Page 369 - DECO503_INTERNATIONAL_TRADE_AND_FINANCE_ENGLISH

Unit 31 : India’s Trade Policy : Recent Developments

consumables and tools and capital goods allowed under OGL, besides other limited Notes
permissible items and canalisd items.
(d) A scheme of Star Trading Houses was introduced for exporters with an average annual
net foreign exchange earnings of ` 75 crores in the preceding three licensing years of the
base period.
(e) Under the Duty Exemption Scheme, Blanket Advance Licensing was introduced for
manufacturer-exporters having a minimum net foreign exchange earnings of ` 10 crores
during the preceding 3 years.
(f) The Import-Export Passbook Scheme introduced in January 1986 was withdrawn.
Evaluation of India’s Export-Import Policy
The 1985 import policy was broadly welcomed by various Chambers of Commerce and Industry,
business and industrial houses and leading industrialists. The policy aimed at restricting unnecessary
imports, but permitted imports for encouraging indigenous production and promoting exports. The
policy also intended to pursue technological upgradation through imports. The policy was aware of
the need to check dumping of goods by multinationals and, therefore, gave support to the indigenous
industries by selective restrictions on imports. Another welcome feature of the import policy was the
fillip it gave to the small-scale and cottage industries as well as to agricultural exports, all this would
help to maximise utilisation of our manpower and agricultural resources. As regards promotion of
exports, the import policy contained clear cut measures to expand India’s exports. The various
measures were direct and positive and a general feeling was that India’s import policy was clearly
export-oriented.
However, critics noted some developments of a serious nature which would adversely affect our
economy. They are :
(i) Adverse effect on the growth of capital goods industry in India : The most serious liberalisation
has been attempted in the Exim Policy 1985-86 in the Capital Goods List bringing 208 items
under the OGL list. Among the additions was microprocessor based equipment, machine tools,
spinning machines, jute machinery etc. The impact of this wave of liberalisation is bound to be
adverse. Given the limited size of the market and the problems of technology transfer and the
procedural bottlenecks created by licensing, the development of capital goods industry which
was never a very lucrative proposition for Indian industrialists, was made much more
frightening in the wake of liberal imports of customs duty concessions.
(ii) Import policy likely to hit small-scale industries : Although the statement of objectives
specifically mentioned encouragement of the small-scale sector, but the measures suggested do
not match with the professed aims. Rather the Government in the name of modernisation was
helping big business to import labour-saving machinery. Economic and Political Weekly
exposing double talk of the Government mentioned : “the government’s pretensions of
encouraging the handloom sector by controlling the textile industry are exposed by the fact
that the latest in the labour-saving textile machinery, air jet and water jet looms (including
shuttle-less looms), have been placed under OGL on the plea of modernisation.”
(iii) Adverse effect on indigenous industry : The new import policy was trying to over-reach its
objectives of liberalisation and under pressure from multi-nationals opened areas in which
indigenous industry had adequate capacity. There was certainly far reaching implications of
such sweeping relaxations in imports. The Gujarat State Fertilizer Corporation (GSFC) and the
Soda Ash Industry have been continuously pleading before the Government to restrict imports
of caprolactum and soda ash since it would hit their interests adversely but the powerful
multinationals forced the Government to dump these raw materials in India. This posed a
problem of survival for the indigenous industry.
(iv) Technological dumping in the name of technology upgrading : According to RBI Report on
Currency and Finance (1989-90), capital goods imports increased from ` 3,168 crores in 1984-85
to ` 8,831 crores in 1989-90 i.e., they have grown at an annual growth rate of 22.8 per cent
during the 5 year period. There is, therefore, a relentless drive for unfettered import of capital

LOVELY PROFESSIONAL UNIVERSITY 363