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End of Quantitative Import Restrictions
The paranoia in some quarters over the ending of quantitative import restrictions will be proved unfounded and will die down. There will be some difficulties initially, particularly because domestic producers have been protected for so long. In the longer run competition from producers elsewhere will be beneficial for the domestic economy. This will, however, require policy-makers and other economic agents to give up their defensive attitudes and approach positively the tasks of becoming globally competitive.
April 1, 2001 will remain a memorabledate for Indian trade andindustry because on this day thelast of the quantitative restrictions thatcontrolled imports into the country wereremoved. For decades, trade and industryused to wait anxiously for the first day inApril when the government announcedthe exportimport policy. These controlswere being implemented under a law thathad been initially devised during thesecond world war to deal with the specialsituation arising from the hostilities. Indiahad accumulated a huge surplus of foreignexchange, known as the Sterling Balances,by the sale of war materials to the Allies Within 10 years of independence it ranthrough the sterling hoard and before theclose of the Second Plan faced a severecrisis of foreign exchange. It resurrectedthe wartime system and introduced aplanned system of import restrictions thatgained in intensity and refinements as theyears went by. Some items were totallybanned, some could be imported in limitedquantities, some could only come infrom soft currency areas, some werepermitted against equivalent exports, somewere canalised for imports through statetrading agencies, and so on. The consumergoods were, more or less, completelyprohibited for import while industrial rawmaterials and intermediates were allowedin limited quantities depending upon theavailability of foreign exchange.
Although the General Agreement onTariff and Trade (GATT) generallyfrowned upon the imposition of quantitativerestrictions, it permitted temporarydeviations for developing countries withlow standards of living and in the earlystages of economic development. If suchcountries faced balance of payments problemsarising from efforts to expand internalmarkets and from instability of trade,they were allowed to control the generallevel of imports by quotas in order topreserve the external financial situationand to build adequate reserves of foreignexchange. The import control measures,however, were monitored in the GATTwhich examined their justification, inconsultation with the IMF, at regulatedintervals. The Indian restrictions had beenin existence continuously since the beginningof the 1960s. Towards the close ofthe Uruguay Round, the major developedcountries pressed India to undertake aphased liberalisation of its regime thathad survived for more than 30 years The phaseout that took place on April 1this year was the culmination of that commitment.
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