WTO may not wipe out locals, but industry's fingers are crossed

WTO may not wipe out locals, but industry's fingers are crossed
ENS Economic Bureau

New Delhi, March 30: The Taste, a popular bakery-cum-grocery store in South Delhi's upmarket Defence Colony could well be a large cornershop in any part of the developed world. When you enter the store, you'll be hard-pressed to find any Indian brand amongst the Oreo's Cookies, Chips Ahoy, Betty Crocker Cake Mixes, Alpen Cereal, Ragu's Pasta Sauce. In fact, as Jimmy Wadhawan, the proprietor's son and a market `analyst' acclaims proudly, ``You name it, we got six varieties of it.''

What's more, chances are several of those `six varieties' will be cheaper than their made-in-India counterparts. At Rs 45 for 500 grams, the French `La Vache Qui Rit' cheese (remember the `laughing cow' symbol?) is much cheaper than Amul's 70 and Britannia's 68. Not surprisingly, vast segments of India's markets are beginning to look like something out of the US of A.

Australian Berry orange juices are available at exactly the same Rs 63 per litre that Indian brands like Real and Tropicana retail for, and at Rs 93 per litre (including the `free' bottle) Heinz's tomato ketchup isn't too much more than Maggi's Rs 85. We're not even talking of the invasion from the Chinese end of the world.

So, will large chunks of Indian industry get wiped out when, on Saturday, Commerce Minister Murasoli Maran announces the country's most-historic EXIM Policy which will completely throw open the doors to all but a handful of imports? The government, for its part, feels the fears are exaggerated.

For one, the process of opening up the Indian markets to imports began a decade ago, as part of India's obligations to the World Trade Organisation (WTO) -- by March 1996, 6,161 items of a list of around 10,000 were allowed to be imported freely.

By last March, another 2,430 items were added to this list, but barring a few cases, Indian industry was hardly affected. Of the 391 items that were freed up in 1997-98, for instance, just 24 recorded an increase in imports the next year of over Rs five crore!

Data for the first eight months of this year confirms the same muted hike in imports. Imports of items like wheat, rice, coffee, fresh fruits, and sugarcane have been minimal -- their imports for April-October have all been less than Rs 15 crore. Edible oils, it is correct, have been substantial at Rs 4,470 crore, but even this is lower than for the Rs 6,240 crore for the same period last year.

The government also points out that it's been hiking import duties on various items to protect local industry. Import duties on skimmed milk powder were hiked from 0 per cent to 60 when a huge surge in imports brought down localprices by Rs 10 per kg -- imports of this fell to under Rs six crore in the first eight months of this year as against Rs 91 crore in April-November last year. Similarly, import duties on wheat have been raised from 0 per cent to 50 per cent, from 27.5 to 60 for sugar, from 35 to 100 on poultry products -- all this has been done to protect local industry and farmers from cheap imports.

In addition, the Directorate General of Anti-Dumping has initiated 87 cases so far, including suo motu ones on Chinese batteries and sports shoes, and has completed its findings within 90 days. And, three months ago, a list of 131 items was put out, where all imports would have to get a quality certificate from the Bureau of Indian Standards, to ensure a level-playing field for Indian players.

Even so, there are large sections of Indian industry that will be hit after March 31. While imports of brand-new cars and two-wheelers are unlikely to hit any of the local producers, imports of second-hand cars certainly will, especially when you consider that these are available at scrap value in developed countries -- a five-year-old Suzuki-Baleno imported from Japan will cost half what a new one does from Maruti. While Finance Minister Yashwant Sinha increased the import duties on this category to 180 per cent just last month, it is expected that the government will put further restrictions on imports when it finalises the new auto policy.

Similarly, the Ministry of Commerce has identified 22 items as `sensitive', where it feels imports could swamp local producers. These include footwear, newsprint, toys, umbrellas, and various foods and beverages. In some cases, the government has considerable scope to still increase import duties and still honour the commitments made at the WTO. In the case of tea, for instance, the current import duty is 35 per cent, but India can increase this up to 150 per cent if it so chooses; for wheat flour it can be hiked from the current 35 per cent to 100; from 35 to 85 for fruit juices; and for items like footwear, there's no ceiling for import duties. So, the government still has a lot of leeway to protect local industry. Provided, of course, the consumers don't protest at being asked to pay higher prices.