MINISTRY OF COMMERCE

Since June 1991, India has undertaken major initiatives in trade policy liberalisation focussing on liberalisation openness, transparency and globalisation. The basic thrust of the reform package has been on outward orientation with focus on export promotion activity, moving away from quantitative restrictions and improving competitiveness of the Indian industry to meet global market requirements. Since then, trade policy reforms have provided an export-friendly environment with simplified procedures conducive to accelerated export performance. Announcements in the successive Exim Policy have helped strengthen the country’s export production base, removed procedural irritants, facilitate input availability besides focussing on quality and technological upgradation.

After a setback during 1991-92 when exports declined by 1.5 per cent in dollar terms, revival of exports started during 1992-93. Indian exports registered an average growth of 20 per cent in dollar terms from 1993-94 to 1995-96. However, this growth could not be sustained and export growth rate declined to 5.3 per cent in 1996-97 and to 4.6 per cent during 1997-98. The year 1998-99 witnessed a negative growth in exports. However, exports turned around during the year 1999-2000 registering a growth of 11.6 per cent in dollar terms, exceeding the target of 11.3% set for the year. India’s exports during April-October 2000-2001 are valued at US $ 25013.99 million, which is 20.51 % higher than the level of US $ 20757.15 million during April-October 1999-2000. In rupee terms, the exports were Rs 112646.15 crore, which is 25.59 % higher than the value of exports during April- October 1999-2000. This is the highest export growth rate recorded in over a decade. This is also much higher than the export target of 18% growth set for the year 2000-2001. The high-level of performance is being sustained through continuous promotional measures, sector-specific policies and various other measures such as cutting down of transaction costs. India’s imports during April-October 2000-2001 are valued at US $ 30270.27 million representing a growth of 14.00% over the level of imports valued at US $ 26552.71 million in April-October 1999-2000. The details of exports/imports of the country in the last decade are as under:

Exports

Imports

While analysing the trends in India’s foreign trade, it is observed that the US remains the country’s largest trading partner accounting for over 20 per cent of India’s exports and around 9 per cent of India’s total imports. The European Union (EU), however, is the largest trading block accounting for more than 25 per cent of the country’s global trade. As regards imports, nearly a fifth of the country’s imports are from the EU which is followed by imports from the US, Switzerland, Korea, Singapore and China.

Among the major commodities being exported from the country, textiles tops the list followed by gems & jewellery, chemicals & related products, engineering goods agriculture products, leather goods and marine products. As regards commodities being imported from the country crude petroleum & products tops the list followed by pearls, precious & semi-precious stones, gold & silver, machinery, electronic goods and organic & inorganic chemicals.

The government on its part formulates various policy measures from time to time to give a boost to the exports from the country. Some of the measures taken/being taken include:

• A medium term export strategy is being prepared for the period 2000-2005 and all Export Promotion Councils (EPCs) have been asked to come up with their medium term export plans.

• In principle approvals for setting up of seven SEZs at Positra (Gujarat) in the private sector and by the state government/Joint sector at Nangunery (Tamil Nadu), Dronagiri (Maharashtra), Kakinada-Vizag (Andhra Pradesh), Kulpi (West Bengal), Paradeep (Orissa) and Bhadohi (Uttar Pradesh) have been granted. Some of the existing EPZs are also proposed to be converted into SEZs.

• Besides the above, the government has also taken a number of sector-specific measures to give a fillip to exports from sectors like computer hardware & software, gems & jewellery, leather, handicrafts and garment sectors, drugs & pharmaceuticals, agro-chemicals and bio-technology.

• With a view to making exports a national effort by involving all the state governments, a scheme has been evolved for granting assistance to the states on the basis of their export performance for development of export related infrastructure.

India maintains its bilateral trade relations with its trading partners through the Ministry of Commerce & Industry which engages in a continuous dialogue with the other countries through the instruments of JWGs (Joint Working Groups), JCMs (Joint Committee Meetings), JBCs (Joint Business Councils) and other negotiating tools. India has also signed free trade agreements, trade agreements and bilateral investment promotion & protection (BIPP) with many countries to facilitate bilateral trade.

On the multilateral front, India is the member of the WTO (World Trade Organisation) along with 137 other countries. The World Trade Organisation came into being in 1995. One of the youngest of the international organisations, the WTO is the successor to the General Agreement on Tariffs and Trade (GATT) established in 1947 in the wake of the Second World War. The WTO’s overriding objective is to help trade flow smoothly, freely, fairly and predictably. It does this by:

• Administering trade agreements
• Acting as a forum for trade negotiations
• Settling trade disputes
• Reviewing national trade policies
• Assisting developing countries in trade policy issues, through technical assistance and training programmes
• Co-operating with other international organisations

The fundamental principles of WTO are:

• Most Favoured Nation (MFN) Treatment – i.e., every signatory will extend to every other signatory member, the same and equal treatment in a non-discriminatory manner. This is of great benefit as all countries – rich or poor, strong or weak – will have to be given the same treatment by all signatory members.
• The second principle is National Treatment – that imported goods and domestically produced goods will be treated alike, except for payment of customs duty at the time of import.

The agreement stipulates that members will not restrict imports into each other’s countries, though they may levy tariffs. Restrictions are permitted only under certain conditions. Such restrictions or limits set by countries on imports (or exports) are called quantitative restrictions (QRs).

The WTO’s top level decision-making body is the Ministerial Conference which meets at least once every two years. Below this is the General Council (normally ambassadors and heads of delegation in Geneva, but sometimes officials sent from members’ capitals) which meets several times a year in the Geneva headquarters. The General Council also meets as the Trade Policy Review Body and the Dispute Settlement Body.

The first Ministerial Conference in Singapore in 1996 added three new working groups to this structure. They deal with the relationship between trade and investment, the interaction between trade and competition policy and transparency in government procurement. At the second Ministerial Conference in Geneva in 1998 ministers decided that the WTO would also study the area of electronic commerce, a task to be shared out among existing councils and committees.

• Mandated negotiations in respect of WTO General Agreement on Trade in Services (GATS) and Agreement on Agriculture (AoA) have commenced since 1/1/2000. In order to outline our strategies in these negotiations, interactions including meetings have taken place with various stakeholders including major industry associations, research institutes, concerned administrative ministries/departments of Government of India and professional associations in respect of mandated negotiations on GATS. As regards mandated negotiations in agriculture, interactive meetings have been held with major industry associations, and Department of Commerce also participated in meetings organised by Ministry of Agriculture with state governments, farmers representatives, political parties and voluntary organisations. India is participating effectively in these ongoing negotiations in the WTO with a view to continuously projecting and protecting our national interest.

• India, under its Uruguay Round obligations, undertook, for its agricultural goods, tariff bindings at 100% for primary products, 150% for processed products and 300% for edible oils. However, there were certain agricultural products which were bound during the previous rounds of GATT negotiations at zero or low level of tariffs. With a view to giving necessary protection to domestic agriculture and agro industry, especially in the context of phased removal of quantitative restrictions (QRs) on imports, India initiated the process of negotiations in September, 1996 for upward revision of these tariff bindings under Article XXVIII of GATT 1994. A series of negotiations were held with US, European Communities (EC) and Australia in consultation with the concerned administrative ministries. Compensation packages were worked out on the basis of an objective analysis with a view to arriving at a negotiated settlement. Negotiations with the EC were concluded in September 1999, while negotiations with Australia and USA were concluded in November-December 1999. All the revised bindings agreed upon have received the concurrence of the concerned administrative ministries after taking into account the level of protection required, domestic sensitivities, current trade flows, international prices and India's overall competitiveness for the specific items. Within these bound tariff levels, there is considerable flexibility for imposing appropriate tariffs on import of agricultural commodities for protecting the interests of farmers.

The policy seeks to free Indian industry from excessive government regulation and control so as to allow freedom and flexibility in business decisions and for responding to market forces. The government seeks to provide a policy regime which facilitates and fosters the growth and development of Indian industry. To pursue the aforesaid objectives, government has been constantly reviewing the policy framework to bring about improvements.

All industries which do not require an industrial licence are required to submit an Industrial Entrepreneur Memorandum to the Secretarial for Industrial Assistance (SIA). No industrial approval is required for such exempted industries.

In tune with the liberalised licensing policy, the locational policy has also been significantly amended. There is no requirement of obtaining industrial approvals from the central government (except for the industries under compulsory licensing) for locations not falling within 2.5 kms. of cities having a population of more than 1 million.

The overall industrial performance as well as that of the three major sectors—mining, manufacturing and electricity--since 1990-91 has been as under:

The government policy on FDI since 1991 has aimed at encouraging foreign investment, particularly in the core and infrastructure sectors. While foreign investment is welcomed in a wide range of activities, simultaneous measures have also been introduced to ensure a level playing field to the domestic industry. These measures, have been introduced on the basis of sector-specific sensitivities.

The government has also taken several steps to ensure a liberal FDI policy. Some of the salient features are:

• There are two types of FDI approvals: one is automatic approval by RBI; and the other is approval by government through the Foreign Investment Promotion Board (FIPB);
• 112 high priority industries, identified under the National Industrial Classification, 1987, qualify for automatic approval upto 50/51/74/100 per cent FDI, depending on the nature of industry;
• The remaining activities require approval of FIPB/government. FIPB endeavours to dispose of applications for FDI within a time-frame of 30 days;
• FDI is not permissible in sectors such as agriculture (including plantations), housing and real estate, domestic trading, print media, defence and strategic industries etc.

• Access to automatic route is now permitted to all foreign direct investment (FDI) cases except for a small negative list relating to investment in sectors requiring a license or where a product is reserved for small scale sector and foreign equity participation is proposed to exceed 24%.

• 100% FDI is now permitted in B to B commerce, oil refinery, holding companies of NBFCs, power, all manufacturing activities in Special Economic Zones (SEZs), specified activities in telecom sector etc.

• To provide a single point interface between foreign investors and the Government machinery, Foreign Investment Implementation Authority (FIIA) was set up in August 1999. FIIA is holding quarterly meetings and creating a congenial atmosphere for FDI.

• FDI inflows (US $ 4.68 billion) recorded a highest growth of 65% during October 1999 to August 2000 compared to the same period in the previous year.

(Amount in Million)

In the last one year, Government has further deepened and strengthened the reform process. A new Industrial Development Act replacing the current one, redefining the role of the Government from "regulator" to a "facilitator" is in the final stage of preparation.

In areas relating to intellectual property, Government has introduced legislations for amending the Patents, Trademarks and Designs Acts to make them more user friendly and compatible with the international practices. As part of the emphasis on modernising the framework of intellectual property administration, Modernisation of the Patent and Designs Offices and the Trademarks Registry has also been undertaken.

The new Trademarks Act 1999 will expand the scope of protection of trademarks to include Service Marks, Well-known Marks, Collective Marks and will recognise single computerised register as against the manually maintained registered in two parts. Similarly, the Designs Act 2000 will enlarge the scope of definition of design and introduce more stringent provisions for infringement.

A sui generis legislation called the Geographical indications of Goods (Registration & Protection) Act, 1999 seeks to provide the registration of geographical indications by registered users and authorised users to ensure legal cover to producers under a codified law and also protect consumers against deceptive trade practices.

India has succeeded in forcing RiceTec Inc, a Texas-based US company, which had obtained a patent for 'basmati rice lines and grains', to withdraw certain claims in its US Patent which were challenged by the Government through APEDA (Agricultural and Processed Food Products Export Development Authority), under the Ministry of Commerce and Industry. APEDA had filed a re-examination application contesting some of the claims of the Patent. The claims, which could have adversely affected the commercial interests of basmati rice exporters, have now been withdrawn by RiceTec Inc. With this development, the danger to basmati rice exports to the US has been successfully averted as this Patent could be used to interfere in the export of Indian basmati rice. RiceTec Inc. had claimed that the rice grains produced by it had unique characteristics.

Government has also initiated a project for the Modernisation through Computerisation of the Department of Explosives.

Tannery Modernisation Scheme (TMS) has been launched in January 2000 for modernising existing tanneries. Financial assistance of Rs.255.55 lakh has already been sanctioned.

To promote joint ventures and give an exposure to foreign buyers about capabilities and strength of Indian leather industry, INTECHMARTS (Investment and technology buyers’ and sellers’ meeting) are being held.

An actionable blue print for implementation of Technical upgradation and improvement in productivity of organised sector (Footwear industry) has been prepared.

The policy initiatives earlier taken for industrial development of North East were fully activated. For speedy disbursal of assistance under the New Industrial Policy package, North East Development Financial Institution has been identified as the nodal agency.

A policy package for industrial revival in Jammu & Kashmir is under active consideration.