India Finance News

Taking a cue from China and South Korea, govt plans this step to curb sub-standard imports

In September-October 2018, India had raised the import duties on several communication items in the wake of surge in imports of electronic items.

Concerned over massive inflows of ‘sub-standard’ products into India — ranging from chemicals, pharmaceuticals, electrical machinery, furniture and toys to steel — the government is planning the biggest overhaul of its regulatory ecosystem that stipulates technical standards, including safety and quality, in a bid to curb imports of such products.

The move marks a policy shift in New Delhi from an avowedly pro-liberalisation approach to external trade to a more discretionary one, where barriers could be erected to ‘non-essential’ imports that may harm the economy, rather than benefit it.

India’s move follows its decision to pull out of the 16-nation Regional Comprehensive Economic Partnership (RCEP) agreement in November, as its proposals on safeguard measures to deal with any “irrational spike” in imports, among others, weren’t adequately addressed by potential partners, including China. As such, China has been a major source of sub-standard products, according to industry executives.

The policymakers here are also being seen taking cue from countries like China and South Korea, which maintain benign import tariffs but have high non-tariff barriers (NTBs). In September-October 2018, India had raised the import duties on several communication items in the wake of surge in imports of electronic items.

There have also been reports of the possibility of such duty increases on several other items and this has invited criticism from independent experts, who believe it would go against the spirit of free trade and New Delhi’s stated policy of progressive lowering of import tariffs.

An official source told FE that the Bureau Of Indian Standards (BIS) has been asked to develop standards for over 4,500 products (HS lines), preferably over the next six months, taking the total number of imported items where quality and other parameters would be in place to 5,000. Of these, standards for 371 products, with total imports of as much as $128 billion in FY19, will have to be firmed up or reviewed (wherever necessary) on a war footing, said the source. These items include steel, consumer electronics, heavy machinery, telecom goods, chemicals, pharmaceuticals, paper, rubber articles, glass, industrial machinery, some metal articles, furniture, fertiliser, food and textiles.

Commerce and industry minister Piyush Goyal held a crucial meeting on December 23 on this issue with officials of various ministries/departments, including steel, electronics, telecommunications, chemicals and petrochemicals and industry, said the source. It was revealed in the meeting that only about 10% of the country’s imported products are subject to various standards and the rest remain unregulated even from basic safety and environment parameters.

Since sub-standard products are usually imported at much cheaper rates, they not just pose risks to consumer health and environment (toys, for instance) but also hit domestic manufacturing because of the price competitiveness. Many countries, especially the big economies, therefore, subject their imports to rigorous technical standards and sanitary and phytosanitary measures. The proposed measures, once implemented, will boost the government’s Make in India initiative as well, said the official source.

Analysts say India seems to have taken a cue from countries like China and South Korea that have effectively employed various non-tariff measures to curb non-essential and sub-standard imports with potential risks to environment.

Even without RCEP, India’s merchandise trade deficit with China stood at $53.6 billion in FY19, or nearly a third of its total deficit. Its deficit with potential RCEP members (including China) was as much as $105 billion in FY19.

India’s imports rose 9% year-on-year to $507.5 billion in FY19, although in the current fiscal, the imports have contracted 8.9% in the first eight months, mirroring demand compression in the economy.

Source: Financial Express

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