Trade Policies and Non-Tariff Barriers in India
The conversation around trade in India has recently shifted focus from tariffs to non-tariff barriers. India plans to lower import duties, as indicated in the Union Budget, to enhance value addition within the country and integrate Indian producers into global supply chains. However, reducing tariffs alone is not sufficient for economic openness, as regulations, restrictions, and quotas, collectively known as non-tariff barriers, also play a crucial role.
Non-Tariff Barriers: Quality Control Orders (QCOs)
- In recent years, India has increased its use of Quality Control Orders (QCOs) as non-tariff barriers.
- QCOs are ostensibly designed to ensure goods meet local standards but are often used to delay or divert imports.
- Nearly 800 QCOs have been issued, affecting sectors like steel and leather.
- The government plans to triple the number of QCOs, complicating trade for producers and importers.
- QCOs create uncertainty for traders in terms of shipment arrival and clearance times, affecting export schedules and costs.
Impact and Challenges
- The primary reason for QCOs is to prevent the influx of substandard goods from countries like China.
- However, QCOs have expanded uncontrollably, resembling the restrictive licence-permit-quota raj system.
- Bureaucratic control and discretion encourage lobbying and inefficiency.
- These barriers have deterred investment, especially in labour-intensive sectors like readymade garments.
Policy Implications
The government's overall goal of promoting economic openness is undermined by protectionist measures enforced through QCOs. Political intervention is necessary to address the issues arising from the arbitrary use of QCOs, aligning policies with the objective of fostering a conducive environment for trade and manufacturing.
