ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Is Small Industry Ready for a QR-Free Regime?

The removal of quantitative restrictions (QRs) in April 2001 on over 700 items is likely to have significant implications for Indian industry. There will be dislocations in some of the highly protected sectors. The small-scale industry in India must brace itself for the challenges ahead.

The government is under obligation to lift the balance of 715 quanti-tative restrictions (QRs) on imports on April 1, 2001. Is the small-scale industries (SSI) sector ready to face this QR-free importing regime? The government has formed an inter-ministerial group to assess the impact of removal of the remaining QRs on imports. The commerce and industry minister, Murasoli Maran has stated that the group will include representatives from the commerce, agriculture, and SSI ministries. A number of industries have already been facing stiff competition from imports from developed countries. There have been instances of large-scale dumping of cheaper imports over the last three years when there has been a big slump in commodity prices world over.

In the pre-1990 phase, there were QRs on imports of about 8,000 items. The figure came down to 2,700 items in 1997 during the Exim Policy 1992-97. Earlier, the Indian government had reached an agreement with major trading partners (European Union, Japan, Australia and Canada) other than the US, to phase out QRs by January 1, 2003. However, the US insisted on an accelerated phase out on the grounds that India’s Balance of Payments (BoP) situation was quite sound and won the case at the dispute settlement panel. The US had approached the Dispute Settlement Body of the WTO in 1997 and complained against India that it is not phasing out its QRs on imports for 2,700 products in six years, as per the rules laid down in WTO. India’s argument that it still had a BoP crisis did not convince the appellate body of the dispute settlement body. Hence, it rejected India’s argument saying that its BoP situation had improved considerably. Hence, it must lift its QRs on imports within six years as laid down in the WTO agreement.

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