominated by the government or elected by shareholde rs to the boards of the public sector banks also 
meet these "fit and proper" guidelines.161  Nevertheless, as part of re form to increase competition in 
the banking sector, efforts have been made to incr ease the independence of public sector banks.  In 
addition, urban cooperative banks (UCBs) and rural cooperative banks  (RCBs), which are currently a 
source of considerable weakness in the banking sect or, are not subject to RBI governance procedures 
but to state government regulations.  Neither are they subject to shareholder scrutiny as they do not 
depend on equity markets for their funds.  Such ba nks will need to be brought under the purview of 
the corporate governance structure to which pr ivate sector banks are currently subject.  The RBI has 
been providing regulatory support to small and weak  UCBs, while strengthening their supervision, 
including through consultation with state governme nts and representatives of the UCBs.  The Reserve 
Bank has also issued a "Vision Document for the Urban Co-operative Banks" which, inter alia, 
envisages a state-specific strategy for addressing issues relating to UCBs.  As part of this strategy, 
memoranda of understanding are bei ng signed between the RBI and th e respective state governments, 
which envisage the constitution of a state-level Task  Force for Co-operative Urban Banks that would, 
inter alia , identify viable and non-viable UCBs in the State and suggest time-bound plans for the 
revival of the viable UCBs and non-disruptive exit for others.  
196. The Chartered Accountants (Amendment) Act was passed by Parliament in  March 2006.  
The amendment, inter alia :  expands government membership of  the Council of the Institute of 
Chartered Accountants of India and gives the Gove rnment power to dissolve the Council in certain 
exceptional cases;  broadens disciplinary  procedures for misconduct, including the establishment of a 
Tribunal and Appellate Authority;  and provides for the establishment of a Quality Review Board, to 
review the quality of services provided by members of the Institute, and to make recommendations for 
improving these services.162 
(vii) Competition policy  
(a) Introduction 
197. Legislation to address anti-competitive practices by enterprises (e.g. cartels and abuse of a 
dominant position) is an important counterpart to m easures aimed at liberalizing markets.  Since its 
last Trade Policy Review, India has adopted the Competition Act, 2002.  The Act embodies an 
economics-based approach to competition law and shoul d, therefore, be a bulwark of the competitive 
market system.  However, implementation of the core enforcement provisions of the Act has been 
delayed by the need to address questions raised in legal challenges to certain provisions of the Act.  
These and other matters are the subject of amendments  currently before Parliament.  In the meantime, 
the Monopolies and Restrictive Trade Practices Ac t, 1969 (MRTP Act) remains in force.  The new 
Competition Commission, which will be responsible fo r the administration of the new legislation, has 
undertaken useful preparatory studies and research that will assist in the effective implementation of 
the law. 
                                                      
161 Reddy (2005). 
162 The Chartered Accountant s (Amendment) Act, 2006. WT/TPR/S/182/Rev.1 Trade Policy Review 
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(b) Statutory framework 
198. The Competition Act was enacted by the Indi an Parliament in December 2002 and received 
the assent of the President in January 2003.  It contains provisions dealing with anti-competitive 
agreements, abuse of dominant position and "combina tions" (mergers), which are broadly comparable 
to those of other jurisdictions with effective laws in this area and, for the most part, embody a modern, 
economics-based approach.163  The Act permits the Competition Commission of India (CCI) to take 
action against cartels and other anti-competitive pr actices originating outside India but affecting 
Indian markets and consumers.164  The Act also attaches importance to and provides a legal basis for 
"competition advocacy" activities by the CCI, which has been created pursuant to the legislation (i.e. 
research and policy advice by the Commission, aimed at removing impediments to the operation of 
competitive market forces).  This reflects a widely -held view that such activities are an important 
complement to competition law enforcement.165  The importance attached to competition advocacy is 
in line with and reinforces other liberalization m easures implemented over the past decade to remove 
licensing and other measures that have, in the past, limited competition in markets. 
199. A key thrust of the Competition Act is to cr eate a new enforcement body, the CCI, with a 
staff trained in modern enforcemen t methods and branches in various Indian cities.  Eventually, the 
CCI will replace the Monopolies and Restrictive Trade Practices Commission (MRTPC), created 
under the MRTP Act.  However, implementation of the Competition Act has been delayed by 
constitutional issues relating to the structure of the new CCI, in particular th e apparent vesting of 
adjudicatory powers in a non-judicial body.  Consequently, only one Member has been appointed to 
the Commission and the substantive enforcement provi sions of the Act (e.g. regarding agreements, 
abuses of a dominant position and mergers) have s till to be brought in force.  The constitutional 
concerns will be addressed by proposed amendmen ts to the Act that are before Parliament, the 
Competition (Amendment) Bill 2006, and will, inter alia , establish a separate Competition Appellate 
Tribunal to be headed by a current or former judge of the Supreme Court or a High Court Chief Justice.
166 
200. In addition to addressing the constitutional issu es raised in the Supreme Court writ, the 
proposed amendments will fine-tune other aspects of  the legislation and remove certain provisions 
that require amendment.  For exam ple, the amendments will delete a provision adopted in 2002 that 
enabled the CCI to issue a temporary injunc tion to restrain parties from importing goods.167  T h e  
proposed amendments also attempt to strengthen th e statutory basis for introduction of a "leniency 
programme" to facilitate enforcement of the anti-cartel and related provisions of the Act.168 
201. In contrast to the substantive provisions of  the new Competition Act, the existing MRTP Act 
is not perceived as providing a modern statutory framework to address practices such as cartels and 
abuse of dominant position.  Rather, its objectives are framed in terms of:  the prevention of 
                                                      
163 See Chakravarthy (2005).   
164 Such an enforcement approach broadly emulates  those of the United States and EC, which also 
permit action to be taken against foreign cartels and other anti-competitive arrangements that affect those 
jurisdictions' consumers. 
165 Anderson and Jenny (2004), Chapter 4. 
166 Bhattacharjea (2006). 
167 As Bhattacharjea points out, countering an anti-competitive practice involving imports by shutting 
out the imports "amounts to chopping off one's head to cure a headache" (Bhattacharjea, 2006). 
168 Such programmes, which typically offer immunity from prosecution to the first member (and 
sometimes other members) of a cartel who confess to the authorities and provide information leading to the 
prosecution of other members, are now viewed as an essential part of the toolkit of modern competition 
authorities (Bhattacharjea, 2006). India WT/TPR/S/182/Rev.1 
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concentration of economic power;  the control of  monopolies;  and the prohibition of monopolistic 
trade practices, and restrictive and unfair trade practices.  The MRTP Act was amended in 1991 to 
provide a greater focus on curbing monopolistic, restrictive, and unfair trade practices.169  In practice, 
the MRTPC has had greater focus on enquiries into a lleged restrictive trade pr actices and unfair trade 
practices, than on monopolistic trade practices (Table III.13).  Temporary injunctions and 
compensation orders have been issued in numerous cases. 
Table III.13 
Cases disposed of by MRTPC, 2002-05 
 2002 2003 2004 2005 
Monopolistic trade practices enquiry 0 0 2 0 
Restrictive trade practices enquiry 171 81 31 64 
Unfair trade practice enquiry 169 105 51 74 
Temporary injunction 60 69 81 55 
Compensation 420 178 116 144 
Total 820 433 281 337 
Source:  Information provided by the authorities. 
202. The Consumer Protection Act, 1986 (COPRA) pr otects consumers' interest through the 
establishment of consumer fora, wh ich settle grievances regarding, inter alia , quality and pricing of 
goods and services.  Consumers have the right to s eek redress against "unfair and restrictive trade 
practices" (as defined in the Act)170 and "unscrupulous exploitation of consumers".171 
(c) Challenges to be faced and preparatory work undertaken 
203. The new Competition Commission, when its powers are in force, will face significant 
challenges.  There are reasons to believe that de veloping economies tend to be more vulnerable to 
anti-competitive practices than developed countries.  The reasons include:  high 'natural' entry barriers 
due to inadequate business infrastructure, including  distribution channels, and (sometimes) intrusive 
regulatory regimes;  asymmetries of information in  both product and credit markets;  and a greater 
proportion of local (non-tradeable) markets.172  Thus it may be particularly important to protect, 
consumers in developing countries against carte ls, monopoly abuses, and the creation of new 
monopolies through mergers.  Bid rigging in public procurement markets (i.e. collusive tendering) is 
also pervasive in many developing economie s, and merits vigorous enforcement initiatives.173 
204. In anticipation of these challenges, and full entr y into force of the 2002 Act, significant public 
education, training, and preparatory work for the implementation of the Act has been undertaken by 
the Commission.  This includes the preparation of a series of studies on competition issues in 
particular sectors, including manufacturing, tran sport, telecommunications, and energy markets.  
International organizations, including the Worl d Bank, FIAS, DFID and USAID, have extended 
assistance to the Commission for capacity building including funding some of the above mentioned 
studies.  Recently, a state-of-the-art volume on the techniques and modalities of competition law 
analysis has been published under the editorship of the CCI's serving members, as a reference tool for 
                                                      
169 Chakravarthy (2005). 
170 Unfair trade practice means any practice that, for th e purpose of promoting the sale, use or supply of 
any good or service, causes loss or injury to the consumer. 
171 There is some overlap in the co verage of the two Acts.  Howeve r, there are several distinctive 
features in regard to the constitution of the adjudication machinery, jurisdiction, type of persons who may seek 
relief, nature and scope of relief, administrative procedure, etc. 
172 Anderson and Jenny (2004).  See also Dutz (2002). 
 173 See Anderson (2006). WT/TPR/S/182/Rev.1 Trade Policy Review 
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persons involved in implementing competition la w in India and other developing economies.174  When 
the Commission becomes fully operational, it will continue to focus on competition advocacy work 
(e.g. to eliminate regulatory barriers to competiti on in telecommunications and other infrastructure 
sectors) in addition to core enforcement activities e.g. relating to cartels.  This approach is expected to 
provide a sound basis for the eventual implementation of the new legislation .175 
 
 
                                                      
174 Dhall (2007). 
175 Dhall (2005). India WT/TPR/S/182/Rev.1 
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Annex III.1:  The tariff and other import charges 
 
1. India's tariff consists of standard rates (also re ferred to as basic rates) which are statutory rates 
applied under the Customs Tariff Act, 1975.  The ta riff is announced with the Budget annually;  and 
additional changes are made through notifications issu ed during the year.  There are a large number of 
exemptions and reductions, some of which are applied at the tariff line level.  Others may be based on 
industrial use and are thus difficult to include in any calculation of the eff ective applied tariff rate, 
which is likely to be significantly lower than the stan dard rate of tariff.  As a result of reform over the 
years, most of the exemptions have been consolid ated under one notification (Notification 21, issued 
on 1 March 2002).   
2. India's current MFN tariff is applied at the HS 8-digit level.  It has 11,695 lines, of which 
10,977 are ad valorem , 716 (around 6.1% of the tariff) carry a lternate duties;  and two have specific 
duties.  The Secretariat was provided ad valorem  equivalents for the specific components of the 
alternate duties, which are all in textiles and clothing.  The AVE calculations for 563 of the 716 lines are based on import data for 2004 and 2005.  For tariff lines under HS 5801.31, for which no import 
data were available for these years, the au thorities used base rates computed under the 
Non-Agriculture Market Access simulations.  For tariff lines under HS 6101.20, data for imports 
during April-June 2006 were used for the AVE calcula tions, since, according to the authorities, data 
for 2004 and 2005 were erroneous.  AVEs for the rema ining 151 lines could not be calculated due to a 
mismatch between the units of quantity imported accor ding to statistics maintained by the Directorate 
General of Commercial Intelligence and Statistics ( DGCI&S) and the units on which specific duty 
rates apply (e.g. the data on imports may be based  on square metres while the duty is charged 
according to kilogrammes).  The authorities have ther efore used a conversion factor of 0.17 for fabric 
weighing more or less than 170 grammes per square  metre and 0.2  in lines where the description 
states "more or less than 200 gms/sqm".  Where there are no mismatches, the conversion factor was taken as 1. 
3. In addition to customs duties (standard or a pplied tariffs), additional duties (also called 
countervailing duties) are charged at the border in lie u of central excise duties (a tax on manufactured 
goods), which are charged only for domestically produ ced goods.  The additional duty rates charged 
are the same as the excise duties and hence have not b een included in the Secretariat's tariff analysis.  
In addition, India charges a 4% special additiona l duty (also known as special countervailing duty) to 
bring the overall tax rate on imported goods more in to line with that on domestically produced goods, 
which are subject to internal taxes, such as VAT, municipal tax, "market committee fees", etc.  The 
4% duty, however, is not harmonized with internal ta xes, making it unclear to what extent the taxes 
on imports and on domestic goods ar e equivalent.  The additional duty is calculated as a percentage of 
the value of the import plus any applicable tari ff (but not any anti-dumping or countervailing duty 
applicable), while the special additional duty is char ged as a percentage of the value of the import plus 
the tariff and the additional duty.