Import Realities

UNMINDFUL of the rapidly worsening balance of payments situation, the government had, in its new three-year Import-Export Policy announced at the end of March, incorporated further measures to ease the flow of imports into the country. However, within a matter of four months it seems to have been compelled now to think of ways of restraining imports. The commerce ministry has this week announced changes in import policy designed to save Rs 1,000 crore worth of imports in the current financial year. It has been decided to shift 4] items of capital goods out of the Open General Licence list of items which can be imported without a licence; their import will now be permitted only against licences. It has also been decided to impose a 15 per cent cut in imports of raw materials and components by the automobile, consumer durables and electronics industries. That despite the powerful forces within the government and outside pressing for progressive liberalisation of imports the government has accepted a dose of import restriction, howsoever mild, is significant. For one thing it reflects the fact that the beguilingly reassuring assessments of the advocates of import and, more generally, economic liberalisation notwithstanding, it is beginning to dawn on the government that the balance of payments situation is not far short of desperate. Secondly, the government is apparently also being forced to accept, once again in the face of advice to the contrary, that to deal with the balance of payments crisis it has no choice but to take steps to cut imports. This should hardly have come as a startling revelation. The question really is whether the government will draw the plain enough lesson that unless measures are instituted without any further loss of time to enforce cuts in imports selectively, it will be forced, very much sooner than later, to face the necessity of sweeping, across-the-board reduction of imports, with no room left any more for exercising selectivity of any sort and with the most unwholesome consequences for production, incomes and investment in the economy. Any number of poor countries, and not all of them Latin American ones at that, have found themselves in such a situation before. These have been countries whose governments have been successfully led to believe, as our own has been over the last decade or so, that in the unhindered flow of imports paid for out of borrowings from the multinational banks they have at last hit upon the means to get at the pot of gold at the end of the economic rainbow.