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Policy Research
WORKING PAPERS
Woa
0
%C,
CountryOperations
CountryDepartment
The WorldBank
October 1992
WPS989
The IndianTrade Regime
M. AtamanAksoy
Reformingexport policies alone - withoutreformingIndia's
importandtax systems- will produceonly marginalimprovements.The wholesystem needs rationalizing.
PolicyRcewrchWorkingPapersdisseminate
thefindimgsofworkin progrews
and encouragetheexchangeof ideasamongBankstaffand
a1 others interested in development issues.Thesepapers, ditfibuted by thelReseatrchAdvisoryStaft,cury the names ofthe authors.dlect
onlytheirviews,andshouldbeusedandcitedacoordingly.Thefindings,
interptutions,andconclusionsau theauthoreown.Theyshould
na be attributedto theWorldBank,its Boardof Diractors,its management,or any of its membercountries.
Policy Research
ContryOperations
WPS 989
This paper - a product of the South Asia Country Department III -is based on a larger study of India's
trade regime undertaken by the Department. Copies of the paper are available free from the World Bank,
1818 H Street NW, Washington, DC 20433. Please contact Rose Matenda, room J 11-217,extension 35055
October 1992, 82 pages).
Despite attempts to liberalize India's import
trade regime, the structure of import licensing is
still restrictive and complex and for most products, the licensing systems probably offers no
more protection than tariffs do. For most products,trade restrictions are probably redundant as
protection.
Reforming export policies alone - without
reforming India's import and tax systems - will
produce only marginal improvements. Problems
in the export administration can be resolved only
by making changes in four areas:
* The import licensing system must be
rationalized to eliminate import restrictions on
inputs and components. The import regime
inflicts heavy administrative costs on the Indian
economy. Imports of raw materials and other
inputs essential for production are delayed,
leaving downstream producers idle when domestic supplies are interrupted (which happens
often). The export regime is still not rationalized
for smaller producers, indirect exporters, and
firms that rely on domestic suppliers.
* Tariffs and excise taxes must be consolidated around two to three slabs and the quantitative restrictions in intermediate and capital goods
must be eliminated so firms can be compensated
accurately for their tax burdens. The system that
exists is far too complex.
* The absolute level of tariffs on inputs must
be reduced to administer the duty-free import
schemes efficiently. High tariffs encourage
leakage of duty-free imports into the domestic
market and abuse of high drawback rates (incentives).
* Tariffs and taxes on capital goods must be
reduced to reduce the costs of investment. Tariffs
in India - especially on key intermediate
products (metals and chemicals) and capital
goods - are high and getting higher fast. The
high cost of basic inputs increases the cost of
production, leads to uneconomic import-substitution which causes pressure for more protection,
and requires an elaborate, cumbersome system to
compensate exporters. High tariffs and excise
taxes on capital goods damage Indian competitiveness, adding 1(0to 15 percent to the cost of
production and severely handicapping exporters.
Thb excessive tariffs do not fulfill their
primary purpose of providing protection and
incentives; they are aimed mainly at generating
revenues. Public revenues should be generated
through more efficient instruments, especially
taxes.
| TPedPolicy
Research Working Paper Series disseminates
work under
ioefindingsof
way in theBank. Anobjectiveof theseries
is to get these findings out quickly, even if presentations are less than fully polished. The findings, interpretations, and
conclusions in these papers do not necessarily represent official Bank policy.
Produced by the Policy Rese-archDissemination Center
THEINDIANTRADE
REGIME
BY
M. ATAMAN
AKSOY*
*
PrincipalEconomist,IndiaDepartment,
SouthernAfricaDepartment,
World Bank.
This Paperis based on a largerstudyof India'straderegimeundertakenby the
IndiaDepartment.This studydoes not reflectthe major reformsthat have been
implemented
sinceJuly 1991. The mappingof itemsin the importpolicydocument
to the HarmonizedSystem(HS)was undertakenby MadhumitaGupta. UmnuaySae-Hau
draftedthe sectionon tariffsand preparedthe databaseused for the tables.
HelenaTang preparedthe quantification
of exportincentives.The staffof
ICICI, especiallythe late Dr. SanpathS. Iyengar,suppliedthe data on export
profitability.The officialsin the Departmentof Revenueand CCI&E contributed
immensely
to the establishment
of the database. The input-output
tableused as
--the base was constructed
by Prof.M. R. Salujaof the IndianStatistical
Institute. The study also drew heavilyfrom the earlierwork of Garry Pursell
and DonaldKeesing. Numeroushelpfulcommentswere receivedfrom MichaelGould,
David Greene,FrancoisEttoriand Ashok Khanna.
TABLEOF CONTENTS
Paae No.
A.THEIMPORTLICENSINGREGIME ...........................
1
The ExistingImportControlSystem ..*.....
. .3......
Quantitative Assessment of the Import Regime . . . . . . . . . . .
10
OF TARIFFS . . . . . . .
B. THE STRUCTURE
. ... ......
The Existing Tariff Structure . . . . . . . . . . . .
Evolutionof Tariffand ExciseTax CollectionRates .
. . . . . . . .
Restrictions
Tariffsand Quantitative
ExciseTaxes and ExcisableOutput . . . . . . . . . .
C. EXPORTPOLICIESAND ADMINISTRATION..c......
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
. . .
17
.
.
.
.
20
.
.
.
.
.
.
.
.
eseesse........
ExportControls. . . . . . . . . . . . . . . . . . . . . . . . . .
ExportIncentives. . .. . . ..... ..... ..... ..... ..... ... . .
.
Quantification of Export Incentives .... . . . . . . . . . . .
Impactof Trade Regimeon ExportProfitability. . . . . . .
D. CONCLUSIONS. . . . . . . . . . . . a
*
*
*
*
*
*
*
*
.
*
.
*
X e e
23
27
29
31
31
32
38
43
49
APPENDIXA: MATCHINGIMPORT,HS AND INDUSTRIAL
CLASSIFICATIONS. . .
55
DATA BASE FOR TARIFFS.
B: DISAGGREGATED
APPENDIX
71
. . .
. . . . . ..
1. Despiteits importance
in the post-independence
growthof the Indian
economy,
the studyof the tradereginie
has received
relatively
little
attention.Afterthe pioneering
workof Bhagwati
and Srinivasan
(1975)and
Panchamukhi
(1978)whichbasically
covered
the experience
of the 1960s,the
studyby Wolf (1982)focused
onlyon exports.The experience
of the 1970sand
early1980swas studiedin an unpublished
Ph.D.dissertation
by Rao (1985).
The description
of the traderegimein the late1980sis contained,
againin
unpublished
monographs,
by Pursell(1988)and Keesing(1987,1988). Evenin
thesestudies,
the complexity
of the traderegimeand the unavailability
of
up-to-date
statistics
havemadeit verydifficult
to quantify
the extentof
QRs,detailed
tariffstructures
and the magnitude
of exportincentives.
2.
Thisstudytriesto quantify
the structure
of the importlicensing
regime,
analyze
the detailed
structure
of tariffand excisetaxesand their
evolution
and up datethe natureand magnitude
of exportincentives.
It is
basedon a largestudycarried
out by the Indiadepartment
thatmapped
individual
itemsin different
importlicensing
categories
to actualimports,
obtained
disaggregated
information
on tariffs,
analyzed
firmleveldataon
exportcompetitiveness,
and organized
thisdataaroundan input-output
table
builtfor 1987/88.Thisdatabase
allowsus to quantify,
on a consistent
basis,the scopeof QRs,tariffs
and exportsubsidies.The impactof the
traderegimeon the historical
behavior
of exports,
imports
and industrial
outputis summarized
in Aksoyand Tang (1991) and willnot be discussed
here.
Similarly,
the effectof the traderegimeon effective
protection
and
industrial
efficiency
is discussed
in Aksoyand Ettori(1991). The descriptionsof importand exportpolicies
drawheavilyfromPursell(1988)and
Keesing(1987,1988). SectionA coversthe importregime,
SectionB, the
tariffstructure
and SectionC describes
the exportregimewhichcompensates
for the importand tariffregimes.
A. THE IMPORTLICENSING
REGIME
3.
Indiahas had a veryrestrictive
traderegimesincethe late1950s. The
instruments that have been used to regulate import demandhave been an extensive importlicensing
systemand highlevelsof tariffs.The importcontrol
-2mechanisms
in Indiawerefirstintroduced
as e resultof the foreign
exchange
crisisof the SecondPlan(1956-61).From196uto 1977thesecontrols
were
increasingly
tightened
andmademorecomplex.By 1977,whenforeign
exchange
reserves
wereconsidered
adequate,
the Government
beganto relaximport
controls
andquantitative
restrictions.l/
Thisimportliberalization
phase
has lasteduntil1990.
4.
Someof themore important
importpolicychangessince1978include
the
expansion
of OGL (OpenGeneralLicense)
lists,shifting
of goodsfrommoreto
lessrestrictive
lists,swifter
and lessrestrictive
administrative
Judgments
and somereduction
in the scopeof canalization.
In particular,
therehas
beena relaxation
of restriction
on capital
and intermediate
goodsimports,
thoughprimarily
of commodities
notcompeting
withdomestic
production.
Imports
of mostconsumer
goodscontinued
to be banned.Mostof thesechanges
weremadeto allowparticular
domestic
industries
(including
a numberof
exportindustries)
to modernize.Capital
and intermediate
goodsimports
which
werealmostconstant
in realtermsbetween1966to 1977haverisen
substantially
in recentyearsto morethan6X p.a. (Aksoyand Tang,1991).
5.
The complexity
of the importregimemakesit verydifficult
to quantify
the impact and significance of QRs. First the product descriptions in
different licensing categories vary in coverage from very specific to general
and thus do not give any indication of the extent of items covered. Second,
imports are not recorded by licensing categories. Third, classification of
items in the importpolicyis not organized according to the HarmonizedSystem
(HS)classification
usedto reportimports. Therefore, most of the previous
analysis
on the importregimehavebeendescriptive
and the changeshad to be
analyzed in terms of numbersof items shifted from different categories
without measuring their impact on the magnitudeof imports or products
covered.
I/
ThesechangeswereIncorporated
in the tradepolicystatement
of
1978/79.The basicchangewhichappliedto raw materials,
manufactured
inputs,consumer
and spares,
involved
a switchfrom'positive"
listsof
allowable
imports
to a systemof "negative*
listsof restricted
imports.
The complex
policyregarding
importof capitalgoodsand technology
was
alsoliberalized
but on a moread hoc basis. Therewas no changein the
policywhichbansmostconsumable
goodsimports.
-3to
the shareof importssubject
6.
Attempts
havebeenmadeto estimate
of
has maderoughestimates
Pursell(1988)
categories.
different
licensing
imports under OGL forthe 1980sand quotesestimates madeby the Indian
Governmentfor 1980/81. Theseestimates are, however, very broad and based on
to verify.
a series of key assumptionsthat are difficult
7.
This section tries to estimate the structure of import licensing system
moreprecisely
for 1987/88,
by individually
mappingthe itemsin the ImportHS codesat the sixdigitlevel.
to the corresponding
ExportPolicydocument
First,a briefdescription
of the importregime,
drawnheavilyfromPursell
system
results
of the licensing
is presented
and thenthe quantitative
(1988),
are analyzed.
The Existing
ImportControlSystem
8.
Indiahas a verycomplexsystemof importlicensing
thatwas developed
piecemeal
overthe lastthreedecades.The basicdocument
of importcontrols
is a threevolumeImportand ExportPolicyDocument
issuedannually
until
1985,and now issuedeverythreeyears. Thisdocument
classifies
itemsby
licensing
regimeand describes
the procedures
for import.Numerous
changes
whichmakeit
are made in thisdocument
fromtimeto timeby publicnotices,
verydifficult
to ascertain
the scopeand extentof the QRs. For example,in
the firsteightmonthsof 1990,102 importcontrol
and 60 exportcontrol
publicnotices
wereissued.
9.
Non-tariff
barriers
operating
through
the importlicensing
systemhave
longbeenthe principal
meansof regulating
imports
and protecting
domestic
industries.
Thesecontrols
include:(i)the importlicensing
system;
(ii)*actual
userwpolicy(whichforbids
imports
by intermediaries
suchas
wholesalers); (111)canalization (monopolyimport by a public sector firm);
(iv) phasedmanufacturing programs(that mandateprogressive import substitution); (v) the industrial licensing system and (vi) governmentpurchase
preferences
for domestic
producers.
of the importlicensing
System2/.The basicstructure
10. ImportLicensing
as follows:
can be summarized
categories
mainlyfor healthor
a few commodities
(a) A BannedListthatcontains
reasons;
religious
thatrequirean importlicense,
Listof commodities
(b) A Restricted
circumstances;
underspecial
except
importable
not
usually
are
and
thataisorequirea
Listof commodities
Permissible
(c) A Limited
List;
Restricted
the
than
restrictive
less
license
(d)
an
of itemsnot requiring
An OpenGeneral License (OGL),category
import license; and
(e)
Canalized Products (mostly raw materials) whoseimport is
or publicsector
restricted to publicsectoragencies
itemscan be in
To someextent,
enterprises.
manufacturing
andalsobe
permissible)
OGL,limited
lists(i.e.,
different
importtheseitems
agencies
canalized.Thenthe canalization
importregimes.
underdifferent
someof theseitemscan be
to thesemajorcategories,
11. In addition
licenses.The mostcommonof
related
e,,port
through
by exporters
imported
to
whichallowexporters
(REP)licenses,
Replenishment
theseis the tradable
listsfor own use or resale.
Permissible
and Limited
importitemson Canalized
intothreebroad
imports
subdivides
systemfurther
12. The importlicensing
goods;and
goods;(ii)capital
by typeof item: (i)consumer
categories
sparepartsand supplies.
components,
rawmaterials,
(111)intermediate
list,and are
qoodshavelongbeenin the Restricted
consumer
13. Finished
goodsin
exceptions:(a)a few consumer
bannedwiththe following
practically
edibleoils,cereals,
including
agencies,
by canalizing
shortsupplyimported
baggage
effectsin passengers'
and certaindrugs,etc.;(b)personal
kerosene
and
and giftsup to modestvaluelimits;(c)medicaland dentalequipment
goods
(d)a few consumer
and hospitals;
dentists,
usedby doctors,
supplies
and
scientific
are on OGL; i.e.,pulses;booksand Journalsin educational,
homeopathic
films;drieddates;wheelchairs;
educational
fields;
technical
2/
of the import
description
and simplified
Thisis a highlystylized
separate
various
with
each
of 17 appendices,
regimewhichconsists
lists.
-5-
medicines;
somecomputer
sottware;
photographic
film:and (addedin the new
Policy)
fourspices--nutmeg,
cloves,
cinnamon
and mace--which
wereformerly
canalized;
(e)a few industrial
inputson one of the limited
penmissible
lists
havepotential
non-industrial
uses (paints,
paperstationery,
mirrors,
locks,
rubberhoses,and ethylalcohol).
14. Capital
goodsimports
areorganized
on a positivelistprinciple
and are
dividedintoa *restricted"
category
and an "OpenGeneralLicense"(OGL)
category.The importof capital
goodsthatare not specifically
on the OGL
listare treatedas restricted
and requirean importlicense.In addition,
thereis alsoa specific
listof restricted
capital
goodswhichpresumably
indicate
the itemsthatan importlicense
shouldnot be granted.
15. OGL importof capital
goodsis subject
to a numberof conditions,
of
whichthe fourmostimportant
are: (a)the importing
firmmustbe the "actual
user"of the equipment,
whichfor fiveyearscannotbe resoldwithoutthe
permission
of the licensing
authorities;
(b)the resulting
changein productivecapacity
mustbe compatible
withthe capacity
approved
by the industrial
licensing
authorities:
(c)mostitemson the OGL machinery
and equipment
list
are groupedaccording
to the industries
whichpredominantly
usesthem,and
firmsnot belonging
to theseindustries
wouldneedto obtainspecial
permissionto importthem;(d) special
restrictions
applyto imports
of second-hand
machinery
and equipment,
evenif it wouldotherwise
be on OGL.
16. Since1976therehas beena steadyincrease
in the numberof capital
goodson theOGL lists: From79 in 1976to 1170in April1988. Thisostensiblywas doneto allowdomestic
industries
to modernize.However,
mostof
the machinery
put on the OGL listwas not produced
domestically
so relaxation
of the listmightnot implycompetition
withdomestic
producers.An exception
is the machinetoolswhereitemsdomestically
produced
havealsobeenplaced
in OGL. Therealsohas beenreduced
stringency
in the licensing
of imports
of
the majority
of machinery
and equipment
itemswhichremainsubjectto discretionary
controls.A globaltendering
facility
is available
for industries
or
projectsin 14 important
categories
regardless
of the availability
of indigenouscapital
goods,withselection
of suppliers
subject
to scrutiny
by the
Empowered
Committee.Alsounder"project
imports"
and technology
development
-6funds,imports
of machinery
havebeenallowed
muchmoreeasilyin the lastfew
years.
17. One of the changesin the 1988-91 Import-Export
Policyis to allow
recognized
Exportand TradingHousesto importcapital
goodsthrough
the use
of exportrelatedlicenses
(Additional
Licenses).Evidently
thisrpeision
was
causedby concern over the costs and difficulties
to small firms of importing
directly.
18. Intermediate goods are divided into: (a) banned;(b)restricted;
(c) limited permissible; (d) canalized; and (e) OGL categories. In general,
intermediate goods which are not in one of the first three categories, nor on
the separate
canalized
lists,canbe imported on OGL,i.e. without a license.
In practice,
however,
the systemhas not functioned
according
to thisapparent
"negative
listoprinciple,
mainlybecause
of ambiguities
in the listsof
controlled
items. Therefore,
OGL statusfor intermediate
goodshavebeen
limited
to itemsincluded
in the published
OGL lists,plusinformal
internal
OGL listsaccumulated
by the licensing
authorities.3/
In any case,the
negative
listprinciple
for intermediate
goodswas officially
revoked
in late
1990due to balance
of payments
difficulties.
It was not clearto which
category
theseso calledOresidual"
itemsweremoved. However,import
licenses
are now officially
required
for intermediate
goodsnot specifically
included
in the OGL lists.
19. As withcapital
goods,all intermediate
goodsimported
underany of the
fourcategories
abovefallunderthe actualuser"requirement.
The
exceptions
are provisions
for imports
of specified
rawmaterials
by the
government
canalizing
agencies,
a smalllistof raw materials
and components
3/
Importing an unlisted product without a decision on whether it could be
imported on OGL is not possible
becausethe bankswouldnot release
the
foreign exchangeif there was any doubt. Therefore, the import of
unlisted
itemscouldbe moredifficult
thanimporting
unrestricted
or
limited
pe.miissible
items,contrary
to the Intentions
of highlevel
policymakers. The moveto a negative
listprlnciple
was regarded
as
one of the most important
changesrecommended
by the 1977/78
com1ittee,
but the principle
was neverimplemented,and instead case-by-case
decisions
weremadeon individual
applications
and informal
internal
listswerebuiltup of thoseitemswhichcouldbe imported
on OGL.
and raw
for stockor resaleby privateimporters,
on OGL whichcan be imported
applying
to
provisions
by virtueof special
whichcan be imported
materials
rerchants
in the export
and to authorized
REP licenses)
(especially
exporters
Licenses.
through
Additional
houses")
and *trading
houses"
business("export
in the numberof intermediate
goodson
20. Therehas beena steadyincrease
listssince
bannedand restricted
in the various
the OGL list,and a reduction
in f ch year
has occurred
controls
of raw material
1977. Someloosening
the mainthrustof thesepolicy
beginning
withthe 1977/78
policy. However,
of inputsusedby domestic
changeshas beento easethe supplysituation
industries
but not produced
domestically.
Mostof the itemsput in the OGL
category
wereeithernotmadein Indiaor not likelyto be madein the coming
fromthe OGL to the various
year. In fact,eachyearsomeitemsare removed
products
are available.
listson the groundthatdomestic
restricted
21. Themain innovation
in the 1988-91 and 1990-93
Policies,
is thatimport
replenishment
(REP)licenses
are now givenforpractically
all exports(excluand
permissible
dinggems)and can be usedto importany itemin limited
to anyone. Thus,traders
are transferable
lists. Theselicenses
canalized
and domestic
manufacturers
willbe ableto get on all the itemson theselists
by buyingtheselicenses.
exceptforthoseby exporters,
22. Non-OGLImports.All non-OGLimports,
agency"
are subject
to a case-by-case
decision.In eachcase,the "sponsoring
of eachfirmmustcertify
to the ChiefController
of Imports
& Exports(CCI&E)
mustbe
angleclearance"
and an "indigenous
thatthe importis "essential,"
Generalof Technical
Developusuallyfromthe DGTD(Directorate
obtained,
and
of satisfactory
specifications
thata product
ment),whichcertifies
timeby an Indianfirm. For
in a reasonable
qualitycannotbe supplied
GoodsComCapital
mustbe givenby the concerned
goods,approval
capital
in
not considered
is generally
alternative
mittee. The costof the domestic
availability,
the foreign
exchange
include
the decision.Otherconsiderations
In sum,import
authorities.
licensing
by industrial
,pproved
and the capacity
ad-hocmanner.
and administratively
are issuedin a non-price,
licenses
-823. Canalized
Imports.Canalizing
agencies
are anothermeansby whichthe
Government
controls
imports.Thereare 12 designated
suchagencies
listedin
the Import-Export
policy. Therewas not alwaysa cleardistinction
between
canalized
Imports
and licensed
imports,
sincesomeimportlicenses
were issued
to canalizing
agencies
to importapparently
canalized
products.Duringthe
late1970sand early1980sthisoverlapping
occurred
on a largescale. Import
canalization
was adoptedthreedecades
ago in India. Between1969and 1973,
there was a steep growth in the proportion of canalized imports to total
imports, an outcomeof the Government'sdecision to be more interventionist
withregardto foreign
trade. The shareof canalized
imports
increased
from
37.28%of the totalin 1968-69
to 65.81%in 1973-74.From1980,the shareof
canalized
productsin totalimports
has declined
substantially,
fromabout67%
in 1980/81
to about27% in 1988. The fallin shareswas lessa reflection
of
decanalization
thanit was the resultof: (i)an increase
in domestic
POL
production,
a declinein POL imports
and a declinein worldpricesof crude
oil and petroleum
products;
(ii)thedisappearance
of grainand cotton
imports; and, (Mii)largedeclines
duringthe 1980sin the international
prices of someof the otherprincipal
canalized
imports.Nevertheless,
there
was decanalization
of 21 itemsin April1985and a further
26 itemsin April
1988,although
as a percentage
of totalcanalized
imports,
thesefigures
are
rathersmall.
24. ActualUserPolicy.Thispolicyexcludes
non-government
intermediaries
fromlmporting,
thereby
disallowing
imports
for resale.The implications
of
thispolicyfor different
categories
of imports
are as follows:(a)consumer
goods- ActualUserPolicywouldprevent
mostof theseimports
evenif the ban
werelifted; (b) intermediate
goods- special
importlicenses
may be issued
to allowcanalizing
agencies
and certain
privateexportand trading
housesto
importraw materials
and components
in bulkfor resaleto manufacturing
fimrs.
Also,privateintermediaries
can legally
bypassthispoli.1_
to someextentby
actingas agentscombining
the replenishment
licenses
for exporters;
(c)capitalgoods- the policygreatlyrestricts
imports
of capitalequipment
and
intermediate
goodsby smallandmediumfirms,and evenby largefirmswhenthe
quantities
required
are small,owingto the hightransaction
costsof
importing
on a smallscale.
-9-
25. The onlyitemsthatcan reallybe imported
freelyare itemsimported
through
REP licenses.4/
Anybody
who buysa REP licensecan importthe productsthatare in canalized
and limited
permissible
lists. Thusthe most
important
distinction
in thiscategorization
is betweenthe commodities
in the
restricted
listand othercategories.
Itemsin othercategories
can be
imported
by REP licenses,
whileitemsin the restricted
listcannotbe
imported
by REP licenses.Although
the proportion
of imports
throughREP
licenses
are small(about10 of exports),
thepotential
importof theseitems
allowthe gapsbetweendemandand supplyof thesecommodities
to be met by
imports.For the commodities
in the restricted
list,adjustment
of imports
automatically
to meetthe excessdemandin the domestic
marketis not
possible.
26. PhasedManufacturing
Programs
(PMPs).Theseconstitute
a newdevelopmentwhichrunscounterto the general
trendof the easingof restrictions
on imports
of intermediate
inputs.The PMPsaccompany
investment
licenses
and
involve
agreement
by the concerned
firmto progressively
replaceimported
materials,
partsand components
withthoseproduced
in-house
or by other
Indianfirms. To ensureimplementation
of the agreements,
the importof all
suchpartsand components
requires
priorclearance
(ListAttestation)
by the
sponsoring
authority
for the industry.Theseagreements
and procedures
thereforeamountto a separate
set of quantitative
importcontrols
whichapplyto
many intermediate
products,
including
thoseon OGL lists,whichin theoryare
importable
withoutthe restrictions.
27. Industrial
Regulatory
System. Thisis in effectanotherdiscretionary,
non-tariff barrier that protects the machinery and engineering industries
against comp;ting imports. The system involves the clearance by the Capital
GoodsCommittee
(CGC)of applications
for industrial
licenses
for new or
expanded
capacity.The CGCscrutinizes
the foreign
exchange
contentof the
investment
and may rejectapplications
involving
whatit regards
as excessive
foreignexchange
outlay,or may require
localsourcing
of particular
machinery
and equipment
items. The latteris applicable
evenif the itemsare on the
4/
The onlyexception
is the few itemsthatare on OGL-stock
and salelist.
This listhas about75 itemsand imports
in thiscategory
are lessthan
1X of total imports.
-
10
-
goodsindusthe c3iftal
alsoprotect
importpolicies
OGL lists. Technology
to pay the
exchange
of foreign
the allocation
tries. Underthesepolicies,
administrative
to a case-by-case
feesare subject
and license
royalties
for foreignfirms,wheresuch
licenses
of technology
review. The requirement
is anotherformof nongoodsimports,
are oftenlinkedto capital
licenses
the
Finally,
goodsand technology.
capital
tariffbarrierto importing
reservation of particular products for exclusive production by small scale
firms Is also an indirect import barrier.
28. There has been liberalization of the controls on domestic industry since
1985. Someof the policy changespertaining to this are include: (i)increasesin the assetlimitbelowwhichfirmsdo not needan industrial
a
withoutobtaining
capacity
for increasing
(ii)greaterflexibility
license:
(iii)greater
endorsement*);
suchas ucapacity
provisions
license(through
for "broad
provisions
(through
production
for diversifying
flexibility
groups
a numberof product
licenses).In addition,
of industrial
banding"
and in June1988,a majorreformcarriedthisprocessfurther
weredelicensed,
listof 27 industries.
exceptfor a negative
all industries
by delicensing
in manyways: (i)onlyimport
has freedup importrestrictions
Delicensing
affectfirms'
can in principle
policies,
licensing
not industrial
policies,
(ii)with
or buy it locally;
equipment
on whetherto importcapital
decisions
limitsderivedfromindustrial
thereare no longerindependent
delicensing,
whichcan be imported.
the quantities
whichconstrain
licensing
givepreference
purchases
Government
Preferences.
Purchase
29. Government
to domestic firms. A price preference equivalent to 25X of the CIF price of
imports plus duties and port charges is given to domestic suppliers by the
Directorate General of Supplies & Disposals, which buys supplies for the
central governmentand substantial amountson behalf of state governmentsand
state enterprises. Since Indian tariffs are high, this is equivalent to a.
substantial margin on CIF prices.
Quantitative Assessmentof the Import Realme
to
30. Given the complexity of the import regime, it is very difficult
quantify the impact and significance of QRsin India. First, the descriptions
fromveryspecific(Broach
in different licensing lists vary in coverage
-
11 -
up to 250 mm diameter
and 2000mm
sharpening
machinefor grinding
broaches
lengthand equipped
withhydraulically
operated
crossslidefor flatbroach
goodshowsoever
described,
of indusgrinder)
to verygeneral(allconsumer
or animalorigin,not appearing
individually
in Appentrial,agricultural
dices3, partA and 5 or specifically
listedfor importunder(penGeneral
of the
doesnot giveany indication
License).Thus,the numberof entries
extentof itemscovered.Second,the classification
of itemsin the import
according
to the harmonized
system(HS)classipolicyis not organized
in import
fication
usedto reportimports
and tariffs.So items,as specified
can not be directly
compared
to actualimports.And third,customs
policy,
doesnot recordimports
by licensing
category,
so information
on themagnitude
underdifferent
licensing
categories
cannotbe directly
observed.
of imports
31. Forthe purposes
of thisstudy,individual
itemsin the 1988-1991
Import-Export
Policy document
weremappedintothe corresponding
HS codesat
the six digitlevel. The methodology
of themappingis givenin Appendix
A.
Giventhe variance
in levelsof disaggregation
ir,itemslistedin the policy
document,
however,
the mapping
to HS codesare not exact. Furthermore,
some
of the HS codesare notmentioned
at all in the importpolicy. Instead
of
makingassumptions
aboutitemsnot listedin the policydocument,
theyare
treated
as residuals
thatcan not be classified.
Thispartial
mappingcovers
82% of imports
by valueand 70% of itemsby numberof sixdigitHS codes.
32. Thereare threemethodsof estimating
the shareof itemsin different
licensing
categories.
Firstis the distribution
of HS codes(morethan4,500
items)by licensing
category
whichgivesequalweightto eachHS code. Second
is to weightthesecodesby domestic
output.Unfortunately,
theoutputdata
is not available
in the samedisaggregated
formas the HS codes. The availableoutputdata is fromthe input-output
tableand includes
98 tradeable
sectors.So the outputweightsinclude
onlythe 98 sectors.Thirdmethodis
to lookat the distribution
of imports.The codeswhoseimportlicensing
category
couldnot be identified
are shownseparately
as "unknown."These
unknown
HS codesare distributed
acrossthe categories
according
to their
sharesin the totalknownitems. Thusthepresentation
assumesthatthe items
whoseimportlicensing
category
are unknownaredistributed
in the same
proportion
as knownitems.Table1 presents
the structure
of the licensing
systemunderthesethreemethods.
-
12 -
TABLE1: COMPARISON
OF DIFEREN? MEASURES
OF SNDIA'S !MPRT LICENSINUG
STRCTUR
DannedI
Restricted
Percentages of BS Codes
Percentages of Output-weighted
HS codes
Percentages of Imports
LiaLted
Permiesible
OGL Canalized
Percentage
TOTAL Identified
46
56
26
24
19
11
9
9
100
100
71
76
20
28
20
33
100
82
As expected,restricted
licensing
measuredthroughHS codesis muchmore
prevalent than measuredthrough imports. Thisis becausemost itemsIn the
restricted listsare not imported.
33. The structure
of importsand numberof six digitHS codes(weighted
by
output)by licensing
categories
are givenbelowIn Tables2 and 3. Theyare
obtainedby dividingimports(or HS codes)in different
licensing
categories
to totalidentified
imports(totalnumberof output-weighted
HS codes)in that
subsector.The percentage
of itemswhoseimportlicensing
category
couldnot
be identified
is shownseparately
in the ounknowncolumn. Theseunknown
importsand HS Codesare distributed
acrossthe categories
according
to their
sharesin the totalknownitems. Thismethodseriously
understates
the
restrictiveness
of the importregime. First,by definition,
all capitalgoods
not specifically
on the OGL listare restricted.Second,although
raw
matelials
not on the restricted
listsare supposed
to be on OGL,the actual
implenentation
has not workedthisway. Effectively,
itemsnot explicitly
placedon OGL listsare restricted.
- 13
TABLE
2:
Banned
and
Restricted
AGRICULTURE
-
IMPORTS
BYLICENSING
CAEGORY
(l7/88)
(percentage ot total 1ports)
Limited
Permissible
ML
Canal zed
of
Total
Imports
inGross
Denetic
Unknown/*
OutRnt
42.0
2.0
46.0
10.0
100.0
23.0
0.92
ENERGY
0.0
0.0
0.0
100.0
100.0
6.0
44.06
MINERALS
0.0
0.0
8.0
91.0
100.0
16.0
23.98
KANUFACTURING
23.0
36.0
23.0
18.0
100.0
21.0
8.94
Food,Beverages
and
Tobacco
34.0
0.0
0.0
65.0
100.0
26.0
2.51
Textiles
andLeather
40.0
38.0
22.0
0.0
100.0
22.0
0.61
0.0
42.0
20.0
38.0
100.0
91.0
6.48
Chemicals
6.0
26.0
40.0
29.0
100.0
13.0
12.14
Non-metallic
Minerals
8.0
89.0
2.0
0.0
100.0
2.0
28.38
16.0
26.0
10.0
47.0
100.0
12.0
13.97
0.0
94.0
6.0
0.0
100.0
28.0
4.41
52.0
21.0
27.0
0.0
100.0
13.0
24.79
Electrical
Appliances
andElectronics
2.0
56.0
40.0
2.0
100.0
5.0
16.21
Transport
Equipment
3.0
56.0
24.0
18.0
100.0
42.0
4.42
Others
12.0
17.0
47.0
24.0
100.0
47.0
10.15
TOTAL
20.0
28.0
20.0
33.0
100.0
18.0
7.17
Petroleum
andCoal
Products
metals
MetalProducts
Machinery/b
/a
/b
Thesearegiventorinformation
only. In thecalculations,
theyaredistributed
to otherknown
categories,
so thattotalsinclude
allimports.
Project
imports
areassumed
to be restricted.
34.
Table 2 presents the share of imports in different
licensing categories
by key subsectors. The energy subsector consists of crude oil and coal and
lignite.
Minerals include other non-processed raw materials.
The last column
in Table 2 gives the share of imports as a proportion of the gross output in
that subsector.
35. In analyzingthe restrictiveness
of imports,two categoriesof
relativelyQR free importshave to be defined. First,OGL imports,while
subjectto actualuser condition,can be importedwithoutrestriction
on
quantity. Their share in importsare abott20X overalland 23X in manu-
facturing.Second,itemsimportable
through
exportrelatedlicenses(REP);
all itemsin limited
permissible
and canalized
listscan be imported
by REP
- 14
-
by
market. If the itemsimportable
and freelytradedin the domestic
licenses
of
the proportion
as restriction-free,
are alsotreated
REP licenses
to about71%.
increase
categories
undernon-restrictive
importable
commodities
werebroughtin underOGL and
actually
Thisdoesnotmeanthat71% imports
underlessrestrictive
thatcan be imported
REP. It onlygivesthe proportion
categories.
was
category
by licensing
of imports
36. The onlyotheryearthatestimates
and
was 6.5%in totalimports
whenthe shareof OGL imports
madewas 1980/81;
to 20% and 25% respec7.9%of non-POLimports.Theseratioshaveincreased
relaxed
thattheQR regimehasmarginally
the hypothesis
tively,
whichsupport
thatthe quantity
of
evidence
overthe 1980s. Thereis also -me indirect
imports
thatare licensed
haveincreased.Thepremiaon imports
havebeen
from100%to
1978);increasing
veryhighin the 1960sand 1970s(Panchamukhi,
in the 1980s
200%for manyproducts.Theserateshavecomedownsignificantly
havebeen
premiaon REP licenses
1989).The average
(Pursell,
1988;Kishore,
around0-20%for mostproducts.The decline
can be attributed
to currency
devaluation
after1986,doubling
of tariffs
on imports
of manufactured
goods
duringthe 1980s(Aksoy
and Tang,1991). By 1988, almostno producthad
consistently
highimportpremia.
thatIndianimportregimeis
37. On the otherhand,Table2 alsoconfirms
and
on OGL are only20% of all imports
Imports
stillveryrestrictive.
output. In manufacturing,
whichis
constitute
only1.5%of totaldomestic
shareof OGL importsin gross
moreliberalized,
to be relatively
supposed
gross
outputis only2%. The restof imports(whichareonly9%of domestic
output in manufacturing) are further restricted through various licensing
systems. The bulk of raw materials ln energy and minerals subsectors are
canalized. Even in manufacturing, 33%of imports are still canalized by
publicsectorimporting agencies.
namely
problem
of the importregime,
another
38. Table2 also illustrates
its non-transparency.
Despite
bestefforts,
morethan30% of the HS codesand
creates
Thislackof transparency
couldnot be classified.
20% of imports
tremendousproblems for importers and producers in India. Every item that is
not exactly specified in the Import documentwill be questioned by CCI&E,
leading
to
separately,
exchange)
and banks(whichreleaseforeign
customs,
-
15 -
delaysin imports
and disruptions
in the production
activity.So simplification
and streamlining
of the importpolicyaccording
to international
standards,
suchas HS codes,wouldby itselfimprove
the systemconsiderably.
39. Withinthe manufacturing
sectorthereare largedifferences
among
industries
in termsof restrictiveness
of imports.The shareof imports
classified
underOGL variesbetween0% and almost50%. Imports
of raw
materials
suchas chemicals,
metalsand foodproducts
are primarily
canalized.
Onlythreesubsectors,
chemicals
(40%),
machinery
(27%)and electronics
(40%)
havesignificant
amountof OGL imports.Since1984,special
policypackages
havebeenintroduced
for petrochemicals,
electronics
and machinery,
that
containpartially
liberalized
importregimes.However,
overthe lasttwo
years, even these sectors have begun to experience more import restrictions.
40. Looking at the shareof imports
underdifferent
licensing
categories
gives a misleading picture
of the natureof QRs in Indianeconomy.All the
items that are not imported due to restrictions are excluded from the base,
which only include the imported items. For example,
if one Just looks at
numberof HScodes under QRs, then about 46%of the codes are in restricted
category (as comparedto 20%of imports) and only 19%are in under OGL. A
moremeaningful analysis would be to estimate the share of output protected by
QRs. Table3 presents
the distribution
of HS codesby licensing
categories,
weighted
by grossoutputsof eachindustry
withinthe subsectors.j/
5/
The distribution
of HS codesin eachindustry
is assumed
to be the same
as the distribution
of outputin thatindustry.Thentheseratesare
weighted
by grossoutputsharesof eachindustry
withinthatsubsector.
Withinagriculture,
for example,
thereare 22 activities
(industries).
In eachof theseactivities,
thereis a distribution
of HS codesby
licensing
categories.
The distribution
of HS codesfor the whole
agricultural
sectoris weighted
by the grossoutputsof eachof the 22
activities.
Othersubsector
ratiosare similarly
weightedby the gross
outputs
of industries
withinthatsubsector.
-
16 -
TABLE
3: DISTRIUTION
OFHS ORESB _LICENSIN6
P,=RV
(weighted
by aoest c gross output)
Number
of
Industries
AGRICULTURE
BannedS
Restrieted
Limited
Permissible
OIL
()
Cnalized
Total
Unkn
La
22
74.0
3.0
7.0
15.0
100.0
36.0
ENERGY
2
0.0
0.0
0.0
100.0
100.0
62.0
MINERALS
7
24.0
20.0
31.0
24.0
100.0
58.0
67
52.0
28.0
12.0
8.0
100.0
21.0
7
90.0
1.0
0.0
8.0
100.0
11.0
10
55.0
43.0
2.0
0.0
100.0
8.0
Petroleum
andCoalProducts
3
24.0
26.0
8.0
42.0
100.0
41.0
Chemicals
9
17.0
43.0
32.0
8.0
100.0
32.0
Non-metallic
Minerals
3
30.0
31.0
37.0
2.0
100.0
36.0
Metals
4
12.0
36.0
7.0
45.0
100.0
12.0
MetalProducts
2
36.0
46.0
18.0
0.0
100.0
44.0
10
42.0
24.0
34.0
0.0
100.0
31.0
Electrical
Appliances
andElectronics
3
27.0
46.0
22.0
5.0
100.0
13.0
Transport
Equipment
6
40.0
30.0
30.0
0.0
100.0
45.0
Others
7
49.0
16.0
35.0
1.0
100.0
43.0
TOTAL
98
56.0
24.0
11.0
9.0
100.0
24.0
MANUFACMURING
Food,Beverages,
andTobacco
Leather
andTextiles
Machinery
La Tneseare giventor informationonly. In the caiculationsthey are distributed to knowncategori`es,so~
thattotals
include
allHS codes.
41. As shownabove,the shareof output-weighted
HS codesunderrestricted
licensing
is muchgreaterthanthe shareof imports.For example,
In
manufacturing,
whileonly23%of imports
are restricted,
morethanhalfof the
output-weighted
HS codesare in the restricted
list. if the unknown
category
is alsoassumedto be restricted,
thenalmostthreequarters
of outputweighted
HS codesare in the mostrestrictive
licensing
category.
42. The distribution
by manufacturing
subsectors
displays
similar
patterns.
The proportion
of HS codesthatis in the restricted
listfor consumer
goods
suchas food,textiles
andothermanufacturing
subsectors
is veryhigh. In
chemicals
and metals,whichare the key intermediates,
the shareof the
restricted
listis muchlower. In chemicals
the shareof OGL (32%)is much
higherwhilemetalsare basically
protected
throughcanalization.
What is
surprising
is: despiteattempts
since1978to increase
the itemsin OGL
lists,the shareof output-weighted
HS codesunderOGL is only34% in
-
17
-
machinery,
7K in metalsand 32% in chemicals.If the unknown
category
Is also
treated
as restricted
per ImportPolicy,
the shareof OGL for machinery
comes
downto about24X,whilethe shareof restricted
listincreases
to 56X. Howeverthe information
in Table3 is classified
or interpreted,
the import
regimein India,evenin subsectors
whichare supposedly
liberalized,
is still
veryrestrictive.
B. THESTRUCTURE
OF TARIFFS61
43. The relatively
highlevelof importtaxes(tariffs)
in Indiamakesthem
an important
sourceof government
revenue
and a majorinfluence
on the pattern
of development.
Inporttariffs
are the secondlargestsourceof government
revenue(excise
taxesare the largest)
and havebeenthe mostrapidly
growing
majorsourceof revenue
duringthe 1980s. Theyprovided
about35K of the
CentralGovernment
and 26% of thecombined
CentralandStateGovernment
revenue
in 1987-88
and haveincreased
7.4K p.a. fasterthannominal
GDP during
the 1980s.
44. India's
customstariffconsistof threeparts: (i)basiccustomsduties
appliedto the c.i.f.priceof the import;(ii)an auxiliary
duty,also
appliedto the c.i.f.price;and (iii)*additional*
or "countervailing*
(CVD)
dutiesappliedto the c.i.f.priceplusthebasiccustoms
dutyand auxiliary
duty. Basiccustoms
dutiesare mostlyad valorem,
thoughtherehas beena
recentincrease
in the numberof specific
rates. Auxiliary
dutiesare always
ad valorem.CVDsare usually
equalto excisetax imposed
on locally
produced
goodsand are a mixture
of ad valorem
and specific
rates. In November
1989
basicdutiesrangedfromOX to 355K;auxiliary
dutiesfromOX to 45K and CVDs
fromOK to 50K.
45. Additional
or countervailing
dutiesare subject
to MODVATin exactlythe
sameway centralexciseis. Buyersof imported
goodscan deductCVDspaidon
material
inputswhencalculating
theirexciseobligation
on outputs.Hence,
6/
Thissectionis written
Jointly
withUmnuaySae-Hau.
- 18 -
to
protection
wheretheyare equalto excisetaxes,CVDsdo not provide
duty,together,
dutiesand auxiliary
domestic
producers Basiccustoms
tariffprotection.
an indication
of potential
provide
withquite
appearsverysimple,
46. At firstglancethe tariffschedule
uniform
basiccustoms
dutiesfor individual
chapters.In practice
the structureof customs
dutiesis complex
because
thereare a verylargenumberof
forall
(zeroor reduced
rates)thatmustbe tracedseparately
Oexemptions'
commodity.
rateforan individual
the relevant
to ascertain
threecomponents,
tariffratesis
are so numerous
thatthe tableof scheduled
Theseexemptions
virtually
irrelevant.
Almostall scheduled
tariffratesare superseded
by
notification
are
theseexemption
exemptions
givinglowerrates. Moreover,
frequently
changed,
makingit evenmoredifficult
to ascertain
the relevant
customsdutyratefor a particular
goodat any giventime. The effective
duty
ratefor aluminumingots,
for example,
has changedseven.1messince
February
1987. Over18 monthsthebasicdutychangedfrom25X to 35% to 3,700
Rs/tonto,60X to 2,000Rs/tonto 1000Rs/tonto 500 Rs/tonand finallyto
2,500Rs/ton.
47. Anothercomplication
is thatexemption
notifications
do not alwaysapply
to commodities
irrespective
of end use. Frequently,
theyare userspecific.
havebeen
tariffrates,onlythegeneralexemptions
of nominal
In the analysis
takenintoaccount.The magnitude
of userspecific
exemptions
can be only
observed
throughcomparing
tradeweighted
tariffrateswithactualcollections. Suchexemptions
wereprovided
to the leather
industry
in 1979and
againin 1985. Materials,
components
and partsfacelowerdutieswhenusedin
the electronics
industry.So do components
whenusedin the manufacture
of
fuelefficient
cars. The extreme
exampleis givenby Pursell(1988)
where
stainless steel had eleven different tariff rates dependingon the user.
48. There are two characteristics of the Indian tariff system that separate
it from those of other LDCs. First, the absolute levels of tariffs (both
nominal and collection rates) are veryhigh. Second,againunlikemanyother
countries, the tariff rates are increasing. Table 4 gives the comparative
tariff collection rates for a group of comparablecountries. As can be seen
ratesare two to fivetimeshigherin India
from the table, tariff collection
thenin comparablecountries.
-
TABLE4:
19
-
CROSS-COUNTRY
COMPARISON
OF INDIA'S CUSTOMS
TARIFFSTRUCTURE
INPORT
DUTY
AS A PERCENTAGE
OF
IMPORTS
1980
1987
IMPORT
DUTY
AS A PERCENTAGE
OF
TAXREVENUE
1980 1987
India
Pakistan
Bangladesh
Indonesia
29.7 61.9
24.6 24.7
19.8 17.9
4.7 4.7
24.8 34.8
34.8 38.8
39.1 38.7
4.5
6.4
Thailand
10.1
21.8
Turkey/a
Brazil
Mexico/b
39.1 11.8
16.0 8.7
11.0
3.9
11.1
20.6
12.3 17.8
8.7
2.5
7.7 6.5
/a The figures
for Turkeycoveryears1979and 1987.
ab The figures
for Mexicocoveryears1980and 1988.
Sources:Exceptfor Turkey,Indonesia
and Pakistan,
all revenue
figures
are
fromIMF: Government
Finance
Statistics
Yearbook,
1989:and all
importfigures(CIF)are fromUN: 1987International
Trade
Statistics
Yearbook,
1989.
49. Table4 compares
India's
customs
tariffcollections
withthoseof
selected
countries
in 1980and 1987in termsof (i)percentages
of imports
whichmeasurethe protection
givenby the tariffsystem,
and (ii)tax-revenue
shares,
whichmeasurethe importance
of customs
collections
as a sourceof
publicrevenue.In mostdeveloping
countries,
theserepresent
the two main
objectives
of customs
tariff. As a percentage
of imports,
Indiahasby far
the highest
customscollections
ratein the sample.At 61.9,rits tariff
collection
rateis morethantwicePakistan's
25X. Ratesfor the restof the
samplerangefrom4.7Xin Indonesia
(1986)to 17.9%in Bangladesh
(1987).
Whatis equallystriking
aboutIndia's
customs
collection
rateis thatit has
been risingveryrapidly
overtime- morethandoublingin sevenyears(from
29.7%in 1980to 61.9%in 1987).Whilepartof the increase
is due to
relaxation
of QRs, the collection
rateshaveincreased
in almostall sectors.
The onlyothercountrythathas liberalized
itstraderegimebut stillhas
relatively
hightariffsis Turkey. Partof thisis causedby the liberalized
importof luxuryconsumption
goodswhichattract
highertaxesand special
extralevies. For the restof the sample,
actualtariffrateseitherremained
littlechangedor, as in Brazil,
Mexico,and Bangladesh,
actually
declined.
- 20 -
Between1980and 1987,Brazil's
collection
ratedropped
dramatically,
from
16.0%to 7.1%whilein Mexicoit fellfrom11% in 1980to 3.9%in 1988.
50. As a shareof tax revenues,
Indiaalsorankshighin the sample. Import
dutiesrepresented
34.8%of India's
central
government
tax revenuesin 1987.
Although
thisis not as highas Pakistan's
at 40.9%or Bangladesh's
at 38.7%,
it is far abovethoseof othercountries
whereratesrangefrom6.4%In
Indonesia
to 20.6%in Thailand.
51. Whencompared
withthe othercountries
in the sample,
dispersion
of
India's
customs
tariffappearssurprisingly
low (Table5). On the basisof
nominal
tariffrates,Indiahas a coefficient
of variation
of 0.36,compared
with0.44for Braziland 0.81forbothPakistan
and Thailand.
52. The abovecomparison
showsthatIndiahasan extremely
higheffective
customstariffrateand thatthe rateis highacrossthe boardas indicated
by
the relatively
low dispersion
of its tariffrates. Shareof tariffsin total
tax revenue,
although
not as highas Pakistan
and Bangladesh,
is veryhigh.
TABLE5:
CROSS-COUNTRY
COMPARISON
OFDISPERSION
OF NOMINAL
CUSTOMS
TARIFF
Nominal Tariff Rate
India
1988
a. Mean
b. Standard
Deviation
Coefficient
of Variation,
b/c
141.2
50.4
0.36
Pakistan Thailand
1986
1985
65.6
53.2
0.81
33.8
27.3
0.81
Brazil
1989
43.0
19.1
0.44
The Existing
TariffStructure
53. Table6 presentsIndia's
customs
tariffstructure
by subsectors.
For
eachsubsector,
threetariffratesare given:(i)nominal,(ii)importweighted,
and (iii)collection
rates. Tariffratesare further
subdivided
into*protective"
and *total" tariffrates. Protective
tariffis simplythe
sum of basicand auxiliary
tariffs
whiletotaltariffequalsprotective
plus
countervailing
(CVD)duty. Nominaltariffratesare basedon the 1989-90
customs
tariffschedules,
whilethe collection
and importdataare for
- 21 1987/88.Sincetherehasbeenonlymarginal
changesin the nominaltariff
ratesthisshouldnot affectthe analysis
significantly.7/
TABLE6: INDIA'S
1987/88
CUSTOMS
TARIFFSTRUCTURE
TRADE-WEIGHTE
DI~s
a T wEI6
1E0-MNA UEARI O
LIS
customs~~~~~
FOO
Ismorts Duties tive
AGRICULTURE
2
Poec-
10tRATES
Total
tive
]otL1
90.3
37.5 39.7
21.7
22.0
Total
tive
4.3
1.6
14.6
14.2
92.6 115.1
60.7 60.7
55.8 56.8
1.9
0.8
99.5 103.6
24.3
27.5
20.6
23.1
79.2
83.4
119.5 146.9
83.3 105.4
57.1
65.9
3.9
4.1
135.1 147.1
80.7 89.8
60.3 61.2
Textiles
andLeather
1.1
1.4
136.1 158.4
119.8 170.4
44.1 72.6
Petroleum
andCoal
Products
4.9
2.7
127.0 174.1
13.1 32.2
12.6 32.6
13.7
20.4
118.3 156.4
94.0 123.7
70.5 87.8
Non-Metallic
HineralsLe 9.5
0.8
ENERGY
HINERALS
MANUFACTURINOL&
Food Beverages
and
87.8
_rtc
Tobacco
Chemicals/b
metals
126.3 171.0
118.3 168.3
64.5
79.7
11.3
15.6
117.2 132.9
88.1 100.5
71.0 80.5
MetalProducts
1.2
1.1
131.0 168.0
97.7 129.6
45.4 57.0
AllMachinery
21.3
24.8
92.2 109.6
89.5 101.4
62.9 67.6
Electrical
Appliances
andElectronics
3.6
3.9
105.1 144.6
97.1 131.1
52.1 63.0
Transport
Equipment
2.2
2.2
95.7 125.7
73.5 88.9
51.9 59.7
OthersLd
6.5
6.4
115.2 147.4
53.2 68.6
26.0
100.0
100.0
116.0 141.2
72.3 85.5
4.
TOTALIa
32.4
61.9
Basedon reported
totalimports
andcollections,
i.e.,withno adjustments.
Excluding
tariff
chapters
98 and99 whichhavecollection
numbers
butno recorded
imports.
Excluding
gem imports
forexport
production.
Excluding
tariff
chapters
98 and99 in Miscellaneous
Manufacturing.
54. NominalTariff. The nominal
tariffratesshownin the tableare simple
averages.India's
averagenominal
protective
tarifffor 1989-90is about
116X,witha standard
deviation
of 37X,whilethe average
totaltariffis
about142X,witha standard
deviation
of 51X. Thedifference
betweenthe two
implies
an averageCVD rateof about25X.
7/
Moredetailed
tariffratesare presented
in AppendixB.
-
22 -
55. The nominal protective tar1if rates are quite bunchedtogether around
100lwithrawmaterial
supplying
industries
suchas agriculture, energy,
minerals
withtariffs
of lessthan10O, whiletheothersectorshaveprotectiveratesof moretharlOOX. The onlyexceptions
are machinery
and
transport
equipment.Fortotaltariffrates,all ratesexceptagriculture,
are significantly
above100X.
56. Import-Weighted
Tariffs.The protective
and totaltariffratesweighted
by imports
are lowerthannominalrateby about40 percentage
points,
with
wide variation amongdifferent subsectors. The protective imported weighted
tariff rates are 72X for the whole economyand 83X for the manufacturing
sector. Total tariff rates are 86X and 105Xrespectively. The variance among
different subsectors are greater for import weighted tariffs than the nominal
ones. Goodsthatare allowed
to be imported
havesignificantly
lowertariffs;
indicating
thatimports
are restricted
to products
thatare not available
in
India.
57. ActualCollection
Rates. Actualcollection
ratesare lessthanone half
of the legalnominalratesand are on average30 percentage
pointslowerthan
tradeweighted
rates. The difference
betweentradeweightedand actualprotection
ratesare due to specific
exemptions
(specific
to users)and dutyfree
imports
for exportproduction.
For example,
in non-metallic
minerals
subsectordutyfreeimports
of roughdiamonds
for processing
intoexportsare
excluded.In othersubsectors,
it is notpossible
to separate
dutyfree
importsforexports.However,
totaldutyfreeimports(excluding
gems)were
4.4Xtotalimports
in 1987/88.The totaltariffcollection
rateon manufactured
goodsimports
excluding
duty-free
imports
for exportswas 80X,
compared
to 65.9Xfor allmanufactured
goodsimports.
58. Thecollection
ratesalthough
lowerthannominalor tradeweighted
rates,are alsoveryhighwithprotective
tariffs
of 55X and totaltariffof
62Z. Moreover, protective tariff rates are highest in threesubsectors
which
havea strong cost impact on the rest of the economy;metals (71S), chemicals
(70X) and machinery (63X). Furthermore, these the subsectors also account for
about 45X of all imports. The sectoral average tariff rates given in Table 6
maskthe very high rates in somekey industries within sectors. For example,
protective tariff rates are 106Xand 122X,respectively, in organic heavy
-
23 -
chemicals and other chemical industries, comparedto the average of 70X for
chemicals as a group. In non-ferrous metals, the protective tariff collection rate is 82X. For most industrial machinery imports, the rate was 75X.
Theseratescan onlybe justified
as tryingto earnmaximumrevenue
froma
very small import base. Very few of the firms in thesesectorsrequire
these
levelsof protection
for theirviability
(Aksoyand Ettori,1991).
Evolution
of Tariffand ExciseTax Collection
Rates
59. Duringthe 1980s,the tariffcollection
ratesfor mostcountries
have
beendecreasing
as theymoveawayfromovervalued
exchange
ratesand
liberalize
theirtraderegimes.In India,the opposite
has happened.
Historically,
to contain
balance
of payments
crises,tariffrateswere
increased
instead
of adjusting
the exchange
rate. However,
theserateswere
not reduced
whenthe exchange
ratewas eventually
adjusted.Thuswithevery
foreign
exchange
crisis,
the average
tariffcollection
ratehas ratcheted
upwardto a higherplateau.Figure1 showstariffcollection
ratessince
1960/61
for totaland manufacturing
imports
(totalimports
minus food, fuels
(POL),
and gems).
FIG.
1
TARIFF COLLECTION
RATES
80.
70
60.
5040-
340
10
I
I , . . . . . , . . . . . . . . . . . .
62 64 66 68 70
-|TOTAL
7274
IMPORTS..
7f6 78 80 82 84 86 88
MANUPACTURING
IMPORTS!
- 24 °
to
downafterthe 1966devaluation
60. Thetariffrateswerebrought
tariffson manufactured
Since1970,however,
excessprotection.
eliminate
were
Tariffs
ratedepreciation.
for exchange
havenot beenadjusted
imports
evenbeforetheoil shock,to arrestdeclining
raisedduring1965-74,
to declinein totaltariff
of 1976,whileleading
reserves.The devaluation
did not leadto
on fuels),
tariffs
due to decreasing
(primarily
collections
in tariffs
products.The rapidincrease
on manufactured
in tariffs
reductions
to a periodof appreciating
againcorrespond
to 1984/85
between1980/81
rateadjustforthe exchange
weresubstituted
rateswhentariffs
exchange
down
ments. As was the casein the mid 1970s,the rateswerenot adjusted
withthe currency
depreciation
after1985. One reasonfor thiswas the
customrevenues.This
and the needfor additional
publicdeficit
increasing
of the
irrespective
has increased
whereprotection
adjustment,
ratcheting
fromthe restof
delinked
Indianpricestructure
rate,has gradually
exchange
theworld.
tariffs
not onlythe protective
ratesinclude
61. Totaltariffcollection
whichmatchthe excisetaxesleviedon domestic
tariffs
but countervailing
thesetwo typesof
to separate
it is not possible
Unfortunately,
production.
excise
of domestic
the structure
periods.In addition,
tariffsfor earlier
thesechanges,
the.input-output
overtime. To analyze
taxeshavechanged
of
havebeenusedto deriveestimates
and 1987/88
1978/79
tablesfor 1973/74,
In
and are presented
subsectors
tariffand excisetax ratesfordifferent
the original
input-output
tablesare moredisaggregated,
Table7. Although
are presented
here.
onlythe summarystatistics
- 25 TABLE
7: TARIFFANDEXCISE
COLLECTION
RATES
LA)
TARIFFRTES
ing/j/14
AGRICULTURE
197R/79l
1987U8
EXCISE
1iz39l-----1]9lrg I--]
13.08
24.19
22.01
0.41
0.19
0.01
ENERGY
0.00
0.94
55.30
0.00
5.56
0.78
MINERALS
3.00
15.07
23.15
0.00
0.14
0.96
37.40
39.65
65.22
12.59
9.nl
7.03
28.79
2.18
60.72
11.70
9.23
7.41
7.44
52.96
72.12
3.97
6.72
3.85
Petroleum
andCoal
Products
78.07
40.55
32.64
232.77
47.77
16.70
Chemicals
31.49
57.59
87.23
13.55
8.54
6.56
Non-Metallic
Minerals
12.00
5.40
4.67
7.30
6.69
15.74
Metals
34.83
61.12
80.18
8.72
8.56
4.33
MetalProducts
59.22
49.98
56.77
9.66
4.77
3.25
Machinery
37.39
49.98
67.28
1.55
3.85
7.44
Electrical
Appliances
andElectronics
75.21
26.37
58.29
14.21
10.97
8.48
Transport
Equipment
39.24
63.90
58.00
3.58
4.37
7.45
Others
32.64
31.93
56.14
5.42
7.15
2.94
32.02
31.75
61.22
5.49
5.14
4.78
MANUFACTURING
Food Beveragesand
To6acco
Textiles
andLeather
TOTAL
Source:Datafor1973/74
and1978/79
arefromthefive-year
plansrespectively.
1987/88
hasbeen
estimated
forthisstudy.
62. Table7 indicates
the rapidincrease
in tariffcollection
rates,
especially
between1978/79
and 1987/88,
and the declinein excisecollection
rates.8/The changesin energytariffand excisetax collections
reflect
the
declinein international
oil priceswhichhavenot beenfullypassedon to
domestic
users. For domestic
oil production,
the exciserateshavebeen
reduced
whileex-factory
priceshavestayedhigh,leading
to largeprofitsto
ONGC,etc.
63. Formanufacturing,
the trendsare veryclear. The tariffcollection
rateshaveincreased
fromabout40X to 65% between1979and 1988whiledomes-
8/
The 1973/74
dataon tariffratesare probablylessindicative
of
protection
due to veryhighimportpremiacausedby QRs whichweremore
bindingin thoseyears.
-
26 -
ratehas comedownfromabout10% to 7%. Thisby itself
tic excisecollection
producers.
givento the domestic
the protection
wouldincrease
trendtowardincreasing
to the general
64. Thereare a few exceptions
excisetaxes. Tariffrateshavefallenin three
and decreasing
tariffs
and transport
minerals,
non-metallic
and coalproducts,
petroleum
subsectors:
in the
thisis causedby the increase
minerals,
equipment.In non-metallic
share of rough diamondimports for export production, which are imported duty
free. In transport equipment, share of imports of motor vehicles (which has
and its tariffcollection
the highest tariffrate)in the total hasdeclined,
rate has been reduced from 107%to 75%. The shares of ships, rail equipment
whichhavelowertariffrates(32%,40% and 39%
and scooter imports
in
haveincreased. Thesechangeshave led to a smallreduction
respectively)
tariffrate.
overallsubsector
to a generaldeclinein exciserates;
65. Thereare alsothreeexception
equipment.In non-metallic
and transport
machinery,
minerals,
non-metallic
whichhas an excisetax rateof 32%,has
the shareof cementoutput,
minerals,
from10% in 1979to morethan30% in 1988. Also,excisecollection
increased
fromabout1% in
haveincreased
products
mineral
ratesfor othernon-metallic
onlymotorvehicles
equipment,
1979to almost15% in 1988. In transport
was levied10% excisetax in 1979. By 1988,all the subsectors
subsector
werebroughtintothe excisetax net. Shipsand
equipment
withintransport
ratesof 21%,5% and
haveexcisecollection
and scooters
boats,railequipment
have
the exciserateincreases
subsector,
In the machinery
12% respectively.
been across the board with large increases in basic machinery (especially nonelectrical industrial machinery) with somemarginal reductions in office and
equipment.
communications
as
are as distortionary
the changesin excisetaxation
66. In somerespects
1979and 1988the excisetax burdenon
the large increase in tariffs.Between
consumerand other intermediate goods decreased, whilethe tax burdenon
investment goods increased.9/ The three sectors where excise tax rates rose
9/
Onepossible reason for the decline in excise rates might be the
of smallscale(SSI)and tinyunitswhicheitherpay a lower
expansion
rate (SSI)or are outsidethe excisenet all together(tinyunits).
-
27 -
are machinery,
non-metallic
minerals
and transport
equipment.Thesesectors
constitute
the threeelements
of fixedinvestment.
Thusthe burdenof
taxation
has switched
fromconsumption
to investment.
Thisis the reverse
of
whatis happening
in othercountries,
wherethe burdenof taxationis being
switched
from investment
to consumption
via the value-added
taxes.
67. It shouldbe pointedout thatIndiais almostuniquein levying
such
hightaxesand tariffs
on capital
goods. Mostothercountries
usually
exempt
machinery
fromimportdutiesanddomestic
taxes. For example,
in Brazilwhich
has had veryhighprotection
for thedomestic
capital
goodsindustry,
the
tariffcollection
ratein 1984was 17X in non-electrical
and llX in electrical
machinery.In Korea,the tariffcollection
rateson machinery
for domestic
use was about9X duringthe late1970sand early1980s. Tariffcollection
rateson machinery
for exportuse was negligible.
Evenin Pakistan
(whichhas
the secondhighest
overalltariffcollection
rateafterIndia)the tariff
collection
rateon machinery
was 15X in 1987/88.In comparison,
the average
tariffcollection
rateson machinery
in Indiawereabout75X in 1983/84
and
67% in 1987/88.
TariffsandQuantitative
Restrictions
68. The substantial
increase
in tariffcollection
ratesin the 1980shave
beenattributed
to the relaxation
of QRs. Thatis, the QRs havebeenreplaced
by tariffsthusincreasing
theoveralltariffcollection
rate. Unfortunately,
thishypothesis
can not be testeddirectly
due to lackof detailedtimeseries
data. However,
if thishypothesis
is correct,
thenimports
underless
restrictive
importcategories
shouldhavehighertariffs
than imports
under
morerestrictive
categories.
Table8 presents
tariffcollection
ratesfor
different
subsectors
separately
for imports
underdifferent
licensing
schemes.
-
TABLE8:
28 -
CUSTOMS
COLLECTION
RATESBY LICENSING
CATEGORY
ANDSECTOR,
1987/88
(as I of respective imports)
LINITED
BANNED/RESTRICTED
PERMISSIBLE
OGL
CANALIZED
ProtecProtecProtecProtective
Total
tive
Total
tive
Total
tive
Total
AGRICULTURE
22
22
20
20
20
20
27
28
-
-
-
-
-
-
59
60
MINERALS
36
38
-
-
84
100
2
2
MANUFACTURING
77
82
56
68
51
66
49
59
Food, Beverages
and
23 23
Tobacco
Textiles
and Leather
61 107
Chemicals/a
85 107
Non-MetalTTc
Minerals/b 26 29
Metals
20 21
MetalProducts
All Machinery/c
93 95
Electrical
Ap-pTlances 132 162
and Electronics
Transport
Equipment
190 273
others/a
67 84
5
5
24
82
60
70
39
44
49
80
97
77
79
50
53
54
37
67
63
58
69
37
41
-
-
96
100
66
85
42
55
62
65
93
132
63
91
105
172
44
26
50
31
81
45
83
59
59
6
78
7
56
68
48
62
51
57
ENERGY
TOTAL
72
77
101 102
59
3.7 37
/a Excluding
tariffchapters
98 and 99.
7b Excluding
importsof unworked
gems.
7E Projectimportsare assumedto be restricted.
69. Table8 clearlyshowsthatthe tariffratesare highestfor commodities
in the restricted
listand itemsunderOGL and limitedpermissible
categories
havethe lowestrates. Thisresultis not causedby different
typesof
productsbeingassignedto different
licensing
categories
(i.e.,consumer
goodsbeingin restricted
category).Evenfor similarproductgroups,tariff
ratesfor productsin OGL are much lower. In chemicals,
metalsand machinery,
the key subsectors
whichare all intermediate
products,
OGL importshavelower
tariffsthan importsin morerestrictive
categories.
70. Table8 alsoillustrates
the overkillin termsof protection
bothby QRs
and tariffs. In metals,the bulkof importsare canalized
and the canalized
itemshavethe highesttariffrates. In chemicals,
it is the restricted
and
- 29 -
limited
permissible
itemsthathavethe highesttariffrates.10/Similarly
in
machinery,
OGL imports
havethe lowestrateswhichsupport
the hypothesis
that
mostof thesemachines
probably
do not compete
withdomestic
production.
71. Thesefindings
leadto threemainconclusions.
First,it is quite
difficult
to relatethe increases
in tariffsto relaxation
of QRs. Theyare
probably
causedby revenue
or otherconsiderations.
Second,
givenmuchlower
tariffs on OGL imports, these products probably do not competewith domestic
production. -Third, given the tariff collection rates on restricted products,
mostof the QR systemis probably
redundant.
ExciseTaxesand Excisable
Output
72. The excisetax ratespresented
in Table7 was derivedfromthe gross
output data estimated for the input-output table and thus includes output of
small scale sector that is either not taxed or taxedat a lowerrate. The
RevenueDepartmentalso collects information
on value of excisable output.11/
The excisetax rateson excisable output are muchhigher.Whilethe excise
collection
rateon grossoutputfor the tradable
sectorsis only4%, it is 21%
on excisable
outputwhichindicates
thatexcisebaseis onlyabout20% of
grosstradeable
output. Partof thisdiscrepancy
arisesbecausemostof
agriculture
is outsidethe excisenet. However,
the situation
is not very
different
in othersectors.Table9 presents
the excisetax rateson gross
output from the input-output table and the rates estimated on excisable output
supplied by the RevenueDepartment. A more disaggregated table is given in
Appendix B. The excise numbersare net of MODVAT
credit and are the net tax
burdens on each subsector. Although both the output numbersare estimates,
they indicate that a significant portion of output stays outside the excise
net. The remaining
(mostly
largescalefirmsand fewproductlines)havevery
highratesof excisetaxation.
10/ Withan averageprotective
tariffcollection
rateof 130%,one wonders
whether any imports wouldtakeplacein the chemicals subsector, even if
the import restrictions are eased.
11/
Since manyexcise taxes are specific taxes leviedper unitof physical
output, these value of output data are estimates and are not very
reliable.
-
Table 9:
30 -
CENTRAL
EXCISECOLLECTION
RATES(X)
ExciseRateon
GrossOutput
ExciseRateon
Ratioof Excisable
Excisable
Output Output to GrossOutput
AGRICULTURE
0.0
11.0
0.0
ENERGY
1.0
3.0
26.0
MINERALS
1.0
17.0
6.0
MANUFACTURING
7.0
21.0
33.0
7.0
4.0
17.0
7.0
16.0
4.0
3.0
7.0
8.0
22.0
29.0
48.0
17.0
21.0
22.0
11.0
13.0
24.0
33.0
14.0
35.0
39.0
76.0
20.0
28.0
59.0
35.0
7.0
3.0
13.0
12.0
58.0
25.0
4.0
21.0
21.0
Food,Beverages
and Tobacco
Leatherand Textiles
Petroleum
and CoalProducts
Chemicals
Non-Metallic
Minerals
Metals
MetalProducts
Machinery
Electrical
Appliances
and Electronics
Transport
Equipment
Others
TOTAL
13. Evenwithinmanufacturing,
abouttwo-thirds
of outputare outsidethe
excisenet. As pointed
out above,the accuracy
of excisable
outputfigures
are highlysuspect
and thatcouldbe one reasonfor the underestimation
of the
excisebase. However,
the difference
betweenthe excisable
baseand gross
outputis so largethatit is hardto attribute
it to dataInaccuracies.
74. Themainproblem
of the excisetax structure
is thatfew sectors,
because
of the scaleof production,
are incorporated
intothe excisenet while
othersare basically
leftout. Partof thisexclusion
is by choicewhere
Government
has decidednot to tax agriculture,
drugs,fertilizers
and
pesticides.
However,
the otherpartIs due to the existing
excisetax policy
and administration
whichfocusesits taxcollection
efforton a few
commodities
thatare moreeasilytaxable.
75. The outcomeof thissystemis that,the tax burdenfallson a few
sectors
thatare basically
investment
goodsand key intermediates
whilethe
tax rateson consumer
goodsare muchlower. The shareof excisable
outputto
-
31 -
gross output is very high in non-metallic minerals (76X) which is basically
cement, machinery (59X) and transport equipment (58X). These are all
on goods
whilethe overallexcisecoverage
sectors,
investment goodproducing
are
however,
products,
Is far lower. Someconsumer
for finalconsumption
rubber
products,
fibers,tobacco
synthetic
for example,
taxedexcessively,
etc.
batteries,
products,
C.
POLICIESANDADMINISTRATION
EXPORT
thatmatch
schemes
exportIncentive
76. Indiahas a numberof veryelaborate
of the importand tariffsystems.The firstset of controls
the complexity
on exportsand exporttaxes. The second
restrictions
quantitative
involves
exporters
for the
involves
compensating
arrangements
set of administrative
restricted
themto importotherwise
and importtaxesand allowing
domestic
for exportpurposes.
products
ExportControls
in the
regimewhichis announced
are subject
to a licensing
77. Exports
and
Import-Export Policy and administered by the Chief Controller of Imports
Exports (CCI&E). In mid-1988approximately 172 products were listed in the
Orderand theirexportwas subjectto some
of the Export(Control)
schedules
of the following:(a)Sixtyseven
kindof control.Theselistsconsisted
(b)a list
or productgroupsthe exportof whichwas 'notallowed";
products
on the
of 30 itemsthe exportof whichwas allowed'onmerits';i.e.,decision
aremadeon a caseby casebasisby the exportLicenexportof suchproducts
underCCI&Ein New Delhi;(c)a listof 21 itemsthe exportof
singCommittee
i.e.,exportquotaswhichare
ceiling,"
againstalimited
whichis allowed
to exporters each year; (d) a list of 19 itemsthe
and allocated
announced
and (e)a listof 33 itemsthe exportof which
exportof whichis canalized;
conditions.
to prescribed
subject
is on opengenerallicense
to serve
systemis intended
the exportlicensing
78. Likeimportlicensing,
purposeis to ensurethatindigenous
of purposes.One important
a variety
marketwhenthe supply is lessthat
willbe sold in the domestic
production
canaldemandand not exported.Theyare alsousedto implement
domestic
- 32 to be India's
of whatis supposed
products
takeadvantage
of certain
ization
its exportsupply. Examples
worldpricesby regulating
abilityto increase
sugar,raw jute,tea and
are ironore,mica,rutileand otherminerals,
valueadded'
of nhigher
coffee.Another
objective
is to helppromoteexports
as inputs. Thisis a
products
whichuse the exportable
products
downstream
motive for banning exports of various primary and intermediate products (raw
rawwoolabovea
hides and skins, wool waste, angora goathair,indigenous
the
or controlling
bauxite)
cakes,calcined
quality,
oil seedexpeller
certain
(cotton,
cottonyarn,woollen
yarn raw silk,silkyarn,
quantities
exported
semiprocessed
hidesand skins).The exportcontrols
are alsousedto
countries
(notably
regulate
exports
of products
subject
to quotasin importing
textileandgarmentexportssubject
to importquotasallowedby the MultiFibreArrangement).
Canalization
hasalsobeenusedto subsidize
exports
of
certain
commodities.
For example,
duringthe 1980s,Minerals
and Metals
Trading
Corporation's
(MMTC)exports(notably
ironore)havebeencross
subsidized
by itscanalized
imports
of non-ferrous
metalsand fertilizer.
MMTC'scanalization
of ironore exports,
has alsobeenusedto subsidize
certain
highcostmines,the costbeingcovered
by the ironore mineswith
lowerproduction
costsand/orlowertransport
coststo the ports.
79. Recognizing
the inefficiencies
associated
withquantitative
export
controls,
the 1988-91 ImportExportPolicyreduced
the numberof products
simplified
the expert
to thesecontrols
by 69 to 172,and considerably
subject
licensing
rules(although
theyremaincomplex
and comprehensive
by most
international
standards).
Furthermore,
duringthe 1980s,exporttaxeshave
declined across the board.
Export Incentives
80. There are seven principal types of incentives to promote exports in
India: (a) cash compensatorysupport (CCS); (b) duty drawback; (c) import
replenishment licenses; (d) advancelicenses and passbooks; (e) free trade
zonesand exportoriented
units(EOU);(f) interest
and incometax rebates;
pricereimbursement
scheme(IPRS).
and (g) International
in the
schemes
werefirstintroduced
exportincentive
81. Theseselective
1959/60-1965/66period. This was a period of balance of paymentspressure and
-
33
-
withtightimportcontrols.
whichwas tackled
scarcity
exchange
foreign
export
affected
rulesadversely
thesead hoc importallocation
However,
as counterwere introduced
exportsubsidies
and product-specific
performance,
phasesof
haveundergone
schemes
measures.Sincethen,theseexportincentive
and expansion.
tightness
varying
in August1966. CCS
Support(CCS)was introduced
82. The CashCompensatory
on
indirect
taxespaidby exporters
for unrebated
is designed
to compensate
implicit
in
disadvantages
neutralize
inputsthatenterintoexportproduction,
promoto financethe initial
assistance
rates,etc.,and to provide
freight
the
andmarkets.The CCS involves
tioncostsin the caseof new products
of exports.The CCS rates
outlayin support
largestsingledirectbudgetary
are product specific and are announcedregularly.
83. The DutYDrawback(DD) was introduced in 1954. The objective is to
reimburse exporters for tariffs paid on the imported raw materials and interproduced
and for the centralexcisedutiespaidon domestically
mediates
At presentthereare morethan450
inputswhichenterintoexportproduction.
firmscan
eligible
for DD. In addition,
listof exports
itemson the standard
applyfor *brand ratesspecific
to theirproducts.
and stillthe principal
(REP)Licenses.The earliest
84. Replenishment
methodof givingincentives to exporters is the special importlicenses
for
Combined
withdutydrawback
(REP)licenses.
knownas Replenishment
exporters,
to importcertain
allowthe exporter
(CCS),REP licenses
and cashcompensation
i.e.,rawmaterials
and components
raw materials
and components:
restricted
and canalized
itemsin the
appearing
on the listsof limited
permissible
can
but refunds
pay normalcustomsduties,
policy. The imports
Import-Export
be claimed through the duty drawbackscheme. The exported products for which
REPlicenses can be obtained are listed in the Import-Export policy, together
with the foreign exchangevalue of the REPlicense (expressed as a percentage
rawmaterials
of the f.o.b. value of the export)and a listof the importable
of
as a percentage
alsoexpressed
ceiling
exchange
eachwithits own foreign
can be soldon the open
the f.o.b.valueof the export. The REP licenses
and foreign
market. Duringthe 1960sand 1970s,becauseof importcontrols
oftencouldbe soldat highprices("premREP licenses
rationing,
exchange
the
provided
exportincentive,
a substantial
iums").Theseconstituted
- 34 -
at reasonable
couldbe obtained
actually
in the exports
incorporated
materials
after1985,REP premiadeclined
cost. Duringthe 1980sand particularly
levelof customs
increasing
due to the steadily
probably
substantially,
domestic
and the increased
of importcontrols
duties,somerelaxation
of manyrawmaterials.
production
underREP licenses
withimports
(AL). The problem
85. AdvanceLicenses
listscan
is that(a)goodsthatare in restricted
by dutydrawbacks
followed
tie
thisway;and (b)giventhe highimportdutiesexporters
not be imported
if thereis any delayin obtaining
especially
capital,
working
up considerable
for duty
wereintroduced
schemes
refund.To reducethisproblem,
drawback
Is the advance
however,
of rawmaterials.Themost important
freeimports
licensing
schemeunderwhichspecified
materials
can be imported
dutyfreeon
of creditand/orexportorders. In orderto streamline
the basisof letters
Schemewas
Passbook
a new Import-Export
procedures,
advancelicensing
announced
in April1985. Finally,
thereis a schemeunderwhich"Special
Imprest"
licenses
are available
fordutyfreeimports
of raw materials
by
competitive
to international
projects
in Indiasubject
Indianfirmssupplying
or supplying
Indianfreetrade
projects)
bidding(e.g.,
WorldBankfinanced
zones. Domestic
salesof thiskindare knowas 'deemed
exports."
also
The government
86. FreeTradeZones(FTZ)and BondedManufacturing.
to promote
makesuse of freetradezones(FTZs)and bondedmanufacturing
and fourmorewerebeing
exports.In 1988thereweretwo FTZsin operation
launched.The bondedmanufacturing
scheme,(known
as the 01OOXExport
was introduced
in 1981. The EOUsare treatedas
Oriented
Unit (EOU)scheme)
outsidethe domestic
tariffarea,and hencehavethe rightto import
operating
controls
and importduties.
freeof importlicensing
all theirrequirements
havepreventthe achievement
of the export
However,significant
deficiencies
units(EOUs)and the FTZs.
offeredby the bondedexport-oriented
potential
system,unnecessary
customscontrol
by an onerous
The EOUsare hindered
The FTZsare
regulatory
restrictions.
bondingrequirement,
and by excessive
incentive
and paperwork.The restricted
alsosubject
to complexprocedures
promotion
haveresulted
in few
and decentralized
packageand under-funded
in the zones. In 1988it was decidedthatbonded
foreignfirmslocating
and firmsin freetradezonescouldsellup to 25X of theiroutput
warehouses
- 35 in the domestic tariff area (subject to normal import controls and tariffs)
and alsoreceive
CCS at reduced
rates.
87. Subsidies
on Domestic
Raw Materials.Thereare alsoschemes
for
refunding
to exporters
thedifference
between
the domestic
and worldpricesof
Indianmaterials.The mostimportant
is the International
PriceReimbursement
Schemefor Steel(IPRS)whichwas introduced
in 1981and is financed
by a
chargeaddedto the controlled
pricesof basicsteelproducts.In 1986this
schemewas extended
frombasicsteelproducts
to alloysteelsand laterto
othermetals. Thereis alsoa similar
subsidy
schemefor naturalrubber
administered
by the RubberBoard,(mostof the 1980scontrolled
domestic
rubber prices was about 80X to 1OOXaboveworldprices.)Pricesat which
transactions
actually
takeplacecan be extremely
difficult
to discover,
especially
worldprices.12/Moreseriously,
if the localrawmaterials
have
highproduction
costsas wellas highselling
prices,
and are not being
imported,
thereis a dangerthatthe subsidy
willstimulate
exportsof productsthatuse them,at an overall
economic
lossto the economy.Finally,
both
in 1988and 1989the fundwhichfinances
the IPRS for steelproducts
has ran
out of moneyand exporters
haveexperienced
increasing
delays (from 4 to 6
months)in receiving
funds.
88. ProfitTax and CreditSubsidies.Exporters
havereceived,
in one form
or another,
profittax concession since the early 1960s. Effective
fromApril
1989,profits
fromexports
werefullyexempted
fromincometaxes. Therewere
alsoprovisions
for preferential
preshipment
and postshipment
creditat 9.5X
laterreducedto 7.5%bothfor up to 180days. Forexportsof capitalgoods
and projectexports,
subsidized
termfinancing
(inexcessof 180days)is
available
fromthe Export-Import
Bank. Export creditguarantees
for banksand
credit insurance
for exporters
is available
fromthe ExportCreditGuarantee
Corporation.
Untilrecently
therewereno systematic
creditsubsidies
or
12/ During1985,1986and 1987the natural
rubbersubsidy
was inadequate
and
exporters
preferred
to importunderadvancelicenses
ratherthanbuy
localrubber. Thischangedin 1988,however
whentherewas a large
increase
in worldrubberprices.On theotherhandin 1987,the IPRS
schemefor alloysteels.-for
whichthe subsidyis basedon the
difference
betweenestimated
worldpricesand SAIL'sprices,
was
overcompensatingexporters buying alloy steel from mini-steel producers
at lowerpricesthanSAIL's.
-
36
-
preferences for exporters as regards term financing. A new schemewas
introduced in 1988 which gives a 20X interest rebate on long term loans to
firms exporting more than 25%of their output.
the
in 1986/8787,
and moreeffectively
89. RecentReforms.In 1985/86
the issuesof exportpolicy. These
to address
a program
started
Government
refonms have been further extended under the newImportand ExportPolicyfor
in April1988. A major
announced
the nextthreeyears(1988/89-1990/91)
scheme
of the dutyexemption
changehas beenin the designand administration
1987,the
inputs.)In February
for imported
and passbook
licenses
(advance
to coverall imported
was extended
Licenses)
system(Advance
dutyexemption
sparepartsand packing
mandatory
components,
rawmaterials,
inputs(including
basedeitheron a specific
exporters,
forbothdirectand indirect
materials)
of
the granting
To facilitate
exportorderor pastexportperformance.
withdecision-making
committees
and regional
(AL),central
AdvanceLicenses
powershavebeenset up and meetweeklyor biweekly.In May 1987,the "passfor theprevfor firmsthathaveexported
book* schemewas madeoperational
iousthree years and would like to import their inputsfor a longerperiod
to all
schemewas extended
(e.g.,18 months).In April1988,the passbook
evenif theyhad not exported
firmswith salesof morethanRs 150 million,
previously.
DutyDrawback(DD)and
and/ordutypaidinputs,
90. For firmsusingdomestic
The Duty
havealsobeenstreamlined.
Support(CCS)systems
CashCompensatory
and Centralexcise
for customs
the exporters
whichcompensates
Drawback,
by the establishment
and rationalized
simplified
duties,has beenconsiderably
Theserateshavealsobeen
ratesand fasterreimbursements.
of all industry
increased to approximate the actual duties and excise taxes paid. For CCS,
by
taxesof all typesnot covered
for indirect
the exporters
whichcompensates
the
to reflect
considerably
the rateshavebeenincreased
dutydrawback,
schemes
taxes. In 1987,firmsthatuse dutyexemption
actualcostof indirect
taxeson local
themfor the indirect
werealsobroughtunderCCS to compensate
whichallowsthesefirmsgreaterflexibility.
inputs,
in April1988,has
announced
91. The 1988-91 Importand ExportPolicy,
changeswere madeto the
and changes. Important
broughtfurtherreforms
are
(REP)licenses.Now almostall exporters
schemefor replenishment
-
37 -
entitledto receiveREP licenseswhichare a proportionof their exports.
With these licensesthe firmscan importany itemsin canalizedand limited
permissible
lists,and can sell these in the domesticmarket. This policy
the incentivesfor exporting,also contribchange,in additionto increasing
of the importregimeby making the
to the liberalization
utes significant-y
to extendexport
QRs less binding. The Policyalso includesmajor initiatives
incentivesto indirectexporters,i.e.,to firmssupplyingraw materialsand
componentsto directexporters.
92. Importantrevisionshavebeen made on the rulesand facilitiesfor
exportand tradinghouses. The previousextremelycomplexqualifyingrules
have been replacedby much simplerrulesrelatedto the f.o.b.valueof
thesehouseswill
exports and net foreignexchangeearnings. In particular,
now have full accessto the advancelicenseand passbookschemesfor duty free
materials:receivea more generousallowanceto importand stockraw materials
for resaleto other firms:will be able to importcapitalgoods and otherwise
restrictedraw materialsunder "additional"
importlicensesand sell them in
the domesticmarket.
93. A numberof measureshavebeen introduced
to make importedmachineryand
equipmentneededby exportersmore easilyavailableand at lowercost. First,
as discussedbelow,the machineryand equipmentneededby some exportoriented
industriesand industries
believedto have exportpotentialwas put on the OGL
list and the corresponding
importtariffswere reducedusuallyto aboutthe
25X to 40X range. Second,for licensesto importrestrictedcapitalgoods,a
new provisionintroducedin April 1988 gives 'specialconsideration"
to manufacturer/exporters
exportingmore than 25X of theiroutputor with exportsin
excessof US$7.7millionin that the importmay be allowedon the basisof
even if the capitalgoods are available
price and deliveryconsideracions
allowedin REP and additional
domestically.Third,the greaterflexibility
licensesamongotherthingsappliesto importsof capitalgoods,and should
benefitall usersof capitalequipmentincludingexporters.
The 1991-94Importand ExportPolicyhas broughtfurtherimprovements.
The complicatedstructureof REP licenseshas been simplifiedand REP licenses
94.
extendedto serviceexports. The Governmenthas announcedthe principleof
loweringtariffson importedmachineryin returnfor exportobligations.
- 38 in 1987,havebeenabolished
and replaced
by a
"Passbook*
scheme,introduced
scheme.
advancelicensew
oblanket
Quantification
of ExportIncentives
95.
Incentives
aregivenprimarily
to manufactured
exportsin India. Here
goods
(SITC5),manufactured
exports
of chemicals
exportsinclude
manufactured
(SITC7)
equipment
and transport
by materials
(SITC6), machinery
classified
manufactured
articles(SITC8). Table10 triesto quantify
and miscellaneous
(a) foreign
tradeand export
typesof incentives:
the fourprincipal
license
(c)importreplenishment
(including
CCS);(b)dutydrawback;
promotion
premia:
and (d)advancelicenses
and passbooks.Incentives
to the
manufacturing
sectorare not applicable
to gemsand jewelryexports;
the
latter are excluded from manufacturedexports in the derivation
of the
incentive figures. Table 11 presents
the quantification
of exporttaxes,
which are primarily imposedon primary exports. Primary exports include
exports of food and live animals (SITC 0), beveragesand tobacco (SITC 1),
crudematerials
(SITC2), mineralfuelsand lubricants
(SITC3) and animaland
vegetable
oils (SITC4). Finally,
Table12 integrates
the combined
effectsof
exportincentives
and taxeson totalexports.Thesetablesupdateand revise
the analysis
of Kishore(1989).
96.
Foreign
tradeand exportpromotion
measures
constitute
the largest
proportion of total incentives, ranging from 3X to 71 of total exports
(Table 12). Within this category, the bulk of the total expenditure is
accounted for by the sub-category, Cash Compensatory
Support (CCS). The
remainder
is usedto provide
assistance
for interest
on exportcreditand
financial
assistance
for exportpromotion
1ncluding
grants-in-aid
to approved
organizations
for exportdevelopment
suchas tradefairsand ExportPromotion
Councils.
97.
The otherincentives
in decreasing
orderof magnitude
are as follows.
Dutydrawbacks
are theactualamounts
reimbursed
duringthatparticular
year.
The premiaon REP licenses
havebeenestimated
for individual
yearsand the
as an exportincentive.For advancelicenses
valueof thepremiais included
as an incentive.
the valueof importdutysavedis included
and passbooks,
Thisis calculated
by applying
the averageimportdutycollection
rateon
-
39 -
totalimports
excluding
food,fuelsand gemsto the valueof advancelicenses
issued.The figures
for advancelicenses
havebeenlaggedby six monthsto
better approximate their actual usage.
98.
Other prevalent incentives not included in Table 10 and 12, due to the
unavailability of data, include the international price reimbursementscheme
(IPRS), free-trade zones(FTZs)and tax concessions
for exporting
units.
Theseare all becomingincreasingly important
especially
for individual
industries.
99. Table 12 showsthe generally rising trend of exportincentives
over the
1970/71-1987/88
period. Exporttaxeshavedeclined
suchthat,on thewhole,
net incentives
forall exportshaveincreased
overtime. The tableshowstwo
distinct
phasesof increasing
exportincentives,
1974/75
to 1978/79
and
1985/86
to 1986/88,
withthe latterin particular
reflecting
the intensification
of exportpromotion
schemes
after1985.
FIG.
2
IMPORT TAXES AND EXPORTSUBSIDIES
/0.
70-
60-
71
72
73
74
73
-
76
77
78
76
iMPORT TAUS
80
. -
61
66
ORT
6
64
65
0
87 X8
UUDXSUD
100. The increase in export incentives for manufacturedproducts, although
significant,
has not keptup withthe increase
in tariffs on imported items.
Figure2 showsthe tariffcollection
rateon manufacturing
imports
and the
exportsubsidyratefor manufactured
exports.Whilethe exportsubsidy
rates
- 40 have increasedform about 12X in the early 1970sto about 25X in the late
1980s,they have not kept pace with the increasein tariffs. The ratioof
averageimporttax rate to averageexportsubsidyrate has Increased
of
since 1979. However,in certainproductgroups,availability
significantly
advancelicensesto importotherwiserestrictedinputsand more realisticCCS
rates have allowedmany firmsto enter intoexportmarkets.
Table
10:
lcenti..s
-----------------
for iHnufactured
_----------------
E.porta
(exclu&dinggm. a Jewelry)
(in tI
1170/71
19n71/2
1972/73
millions)
2973/74
1974/78
1975/76
1976/77
1977l76
09.60
u1.00
210.60
98.00
168.70
96.00
322.90
167.90
405.10
263.90
611.I0
63.90
78.20
92.50
154.20
185.30
1970/79
1979/00
1980/01
1982/82
1982/83
1983/84
1984/85
1M5/66
376.10
4Z3.60
370.60
805.64
476.86
634.10
SM.60
494.70
446.14
447.44
416.8.
438.71
494.40
618.26
724.82
n.m
1M2.60
168.21
207.70
226.47
131.91
126.01
126.19
151.57
141.90
190.62
n.m
150.00
n.m
54.77
62.16
278.73
274.39
n.m
58.34
160.06
275.24
an.
69.06
190.14
320.02
20D.43
357.63
".e
71U.u
258.28
352.39
n.m
70.05
246.18
527.88
23.46
88.61
377.n
692.40
69.57
74.42
2225.08
66.60
19856/87 1987/Us
Value of JZemnctivmez
____________________
Foreign trade A suport promtion
(of which) Caeh meeleteoe
65.73
Duty drewbce,
42.67
demnee 1c.6ces, (AL)
Pese-boo (Pe)
Erort duty as I of lort.
Import duty incentives (AL.P)
Repienidsenh
premium Oo
Total
licence.(We)
*W
mab.idi..
M2O.
100.69
44.85
35.21
81.86
41.74
26.52
31.69
129.99
40.17
46.51
46.56
4e.e6
64.6
125.56
176.36
31.3601 44.10
104.10
41.40
206.60
84.50
212.70
31.70
146.83
364.80
220.50
296.87
a.m
46.46
50.82
464.00
27.00
565.0
46.60
2338.50
69.90
309.90
484.10
607.20
764.30
1349.10
79.20
n.m
51.02
142.21
n.
*5.13
1601.60
66.60
1974.35
70.84
2039.36
66.95
623.17
922.22
903.49
86.70
850.47
642.33
4727.13
4064.60
762.99
4940.86
4177.87
852.28
5167.62
4315.64
916.50
4726.59
3740.09
1170.71
4620.30
3849.59
12.59
4.61
2.01
1.94
20.15
12.10
4.97
3.40
1.69
22.07
12.36
6.29
3.72
1.64
23.02
a.m
2347.10
75.56
694.12
a.m
n.e
2329.00 2776.26
7a.65
67.32
s59.67
365.76
129.00
950.78
1223.25
1694.11
1153.89
520.47
4041.68
1617.67
6295.39
4577.72
2018.42
6508.69
6490.27
12.21
3.25
6.0o
1.94
23.49
13.46
3.10
825
1.91
28.72
11.01
2.94
6.62
199
24.56
Value of Exportes:
_________________
Coem A Jselelr Espoata
Flanufactured Esporta
hat Enportnemelouding
gem 8 Jewelry
s of
Incentives
65.92
1062.01
1026.09
71.26
1157.20
1068.93
102.46
1370.96
1246.60
IS5.64
1740.63
1601.99
122.61
2170.79
2047.91
172.25
237. 48
2205.19
321.03
3392.56
3071.63
637.65
3708.98
306. 13
869.67
4372.08
3502.41
6.43
4.16
0.00
3.08
22.67
6.70
4.06
0.00
2.69
13.66
7.95
4.09
0.00
3.48
15.62
6.21
8.36
0.00
2.58
22.16
8.41
3.67
0.00
1.68
10.77
6.42
4.19
0.00
1.44
14.05
10.81
4.87
0.00
0.88
15.76
13.20
14.61
5.22
0.00
1.71
21.54
portes
Foreign trade A e.port
Duty draebemt
Valvo of AL pius PO
Value of MS preile
Total eueldlee
promotion
4
Table 11:
…-…-
…
1970/71
Emport Taxes
Primary
Export
P
larij
-
---------
Eimport
TI.
me.a S of
EaPoret
-
------
969.72
6223.08
4253.34
63.49
951.67
6.77
----------------
…
Tse
--
on Piary
1973/74
1974/76
1978/76
1976/77
96.77
116.56
109.16
128.50
9i.28
144.69
1466.62
19O.76
2255.05
7.33
6.70
9.72
9.91
-
4.27
-
---
-
2389.13
12.28
3.51
5.71
1.62
23.30
10.25
2.97
6.03
1.7
21.02
Exports
-…-
1977/78
1975/79
2e7.00
171.1
16W.27
2876.09
3170.87
256.31
6.19
_--__---------------------------
13.23
3.65
5.00
1.79
23.68
~~~~~~~~-------------
1972/78
1276.66
0.00
2.53
19.79
(in UJS$*Iilons)
1971/72
995.211
S.08
10.82
-_
-
1979/80
6.64
_
_
-
1980/81
4.99
-_____
__ ----
_
149.07
…
290182
70.31
se6.i
3400.87
3335.45
4.36
2.06
_---------__-----
1982/83
-----
2983/"4
78.68
3267.42
3439.48
2.24
2.29
_
---------
1984/65
".69
3316.56
2.07
__
---
-___---
1985/66
1966/87
67.61
77.62
66.12
3565.37
3579.7e
3646.95
1.90
2.17
____________________---
1967/66
1.61
A
Table
1970/72
1971n
1972/7
1975/74
1974/15
12:
1975/17
Inats,
197/1
for Total Exwto
(Ia U5amIllons)
1977161
1970/19
1919/30
1980/81
1961/52
1912/89
I963/44
1984/465
494.70
466.14
447.44
416.69
435.77
a..
494.40
n.0
610.25
190/68
IWO/5
Volvo of lace.at.1,:
_
.......
...
o.Srl.. trade A eompoct prowtlem
(of which) Cash cI-tnc.
Doty dumwahea
lmport
licones
ltmplmnllamat
(EP)
Frealm. en No1115.61
subsidies
22.S2
88.49
lnentlvee
Total
53.21
129.9
Expeor t#Ae*
net
58.73
42.67
Advance ligcnee
(AL)
PeSS400b (1)
duty as S of Iwporf.
2lot
duty lmcmntlve.
Total
1497/56
.
46.49
emport
2088.5
72.60
100.00
99.30
61.C0
110.60
98.O
685.70
se.00
322.90
167.90
405.10
263.90
811.60
WO.10
473.60
870.60
50.64
476.e6
6U.410
06. "
44.88
51.56
53.90
75.90
92.80
134.20
1R8.30
162.50
186.21
207.75
226.47
181.91
126.01
126.19
131.87
141.96
190.62
n.S
180.00
278.73
274.39
278.24
A.*
69.06
190.14
320.02
n.m
65.13
206.43
387.53
t.ma
71.8
26.26
351.39
n.
70.08
246.15
827.66
692.46
23.45
89.87
U.51
371.72
74.42
859.67
2329.00
76.6
2776.26
S7.32
885.7
129.00
U94.12
950.76
1223.25
IS94.11
41.74
49.17
48.81
46.6
81.35.
176.86
44.10
194.10
41.40
206.60
64.50
148.65
195.67
194.60
06.77
118.86
61.16
00.31
U2S.65
2182.49
2847.54
48.65
n.
n*.
n.
n.m
n.m
84.8
46.46
50.S2
54.77
02.16
61.02
142.21
85.34
150.06
2U2.70
31.70
44.60
27.00
585.60
46.60
1336.50
69.9D
1349.10
79.20
1601.60
66.6C
1974.35
70.04
2039.36
220.60
309.90
4S4.30
607.20
754.30
628.17
922.22
9e3.49
ee3.70
S50.47
109.16
113.80
6.26
144.69
2i7.00
171.16
180.27
149.07
6.86
70.31
70.68
66.69
67.52
7.62
68.62
107.01
213.62
339.41
340.20
803.14
84.90
773.14
924.94
618.30
771.63
828.43
882.97
1145.63
6299.15
4161.56
4632.80
5731.79
6202.29
6945.17
5803.2
6014.02
29.76
2.e6
1.61
0.00
0.53
5.60
2.73
2.87
4.01
2.00
0.00
0.96
6.9
2.06
4.61
8.88
2.34
0.00
0.47
5.45
2.62
8.62
6.44
2.47
0.00
0.74
9.68
4.24
0.41
7897.70
8341.33
"5.95
2225.06
66.60
2347.10
78.
0536.u
6766.64
9m.17
714.02
a..
5.122
1335."9
12152.6
Incentbviaend taxes e i of Total Expte;
Feiogn
trmd* & export
Duty drmmbmcl,a
Value of AL plus PO
Value of f
premim
Total wmbeldlaa
(Ntinme) Exper% T*em.
Hot EsaUrt Incentlves
pro ectln
___ -...
_._ --
-_ -----------
__ -....
-
2.74
2.10
0.00
1.85
6.69
4.21
2.29
6.60
2.06
0.00
1.48
6.90
4.80
2.40
3.96
2.04
0.00
1.73
7.73
4.68
8.28
3.02
2.63
0.00
1.25
5.90
3.31
2.60
----
7.36
2.53
0.00
o.68
1O.86
2.44
6.39
-.........
---
6.00
2.36
1.04
1.00
10.42
2.00
6.42
_---...... _----_----
_..
6.06
2.49
1.70
0.60
11.06
1.79
9.27
-
- --------
6.26
2.69
1.58
0.53
11.6
0.61
10.56
-
-_---_-_
6.17
2.65
2.37
0.54
11.03
0.56
10.15
___
5.42
1.5
2.52
0.62
20.30
0.95
9.34
8.10
1.46
3.00
0.69
10.47
0.60
9.67
.U4
1.50
2.61
0.90
10.05
0.77
10.07
0.30
S.4S
3.68
0.89
12.51
0.79
11.72
5.6s
2.57
4.61
1.06
13.12
0.45
12.6
- 43 Iumact of Trade Realie on Export Profitability
the highindirect
taxesbothon
in the earlier
sections,
101. As discussed
exchange
goods,importrestrictions
and overvalued
key inputsand capital
targeting
exportactivity
in India. Furthermore,
rateshavemarginalized
activities
to selected
exportoriented
concessions
on capital
goodstariffs
(suchas gemsand jewelry,
garments,
leather
products,
etc.)has narrowed
down
and Tang,1991). Duringthe lastfewyears,
the rangeof exports(Aksoy
adjustment
of the realexchange
rateand improvements
in exportincentive
schemeshaveincreased
the profitability
of exporting.Unfortunately
thereis
no set of consistent
datato compare
domestic
and exportprofitability
over
time. However,
thereis partialinformation
collected
throughvarious
surveys
(although
not exactly
comparable
in termsof theproductmix and coverage
of
incentives)
thatcanbe usedto illustrate
generaltrends.
102. Thissection
willfirstdiscussthe behavior
of domestic
and export
profitability
fromsurveys
thathavebeenconducted
by ICICI. It willthen
analyzethe impactof highcapital
and inputcostson exportcompetitiveness
basedon a sampleof appraisal
reports
prepared
by IDBIand ICICI for
financing
(Ettori,
1990).
of
Table13 presents
the estimates
103. Domestic
and ExportProfitability.
domestic
and exportprofitability
for a sampleof exporting
firmsfor selected
years.
-
44 -
TABLE13: DOMESTIC
ANDEXPORT
PROFITABILITY
(gross profit on domestic and export sales)
1978/79
1980/81
197980
1985/86
1986/87
ON ToTALCOSTS
Domestic
Profitability 12.0
Export
Profitability
(without
incentives) -15.4
Export
Profitability
twithincentives)
4.0
12.4
13.9
16.1
13.2
-12.7
-11.2
-27.3
-17.0
5.4
4.9
-8.8
-0.2
27.9
25.1
ON VARIABLE
COSTS
Domestic
Profitability
--
Export
Profitability
(without
incentives) -5.2
Export
Profitability
(withincentives)
14.2
--
--
-2.8
-1.6
15.2
13.9
-11.5
4.6
-2.2
12.4
Source:ICICI.
104. Thedatafor1978-81
comesfroma studyby ICICI comparing
theprofitability
of domestic
andexport
salesforexporting
firms.Thesample
is
identical
forthesethree
years.Thedatafor1985-87
againcomesfromICICI,
but it isa different
sample
of firmsandthedefinitions
of profitability
are
notidentical.
Furthermore,
thisdataisforfirmsthatarealready
exporting.Thesefirms are likely to havehigher efficiency and export profitability
thanmostof Indian
firmswhichdo notexport
at all.
105. Although
thedatais notexactly
comparable,
thenumbers
inTable13 are
broadly
consistent
withtheaggregate
incentive
ratesgivenin Tables
10 and
12. Export
profitability
(without
incentives)
is lessnegative
in thelate
1970sthanin 1985/86
duetoexchange
rateappreciation
overthisperiod.The
devaluations
starting
in 1985/86
beginto haveeffects
in 1986/87
whenthe
profitability
of exports
without
incentives
increases
from-27.3X
to -17X.
Although
thereareno comparable
dataformorerecent
years,theprofitability
of exporting
should
havefurther
improved
bothdueto further
realdevaluations,
thestreamlining
of export
incentives,
andcontinued
deregulation
whichhascreated
exportable
surpluses
(Aksoy
andTang,1991). Thegeneral
conclusion
is thattheexport
profitability
on a fullcostbasis(with
incentives)
havemovedfrombeinghighly
negative
inmid-1980s
tomarginally
-
45 -
negative
in 1987. Moreimportant,
exportprofitability
on a variable
cost
basishas improved
significantly,
allowing
morefirmsto exporttheirsurplus
production
withpositive
profits.
106. The issueof comparable
samplesis veryimportant
because
of the
tremendous
variation
in profitability
causedby differential
tariffsand taxes
and the inability
of the compensatory
systemto compensate
fullyfor It.
Furthermore,
thisvariability
in tax burdens
makesit almostimpossible
to
separate
out production
inefficiencies
fromthe effects
of taxation.Table14
showsexportand domestic
profitability
for different
subsectors
for 1986/87;
the lastyearfor the ICICI datais available.
TABLE14: EXPORTAND DOMESTIC
PROFITABILITY
BY INDUSTRY
GROUPS(1986/87)
(Gross Profit Rate on Domesticana Export Sales)
Industry Group
Domestic
Profitability
Automobiles and Ancillaries
14.8
Chemicals
and Petrochemicals 18.0
Electrical
Equipment
20.2
FoodProducts
10.0
Glassand Pottery
19.3
Machinery
8.6
Ferrous
MetalProducts
16.3
RubberProducts
4.4
Textiles
19.7
Miscellaneous
37.7
Export Profitability
without
with
Incentives Incentives
-0.6
-52.7
-20.3
-9.3
-8.2
-22.0
-22.1
-30.7
10.4
36.4
20.5
-33.0
1.9
0.6
5.7
-2.3
2.4
-16.1
17.4
39.4
Export Profitability
with Incentives on
Variable Cost
29.0
-19.3
19.9
6.8
21.5
14.2
19.4
-9.8
28.5
39.4
Source: ICICI.
107. Exportprofitability
withincentives
showverylargevariation
depending
on the typeof product.It variedbetween-33Xfor chemicals
to 18X for
textiles
and 40X formiscellaneous
manufacturing.
Thisresultsfroma
combination
of domesticinefficiencies
and the inability
of the export
administration
to compensate
properly
for higherinputcosts. The average
profitability
ratiosshould,
therefore,
be treated
withcaution
becausesmall
changesin the samplecan leadto largechangesin average
profitability.
-
46 -
108. Theseresults confirm the marginal nature of exports in India and is
consistent withthe historical
behavior
of exports.Exceptfor textiles,
leather,
and gems, most engineering products are profitable only on a marginal
costbasisand a'e undertaken
whendomestic
marketshaveexcesssupplies.
Whendomestic
marketsimprove,
the exportactivity
ceases.
109. The Effectof TariffStructure
on ExportCompetitiveness.
Thereare two
tax related
costescalating
factors
for Indianfirms. Firstis the highcost
of inputsdue to taxes,tariffsanddomesticinefficiencies.
In theory,
higherinputcostscan be compensated
underthe existing
exportcompensatory
schemes(i.e.,CCS,dutydrawback,
advance
licenses,
etc.) The secondand
potentially
moreserious
costescalation
is due to veryhighcapital
costs,
whichcan not be compensated
underthe GATTsystem.
110. To analyze
the differential
impactof tariffs
and taxeson domestic
costs as wellas exportprofitability,
datafrom60 appraisal reports prepared
by ICICI and IDBIduring1988and 1989in 25 manufacturing
subsectors
were
analyzed(SeeEttori,
1990for detailsand limitations
of the data). The
firmsin question
are not utypical"
exporters
fromIndiaand are concentrated
mainlyin chemicals,
metalsand engineering
industries.
However,
theyare
representative
of the productareasthatare receiving
significant
investments.
The dataon the coststructure
of thesefirmshavebeen
reestimated
by usinginternational
pricesfor the inputsas well as fixed
capital
to observeseparately
the impactof inputand capitalcostson export
profitability.
The average
domestic
profitability
of thesecompanies
was
12.9Xwhilethe exportprofitability
(without
incentives) was -33.2X. That
is, giventhe levelsof input and capital
costs,the firmswouldmakeabout
13X gross profit in the domestic market while they would lose 33X on their
export sales. The structure of profitability
for these companiesis given in
Table 15.
-
47 -
TABLE15: DOMESTIC
ANDINTERNATIONAL
PROFITABILITY
(GrossProfit Rate on Domesticand Export Sales)
On TotalCost
Domestic
Profitability
ExportProfitability
ExportProfitability
(a)onlywithinputs
at worldprices
(b)with inputsand capital
at worldprices
On Variable
Costs
12.9
-33.2
-3.1
-0.2
29.8
10.65
--
--
Source: Ettori(1990).
111. Table15 presents
domestic
and exportprofitability
underdifferent
priceassumptions
on inputsand capital
goods. If theseprojects
had received
all theirinputsand capital
at worldprices,
theywouldhavebeenprofitable
at worldpricesfor theiroutput.Here,the optimistic
forecasts
might
exaggerate
the grossprofitability
of thesefims. However,
the relative
impactof tariffsand taxeson bothinputand capitalsidewouldbe the same
even if the production
efficiencies
weremuchlower. The relatively
higher
inputcostsin India,on average,
constitute
almost33% of the international
sellingpriceof the output.Thatis, if firmsreceive
theirinputsat world
prices,the exportprofitability
wouldincrease
from-33%to about0%,
indicating
a shiftof about33 percentage
points. Thisis stillnot as
profitable
as sellingin the domestic
marketwhichhas a profitrateof 12.9%.
112. The implication
of Table15 is thatevenif the exportcompensation
systemworkedperfectly;
i.e.,firmsreceived
all theirtradable
inputsat
worldprices,theywouldstillnot makea profiton theirexportsales. High
capital
costsincurred
by Indianfirmscompared
to theircompetitors
abroad
wouldonlymakethembreakeven. However,
if the tariffsand taxeson their
capitalcostswerealsolowered
to zero,thenthe exportprofitability
of
thesecompanies
wouldbe verycloseto theirdomestic
levelsof profitability.
Thusundera fullfreetraderegime(notJustfreetradeon inputs),
the firms
in question
wouldbe as profitable
in exporting
as sellingin the domestic
market.
113. Secondand moreimportant
resultof the analysis
is the variance
of cost
reductions
amongdifferent
firmsin a free-trade
environment.
For example,
- 48 -
pointsfor
impactof freetradeon costsvaryfromlessthan10 percentage
pointsfor some
to morethan70 percentage
equipment
someelectronic
on
of taxesand tariffs
is causedby the variability
chemicals.Thisvariance
due to
goods. Changesin exportprofitability
inputsas wellas on capital
pointsfor
justhavinginputsat worldpricesvarybetween2 to 60 percentage
products.
different
for any
of inputcosts,it is almos'impossible
114. Giventhisvariance
firmfor higher
eachindividual
systemto fullycompensate
exportcompensatory
just
the averageexportincentive,
to theseestimates,
inputcosts. According
for the highinputcostsshouldbe 33% of the exportprice.
to compensate
groups
and product
amongproducts
out above,the variance
as pointed
However,
and the rangeof indiexportsubsidy
average
is verylarge. The implied
(15%-68%),
are: 41% in chemicals
withinthe subsectors
vidualfirmsubsidies
32% in
44%in basicsteel(22%-59%),
fibers(27%-50%),
43%in synthetic
electronics (2%-60%)and 23%in other engineering products (3%-53%).
Furthermore, even if these higher input costs were fully compensated,the
due to higher
would still not be positive
resulting export profitability
capital costs in India. Thus, unless the capital costs are also reduced
in nonexportexpansion
a ;ustained
and diversified
significantly,
is not likelyto takeplace.
activities
traditional
115. The Effectof the ImportRegimeon Exports.The impactof the QR regime
of the
to quantify.The analysis
is verydifficult
on exportperformance
showthatthe QR regime
clearly
exporters
facedby individual
problems
veryhighcostson mostexporters.The reformsin exportIncentives
inflicts
in havingaccess
of largeand directexporters
haveeasedsomeof the problems
indirect
producers,
for smaller
However,
and components.
to raw materials
the exportregimeis
suppliers,
and for firmsthatrelyon domestic
exporters
products
truefor manyengineering
Thisis especially
stillnot rationalized.
whose
inputsand components
of veryspecific
a multitude
thatrequire
also changesdependingon the export order. Most of these firms
composition
and dies,
work closelywithlocalfirmsthatsupplythemwithcomponents
molds, etc. Since manyfirms produce the exported product on the specifications of the importer, they have to be able to get all the appropriate
componentsand raw materials quickly to execute an export order. Currently
to get its inputs duty
directexporter
the only option that exists for-the
- 49 freeis to applyfor an advance
license
for the inputs,
receivethe license,
place the order from oversees, import the item and then produce the final
product for export. In most cases, these componentscan be madelocally
mostlyby smallspecialized
firms. However,
sincemostof theseinputs
require
special
metalsand/orchemicals
(plastics)
whichare veryexpensive
in
India,localproduction
costsof the components
end up beingmuchhigherthan
international
prices. To get themetalsand chemicals
at worldpriceswould
require the exporter of the finalproductand the componentproducer to
jointly apply for an advancelicense and receive
the basicinputs again
throughimporting.To do thisforeverysmallcomponent
is both very costly,
timeconsuming
and thereis alwaysone inputor component
thatwillbe questionedor rejected
by the relevant
authorities.
Whenthissituation
is
compared
withthatof India's
maincompetitors,
whichobtainbasicinputsat
worldpricesand can importany component
withoutdelay,the reasonsfor low
Indianexports
becomeobvious.
116. The situation
is similarin manyothersectors.Products
thatrequire
fastexportresponse,
are complicated
and havehighbackwardlinkages
are
heavily
penalized
by the traderegime.Unfortunately,
theseare the products
thathavehighvalueadded,expanding
marketsand highunitvalues. Thus,
India's
exports
tendto be simpler
and morelow end products
withverylow
unitvalues(Aksoyand Tang,1991). Furthermore,
Indiafirmstendto hold
muchlargerinventories
due to uncertainties
in the <L.pply
of imports
and
localsupplies.13/
Thisraisestheircostsof production
significantly
above
theircompetitors,
whichare now movingin just-in-time
inventory
systems.
D. CONCLUSIONS
117. Despite
attempts
to liberalize
the importtraderegime,
the structure
of
importlicensing
is stillveryrestrictive
and highlycomplicated.
It is very
difficult
to quantify
the impactof the importlicensing
systemon costsand
exportperformance.
Formostproducts
in limited
permissible
and canalized
lists(itemsimportable
through
r%EPlicenses),
the licensing
systemprobably
13/ Manyengineering
firmsholdalmostninemonthsof supplies,
because
they
receive
six monthlyimportlicenses
and thereis alwaysthe possibility
thatlicenses
mightbe delayed.MMTC,whichimports
canalized
metals,
periodically
delaysthe imports
of manyproducts.
°50doesnot givtany protection
additional
to thatgivenby the tariffsystem.
Sincetheseproducts
are importable
throughREP licenses,
the premiaon
trading
of REP licenses
indicate
the extentto whichQRs are binding.There
are veryfew products
thathavea consistently
highimport(REP)premia. The
premiaon imports
of individual
products
increase(sometimes
up to 50X)for
shortperiods
of timewhenthereare specific
shortages
(suchas interruptions
in domestic
or importsupplies)
and thendeclineas theseshortages
are
eliminated.
It is not possible
to estimate
the importpremiaon itemsin the
restricted
list. Tariffcollection
rateson itemsin the restricted
listare
generally
higherthanalreadyveryhighaveragetariffrates. At thesetariff
rates,it may be thatveryfewof theseproducts
wouldbe importeO
evenif
restrictions
wereeased. Also,the factthatfor manyproducts,
landedimport
prices(inclusive
of tariffs)
are higherthandomestic
prices,alsoshowsthe
redundancy
of the licensing
system(Aksoyand Ettori,1991). Fromthese
observations,
it wouldseemthatfor mostproducts,
the existing
trade
restrictions
are probably
redundant
in termsof itsprotective
value. Again,
given the very specific nature of the import regime, manyother product groups
maybe receiving significant protection through import restrictions.
118. In terms of administrative
impediments,
however,
the importregime
inflicts very high costs to the Indian economy. It creates delays in
importing
necessary
rawmaterials
leading
to interruptions
in production and
forcesthe firmsto holdlargeinventories
to minimize
potential
import
bottlenecks.
Thesecostsare especially
highfor raw materials
and other
inputsthatare placedon the restricted
listbecauseof sufficient
domestic
supply.Any interruption
in domestic
supply(whichhappens
veryfrequently
in
Indiadue to powercuts,strikes,
transport
problems
etc.)leavesdownstream
producers
idleuntileitherthedomestic
supplyresumes
or Government
(usually
afterlongnegotiations)
decides
to allowimports.At leastfor rawmaterials
in the limited
permissible
and canalized
lists,firmscan use REP licenses
to
import,albeitat highercost(dueto tariffs
and REP premia)and withdelay.
The QR regimeinflicts
similar
damageon exportperformance.
Reformsin
exportincentives
haveeasedsomeproblems
thatlarge,directexporters
have
in gainingaccessto imported
raw materials
and components.
But the export
regimeis stillnot rationalized
for smaller
producers,
indirect
exporters.
and firmsthatrelyon domestic
suppliers.
-
51 -
119. The absolute
levelsof tariffsin Indiaare extremely
highand havebeen
increased
veryrapidly,
especially
overthe lastdecade. Furthenmore,
key
intermediate
products(metals
and chemicals)
and capital
goods,whichhave
substantial
costimpacton the restof the economy,
havethe highest
tariff
rates. The highcostof basicinputsin Indialeadsto highercostsof
production throughout the economy,even whenthe production processes are
otherwise efficient.
The high tariffs on key inputs also lead to: (a) uneconomic importsubstitution
in theseproducts
whichcreatepressures
for more
protection;
and (b)require
a verycumbersome
and elaborate
systemto
compensateexporters for these costs.
120. The high tariffs
and excisetaxeson capitalgoodsare evenmore
damaging
to the competitiveness
of Indianindustry.Highercostof investment
adds10%to 15% to the costsof production
and require
an additional
30% to
50% effective
rateof protection
Justto compensate
firmsfor thesecosts
(Ettori,
1990). Thesehighercapital
costsseverely
handicap
exporters,
and
underGATTrules,thesecostscan not be reimbursed.
121. The extremely
hightariffs
do not fulfill
theirprimarypurpose
of
providing
reasonable
protection
and incentive
signals,
but are primarily
aimed
at theirsecondary
function
of publicrevenue
generation
whichin Indiahas
becomepredominant
and has introduced
pervasive
distortions
in pricesand
incentives.
Furthermore,
closeto 30%of indirect
taxes(tariffs
and excise)
and 23% of totaltaxesby the central
government
are leviedon investment
goods. Attemptsto increase
publicrevenues
usingthe existing
indirect
tax
structure
wouldonlyincrease
themagnitude
of distortions
outlined
in this
study. The function
of publicrevenue
generation,
whichis currently
another
critical
issuein India,shouldbe fulfilled
by othermoreefficient
instruments,
suchas directtaxation(income
tax)and non-protective
indirect
taxation(CVDand excisetaxeswithinMODVAT)including
the introduction
of a
fullvalue-added
tax thatfallson finalconsumption.
122. Whilethe analysis
of the excisetax structure
is beyondthe scopeof
thisstudy,fewgeneralconclusions
can be drawnfromthe analysis
above.
First,the excisetax structure
alsoembodies
manyof the distortionary
characteristics
of the tariffsystem;it taxesinvestment
ratherthan
consumption
goods. Thisis not necessarily
due to highnominalexcisetax
-
52 -
ratesbut greatercoverage
of producers
in thesesectors.The excisetaxeson
consumer
goodsare concentrated
on a fewproduct
groupswhichare taxedat
veryhighrateswhiletheotherproduct
groupsare leftoutsidethe excise
rate.
123. Second,
just likethe tariffrates,the absolute
levelof excise
taxation
of themanufacturing
sectoris alreadyveryhigh. The average
tax
rateon grossoutputfor the manufacturing
sectoris 7% whichtranslates
to a
tax rateof about25-30%on valueadded. Thisis muchhigherthanthe average
valueaddedtaxesin mostcountries
wherethe VATsare morein 10% to 15%
range. Thus,majorreforms
are alsoneededin the excisetax system.
124. Despitesignificant
efforts
overthe pastfewyearsto streamline
the
administration
of exportincentives,
the systemis stillextremely
complexand
theobjective
of supplying
inputsto exporters
at worldpricesis far from
beingreached.Thereis a generalfeeling
in Indiathatexportadministration
can be simplified and reformed by itself without reforming import and tax
policies.
This view disregards the fact that the export regime has to
compensatefor QRs, tariffs, and taxes that are extremely non-transparent and
complicated.
Therefore,
withouta majorreformof the import and tax system,
the reformsin exportpolicies
alonewillonlyleadto marginal
improvements.
125. The exportadministration
undertakes
two specific
activities.First,it
issuesimportlicenses
for inputsthatare not available
domestically,
or that
domestic
priceand/orquality
is not competitive.
Sincemostof theseinputs
are on restricted
lists,special
Importlicenses
haveto be issuedfor
exporters.The secondactivity
is to refundto exporters
the tariffsand
domestic
taxespaidon theirinputs.14/Thisactivity
willbe relatively
straightforward
if the tariffs
and taxesarebindingand clustered
aroundfew
;ates. In India,wherethe tariffand taxesare highlyvariable
and thereis
"waterin the tariffs,"
the refundof taxesbecomesverycomplicated
and have
to be donealmoston a case-by-case
basis. All thesepeculiarities,
evenif
fullyaccommodated,
leadto delaysin administration
of exportincentives
and
14/ Duty-free
importlicenses
for exports(i.e.,advancelicenses)
accomplishthesetwo activities
simultaneously.
However,
theydo not include
stateand municipal
taxesand otherleviesplacedon Inputs.
- 53 take away an essentialelementof successfulexporting:the flexibility
and
speedof response.
126. The problemsof the exportadministration
can only be solvedby making
changesin the followingfour areas. First,the importlicensingsystemneeds
to be rationalized
so that importrestrictions
on inputsand componentsare
eliminated.This will allow firmsto importtheirraw materialsand other
inputswithoutdelaysand on a more continuousbasis. Furthermore,
it will
eliminatethe importlicensingcomponentof the exportadministration.
Second,the tariffsand excisetaxeshave to be consolidated
aroundtwo to
threeslabs and the QRs in intermediates
and capitalgoods need to be
eliminatedso that individualfirmscan be compensated
accuratelyfor their
tax burdens. The existingsystem,due to multipletariffsand taxes,QRs and
controls,is so complexthat it leadsto over and under-compensation
of
exporterseitherblockingsomeof the efficientfirms from exportingor
overcompensating others leadingto uneconomicexports. Furthermore,
the ease
of administration
of duty-drawbacks
wouldbe greatlyfacilitatedif tariffs
are bindingand the ratesare uniform. Then the establishment
of a few tariff
drawbackrateswouldbe sufficientto compensatealmostall exporters. Third,
the absolutelevelof tariffson inputshave to be reducedto administerthe
duty-freeimportschemesefficiently.Thesehigh tariffsinducevery
profitableopportunities
for leakage of duty-free imports into the domestic
marketand/orabuseof high drawbackrates (incentives).These leakages,in
the long-run,will forcethe governmentto tightenthe administrative
controls,defeatingthe purposeof easy and promptaccessto raw materialsat
world prices. Finally,the costsof investmenthave to be reducedby lowering
the tariffsand taxeson capitalgoods. Even if the inputcosts are
compensatedfully,high productioncostsdue to highercosts of investment
will made Indianfirmsuncompetitive
in the worldmarkets. As can be seen
from thesepoints,reformof the exportsystemreallyrequiresa fundamental
reformof the tax and QR system.
- 54 REFERENCES
and IndustrialStructurein
Aksoy,M. A. and Ettori,F. M. (1991). "Protection
India,"Protectionand IndustrialStructurein India," World Bank,
Processed(AprIl).
in
Aksoy,M. A. and Tang,H. (1991). "Imports,Exportsand IndustrialPerformance
India: 1970-88," World Bank,Processed(April).
T. N. (1975). ForeianTradeReaimesand Economic
Bhagwati,J. N., and Srinivasan,
Development:India,NBER,New York.
Ettori,F. M. (1990)."The PervasiveEffectsof High Taxationof CapitalGoods in
India,"PRE WorkingPaper433, World Bank.
in IndianExportPoliciesand Their
Keesing,D. B. (1987)."RecentImprovements
(December).
Processed
World Bank,
Implementation,"
(1988).'An Evaluationof ExportMeasuresin India's1988-91Import
and ExportPolicy,"World Bank, Processed(May).
Kishore,N. (1989)."Movementsin Real EffectiveExchangeRates,India: 19731988,"World Bank, Processed(July).
V. R. (1978).TradePoliciesof India,ConceptPublishingCompany,
Panchamukhi,
New Delhi.
Pursell,G. (1988).Trade Policiesand Protectionin India,World Bank,Draft,
DC.
August,Washington,
Rao, N. (1985)."ExchangeRate and CommercialPolicyin a ControlledTradeRegime,"
OxfordUniversity.
(Unpublished),
Ph.D.Dissertation
DC.
Wolf,M. (1982).India'sExports,OxfordUniversityPress,Washington,
- 55 -
APPENDIX
A
Natchina
Invort.
HS and Industrial
Classifications:
Methodology
and Results
127. To be consistent
withthe importand tariffdata,the licensing
information
for eachproductin the Import-Export
Policywas mappedintothe
six-digit
HS codesby matching
the product
descriptions
in the different
licensing
listswiththoseof individual
HS codes. For the majority
of cases,
the two descriptions
matchedfairlyclosely.About29% of the six-digit
HS
codes,however,
couldnot be locatedin the importpolicydocument.OtherHS
codesmatched
morethanone licensing
category
because
of further
disaggregationin the importpolicy.
128. Ratherthanmakingassumptions
abouttheirlicensing
status,
HS codes
thatcouldnot be located
in the policydocument
were leftunclassified.
In
caseswheremorethanone product(indifferent
licensing
categories)
was
listedin the importpolicywas againsta six-digit
HS code,the following
decision
rulewas used. First,the licensing
category
thathad the greatest
numberof itemswas assigned
to thatsix-digit
HS code. In caseswherethe
numberof itemswereequal,morerestrictive
licensing
category
was assigned
to thatHS code. Forexample,
itemswiththreedifferent
importlicensing
statuses
wereidentified
forHS 846630;one "restricted,
non-canalized,M
one
"limited
permissible,
non-canalized,"
and three"OGL,non-canalized."
The
itemwas classified
OOGL,non-canalized*
sincethiscategory
had the most
numberof items.Overall,
the licensing
statusof about71Z aroundfive
thousand
six-digit
HS codes,covering
about82% of totalimports
for 1987/88,
were identifled.
129. The basicimportlicensing
information
for different
subsectors
is
presented
in TablesA.2 and A.3,whichpresentthe distribution
of import
licensing
status: (i)as percentages
of the listedsix-digit
HS codesand
(ii)as percentages
of 1987/88importvalues,respectively.
-
56
-
is basedon India's115x115input-output
130. The sectoralclassification
table.15/ Threeof the 115 subsectorshave been mergedwith other closely
i.e.,gramwith pulses,sugarwith khandsari,and khadi,
relatedsubsectors,
with cottontextiles.
subsectorsand
131. There is no officialmappingbetweenthe input-output
six-digitHS codes. Thismappinghad to be constructed.This was done by
using:
subsectors,
groupingthe five thousandHS codesinto theirappropriate
(a) Annex 2B of Sintia-T,which listsstandardsubsectorsin six-digitHS
for seven-digit
Tables,TableII, a concordance
codes: (b) the Correlation
documentprovidedby the
HS codes;and (c) an unpublished
SITC and eight-digit
subsectorsto the revisedIndian
PlanningCommissionmappingthe input-oRitput
reviewedby the
(SITC).16/ The resultswere subsequently
Trade Classification
were made accordingly.However,since
and adjustments
PlanningCommission,
levelof
some of the mappingswere originallydefinedat the seven-digit
the presentsix-digitmappingis not exact.
aggregation,
132. India'simportlicensingsystemis dividedinto nine categories.These
categoriesand relevantappendicesin the ImportPolicyare givenbelow:
15/
Is used so as to be
sectoralclassification
115 x 115 input-output
model,which simulatesthe effectsof
consistentwith the input-output
possiblereformscenarioson output,balanceof payments,and public
sectordeficits.
16/
Trade,and IncentivesAnalysis),
Sintia-T(Softwarefor Industrial,
containsa listof standard
User'sGuide,a World Bank publication
Tableswere issuedby
sectorsbased on six-digitHS; Correlation
Ministry
and Statistics,
Generalof CommercialIntelligence
Directorate
of Commerce,Calcutta.
- 57 TABLEA.1: IMPORTLICENSINGLEGENDSAND DIRECTORY
Code
Description
Appendixin the Import
and ExportPolicy
AA
Banned
2 (PartA)
BA
Restricted,
non-canalized
1 (PartA)
1 (PartB)
8
10
BB
Restricted,
canalized
All overlappingitemsin
*BANand 5A & SB
CA
Limitedpermissible,
non-canalized
3 (PartsA & B)
CB
Limitedpermissible,
canalized
All overlappingitemsin
"CA"and 5A & 5B
DA
OGL, non-canalized
1 (PartB) 6 : lists1-6; 8
(PartI); 9-11
DO
OGL, canalized
DC
OGL, stockand sale
All overlapping
items in "DA"
and 5A & 5B.
6 : list 8 (PartII)
Canalized,
not in the other lists
5 (PartsA & B)-leftover
items,not coveredelsewhere
5
Note:_
Allitemsappearing
inAppendix
5 (Parts
A & B)arecanalize.
133.
M " (banned)means that the item may be foundin Appendix2 (PartA);
"BA (restricted,
non-canalized)
means that the itemappearsin Appendices1
(PartA), 2 (PartB), 8, or 10, but not in Appendix5 (PartsA & B) simultaneously;'BB' (restricted,
canalized)means that the item is in one or more
of the "BA"appendicesand in Appendix5 (PartsA & B) simultaneously.The
same logicappliesto the otherpairings,"CAOand "CBNand "DANand "DB*.
Canalizeditemsthat do not overlapare denotedwith code N5, which stands
for "canalized,
not in the other lists."
134. To simplifythe description
of the importlicensingregime,the detailed
licensingcategorieswere combinedon the basisof theirdegreeof
restrictiveness
as follows:
-
(a
(b
c
d
58
-
Bannedand restrictedAA+BA+BB
permissible CA
Limited
OGL
DA+DC
Canalized
CB+DB+5
is a sum of "banned,"
"restricted,
nonThatis, "banned/restrictedm
category
canalized",
and "restricted,
canalized";
"limited
permissible"
category
equals
non-canalized";
"OGL is a sum of "OGL,non-canalized"
"limited
permissible,
is a sum of "limited
and "OGL,stockand sale";and,finally,
"canalized"
and "canalized,
not in the other
permissible,
canalized,"
"OGL,canalized,"
lists."
DATASOURCESAND TABLES
are fromthe following
sources:
135. The datausedin the calculations
(i)1987/88
importdatain six-digit
HS codes,provided
by the
Directorate
General
of ComercialIntelligence
and Statistics,
Calcutta;
(ii)Importlicensing
information
- the Importand ExgortPolicy.
ADril
1988-March
1991,Vol.1, amendedto 31stMarch1989,
(ministry
of
commerce,
Government
of India);
and
(iii)1987/88
grossoutputvalueby subsector
- estimates
by
Prof.Saluja.
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5
PACE2
Noctr
26
28
27
28
29
Sector Nus
AA
BA
BB
CA
CB
DA
DB
DC
4
I
I
I
19
0
0
0
0
0
76
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
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0
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0
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21
0
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0
0
0
0
0
0
0
0
0
0
0
0
0
76
0
0
0
21
25
100
100
100
79
1.6
1.6
0.2
0.0
10.6
26
0
12
0
0
0
16
0
0
0
27
73
4.2
LIMESTONE
MICA
OTHER
NON-METALLIC
MINERALS
NON-IIETALLIC
NINERALS
4
3
62
69
0
0
0
0
0
0
1o
9
0
0
0
0
0
0
10
9
0
0
0
0
0
0
13
12
0
0
0
0
8
3
0
0
0
0
7
0
0
44
39
100
t0o
56
61
0.9
0.7
48.0
37.9
MINERALS
96
0
9
0
6
0
13
2
0
6
36
04
24.0
75
s0
26
0
9
5
0
a.8
0.1
4.0
0.0
2.3
0.3
0.0
2.5
i-.6
IRONORE
MANGANESE
ORE
BAUXITE
COPPER
ORE
OTHER
METALLIC
MINERALS
-------------------------
30
31
82
a3
36
36
87
38
39
40
49 C:Ss
SMARANDIASARI, 800RA
8
HYDROOENATED
OIL (VANASPATI)
4
EDIBLEOILSOTHER
TAN VANASPATI
35
TEAANDCOFEEPROCESSINO
13
MISCELLANEOUS
FOO PRODUCTS
321
BEVERAGES
22
TOBACCO
PRODUCTS
a
fOOD,BEYERAGE,
T08ACC0
409
_________~~~-------
0
50
0
0
0
0
0
0 ----
3
6
TOTAL UtKNONIN Iiputf
0
0
0
0
26
0
0
0
26
0
0
0
0
0
0
0
0
SO
0
0
0
3
0
0
0
71
74
100
0
0
0
0
0
0
0
100
90
0
1
0
0
0
0
0
91
91
0
6
0
0
0
0
0
95
83
0
17
0
0
0
0
0
100
80________ 0a___________-----_----__--_a______-_____-_______________________________________________1
0
0
0
0
6
69
_______________
11
PACE3
N.tor
Sector Name
h-Code
AA
BA
B9
CA
CB
OA
DB
DC
6
TOTAL WIJOWIN
ut'ptut
42
KHAmIaC2M9?TJjIj1SIN EXANDLOOM128
0
a
0
94
0
0
0
0
1
98
2
0.2
43
44
46
4
47
48
49
WOOLEN
TEXTILES
SILKTEXTILES
ARTSILK,SYNTHETIC
FIBERTEXTILES
JUTE,HEMP,MESTA
TEXTILES
CARPET
WEAVING
READY-MADE
GARMENTS
ANDMADEU TE
MISCELLANEOUS
TEXTILEPRODUCTS
TEXTILES
0
0
0
0
0
0
0
0
66
0
79
7
a6
96
70
68
0
0
0
0
0
0
0
0
17
100
7
0
4
0
6
19
0
0
0
0
0
0
0
0
0
0
S
0
0
0
2
2
0
0
0
0
0
0
0
0
0
0
1
0
0
0
1
0
0
0
0
0
0
0
0
0
83
10
92
7
89
97
78
89
17
0
8
93
11
3
22
11
2.8
1.0
0.9
0.6
0.0
0.1
1.8
0.6
____________
54
66
- _________
-_-
----_____
-_-----------------------------------------------------------------------
- -------
LEATHER
FOOTWEAR
LEATHER
ANDLEATHER
PROOUCTS
EXCEP
LEATHER
_______________________
- -------
a
60
66
RUBBER
PRODUCTS
PETROLEUM
PRODUCTS
COALTARPRODUCTS
PETM
OLEUU
ANDCOAL
PRODUCTS
e31
70
16
12
97
____________________-_-____-_-_-__
0
0
0
67
40
43
0
0
17
0
0
0
0
0
0
0
0
0
0
2
0
0
0
0
0
66
0
18
0
2
0
0
0
86
14
0.6
0
0
0
0
0o
0
0
22
0
0
0
0
83
0
8
26
0
7
0
1
9
0
8
7
0
7
26
4
1
0
0
1
0
33
17
7
73
47
58
67
27
63
42
33
1.9
7.8
2.5
6.5
- ------------------------------------------------
LEATHER
ANDTEXTILES
66
68
69
29
8
180
16
27
247
163
776
- -----------
jj
-------
j------
jj
-------
- __________________-
i-------i-------
0
0
0
83
40
45
17
60
6
0.6
1.8
1.0
e
Ch
________________________________________-_-_
------
- ------------------------------ ---
KY
--
--
--
PACE4
1Ne?t°t
60
at
62
63
84
66
6s
67
68
NsC°
Sector Haom
INOROAMIC
HEAVY
CHEMICALS
OROANIC
HEAVY
CHEVICALS
FERTILIZERS
PESTICIDES
PAINTS,VARNISHES
ANDLACQUERS
DRUGS
ANDVEDICINES
SOAPS,COSVETICS,
OLYCERINE
SYNTHETIC
FIBERS,RESIN
OTHER
OiEVICALS
CHEVICALS
189
279
25
23
14
a6
47
102
129
873
AA
BA
BB
CA
CO
DA
DB
DC
5
0
0
0
0
0
0
0
0
0
2
9
0
13
0
25
62
9
2
10
0
0
0
0
0
0
0
0
1
0
44
39
0
35
s0
18
23
29
23
33
0
1
4
0
0
2
2
0
0
1
20
23
0
26
14
14
6
22
26
20
0
0
8
0
0
0
0
0
0
0
0,
0
0
0
0
2
0
0
9
1
0
3
66
4
0
2
2
0
3
3
a
TOTAL
66
75
68
78
64
62
96
60
6e
70
t*NOw
OutpUt
34
26
32
22
36
38
4
40
34
30
16.7
59.0
4.1
8.0
0.5
4.0
19.0
23.6
6.6
12.1
-----------------------------------------------------------------------------------------_------__---_-_--------------
69
70
71
STRUCTURAL
CLAYPRODUCTS
CEVENT
OTHER
NON-METALLIC
VIN. PRODUCTS
NON-M-ETALIC
MINERAL
PRODUCTS
17
6
129
151
0
0
0
0
6
100
13
15
0
0
0
0
12
0
23
21
0
0
0
0
24
0
26
25
0
0
1
1
0
0
0
0
0
0
1
1
41
100
64
63
69
0
36
37
2.1
0.2
2.6
1.6
72
78
74
75
IRON,STEELANDFERRO
ALLOYS
IRON,STEELCASTINO
ANDFOROINO
IRONANDSTEELFOUORIES
NON-FERROUS
BASICMETALS
(INCLUDIN
METALS
43
6
210
171
429
0
0
0
0
0
C
0
0
4
2
21
0
1
0
3
87
40
30
28
29
21
0
26
19
22
0
0
6
11
7
0
0
0
2
I
2
0
0
1
1
7
0
28
17
21
93
40
91
80
86
7
60
9
20
14
4.6
0.2
62.9
28.4
14.0
76
77
HANDTOOLS,HARDWARE
MISCELLANEOUS
VETALPRODUCTS
METAL
PRODUCTS
99
106
205
0
0
0
0
26
13
0
0
0
38
23
30
0
0
0
9
10
10
0
0
0
0
0
0
0
0
0
47
S8
63
63
42
47
4.4
4.4
4.4
____________
-
------
-
-----
-
--
-
-------
-
_
-
--------------------------------------------
PACE6
Ato.
Sector m
AA
AA
OA8Cod.08
BA
CA
CO
DA
08
DC
6
TOTAL UNKNN
zP°6put/
75
79
60
81
83
64
86
89
TRACTORS
ANDOTER ARICULTURAL
IN
INDUSTRIAL
MACHINERY
FORFOOD
AND
INDUSTRIAL
MACHINERY
(EXCEPT
FOOD
UACIINETOOLS
OTHER
NON-ELECTRICAL
MACHINERY
ELECTRICAL
INDUSTRIAL
MACHINERY
ELECTRICAL
CABLES,WIRES
OTHER
ELECTRICALUMACHINERY
BASICMACHINERY
20
63
63
74
236
67
10
27
639
0
0
0
0
0
0
0
0
0
0
22
6
a
32
42
0
16
23
0
0
0
0
0
0
0
0
0
6
10
15
8
la
26
30
48
17
0
0
0
0
0
0
0
0
0
6
44
a8
66
22
12
0
26
30
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
10
76
60
76
71
79
30
89
70
90
24
40
24
29
21
70
11
30
0.2
20.0
264.6
17.0
23.7
5.7
2.3
31.2
28.6
02
68
OFFICECOMPUTING
ANDACCOUNTING
HU
COMMWNICATION
EqUIPMENT
COMM. AOFF. EqUIP.
34
33
67
0
0
0
26
9
15
0
0
0
0
16
10
0
0
0
21
6
13
0
0
6
0
0
3
0
0
0
59
24
42
41
76
58
133.9
6.6
12.S
0
22
0
16
0
28
0
0
0
67
33
24.9
0
31
22
23
0
0
0
0
42
46
38
41
0
0
3
2
26
6
23
17
0
0
0
0
0
0
0
0
0
0
2
1
87
83
90
86
33
17
10
16
3.2
10.6
22.6
16.2
26
0
23
66
14
9
20
0
0
0
0
0
0
0
6
17
17
0
43
0
14
0
0
0
0
0
0
0
0
4
19
0
0
0
9
0
0
0
0
0
0
0
0
0
0
0
0
0
0
6
0
0
0
0
0
1
36
22
58
65
67
9
43
66
78
42
46
43
91
61.8
6.1
2.7
6.6
0.5
0.6
67
4.i
MACHINERY
(BASIC& OFF.)
86
87
90
91
92
93
94
96
96
e006
BATTERIES
ELECTRICAL
APPLIANCES
ELECTRONIC
EQUIPMENT
INCLUOING
T.V
ELECTRICAL
APPLIANCES,
£ ELECTRONI
IS5
0
0
0
0
SHIPSANDBOATS
RAIL EqUIPMENT
MOTOR
VEHICLES
MOTOR
CYCLES
AND SCOOTERS
BICYCLES
ANDCYCLE-RICKSHAW
OTHER
TRANSPORT
EQUIPMENT
TRANSPORT
EQUIPMENT
20
23
53
11
7
11
125
0
0
0
0
0
0
0
________________________________________-
12
62
86
- --____________________________________
__-_---________________________________________________
-______________
PACE6
r etor
97
98
0
51
52
53
67
Soector
NRo.
seC°
AA
BA
B0
CA
CD
DA
DO
DC
S
TOTAL UKWNOWN'rtpu
WATOiES
AND CLOaCS
UISCELLANEOUS
MANUFACTURINO
FURNITURE
AND FIXTURES
ANDFIXTURE
WM AND ODPRODUCTS
EXCEPT
FUR
PAPER,PAPER
PRODUtTS
ANDNEWtRIN
PRINTING,PUBLIStINAND ALLIEDAC
PLASTICPROOUCTS
66
884
9
69
120
29
62
0
0
0
0
0
0
0
40
87
*00
12
10
0
10
0
0
0
0
0
0
0
11
8
0
8
14
24
16
0
0
0
0
0
0
0
4
20
0
14
19
a
21
0
0
0
0
1
0
0
2
1
0
0
0
0
0
0
0
0
0
1
0
0
56
64
100
34
45
28
63
66
OTHERS
688
0
27
0
10
0
17
0
1
0
66
46
4644
0
81
0
20
2
13
0
1
3
72
28
9.0
49O
0
82
0
19
2
13
0
1
4
71
29
7.2
TOTAL
MANUFACTURTNO
TOTAL
44
a8
0
66
72
47
6.7
19.6
0.0
1.2
10.6
0
8.0
3.1
I
an
J
Table A.3:
SectorNeme
1
2
8
4
6
7
a
9
10
11
18
14
16
16
17
20
21
22
23
24
PADDY
WHEAT
JAWAR
OAJRA
UAIZE
GRAMAND PULSES
SUOMCANE
GROUNDNUT
JUTE
COTTON
COFFEE
RUBBER
COCOUT
TOBACCO
OTHERCROPS
OTHERLIVESTOCK
PRODUCTS
FORESTRY
AND LOGOINO
FISHINO
AGRICULTURE
COALAND LICNITE
CRUDE PETROLEUM,NATURAL GAS
ENERGY
-
OF IMPORTS
BISTRIBUTION
BY
1YPORTLICINCINGCATEGORY
(AsI o total Imports;Imports
in Re. mi.)
I1RATS
AA
BA
08
CA
CB
DA
0B
DC
21.5
89.9
0.0
1.2
0.0
2826.8
0.0
0.0
39.0
6.9
0.6
049.1
4.1
6.0
1491.2
1904.9
2392.8
101.7
9692.0
0
0
0
0
0
0
0
ti
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
78
0
0
0
0
100
0
9
0
62
1
0
0
33
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
100
1
2
1
100
2
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1
a1
6
0
14
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
, 0
0
0
0
0
0
0
0
0
0
0
0
0
24
3
a8
0
21
2072.9
0
0
0
0
0
0
0
0
6
TOTAL UNKNOWN
100
100
100
100
0
0
0
0
100
100
0
9
34
0
6
26
0
0
8
100
100
100
100
0
70
0
0
100
100
100
9
42
100
93
92
76
100
78
0
0
0
0
0
22
0
0
0
0
0
91
6S
0
7
8
26
0
22
0
0
100
30302.4
0
0
0
0
0
0
0
0
100
100
…_______._________________________________________-____--____________________________
32436.3
0
0
0
0
0
0
0
0
94
94
__- __--______________________________________
-
0
a
tput'
0.0
0.1
0.0
0.0
0.0
4.4
0.0
0.0
1.2
0.0
0.0
21.3 U1
0.0
0.1
0.6
2.2
4.1
0.4
0.9
4.7
103.1
44.1
PACE2
NV
26
20
Secor
NS.ct;m
---
;--
IRON ORE
MANGANESE
ORE
1FAOS
AA
BA
8s
47.4
6.0
0
0
99
0
Bt'put'
CA
CO
DA
DO
DC
0
0
0
0
o
0
0
0
0
o
0
0
0
0
0
99
0
1
100
1.6
1.0
TOTAL
6
U
27
BAUXITE
0.4
0
0
0
0
0
0
0
0
0
0
100
0.2
28
29
COPPER ORE
OTHERMETALLICMINERALS
0.0
266.5
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
33
0
0
33
0
67
0.0
10.6
METALLIC MINERALS
309.2
0
16
0
0
0
27
0
0
0
43
67
4.2
LIME STONE
MICA
19.8
0.2
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
100
100
0.9
0.7,
OTHER
HNON-METALLIC MINERALS
PON-METALLICMINERALS
3924.0
3944.0
0
0
0
0
0
0
0
0
0
5
5
1
1
0
0
82
82
88
8s
12
12
48.0
37.9
MINERALS
4263.2
0
1
0
0
0
7
1
0
78
85
16
24.0
102
3.8
0
0.1
30
31
32
SUGAR AND KHANDSARI,BOORA
HYDROGENATED
OIL (VANASPATI)
1832.2
0
0
0
0
0
0
0
0
0
0
36
33
12.7
6
0
0
0
0
0
0
94
100
36
EDIBLE OILS OTHER THANVANASPATI
4323.1
0
0
0
0
1
0
0
0
0
98
100
0
4.0
37
TEA AND COFFEEPROCESSING
MISCELLANEOUS
FOODPRODUCTS
BEVERAGES
TOBACCO PRODUCTS
0.0
2391.3
43.2
10.1
0
0
0
0
0
77
99
100
0
0
0
0
0
1
1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
78
100
100
0
22
0
0
0.0
2.3
0.3
0.0
8612.6
0
22
0
60
72
28
2.6
38
39
40
FOOD, BEVERAGE,TOBACCO
- ____----…-_----_-____
…_…_…
--------
____
____
____
___-------_-
0
--------
0
-----
1
----------
0
…--
-------
0
__-_
-
_- _____________________________________
Ch
PACE3
NS:tor
Sector Noo
IUPORTS
AA
DA
BB
CA
CB
DA
D9
DC
D
6
TOTAL IINKNOUN'Stput
42
KHAlDI.Ef8U If
260.7
0
1
0
99
0
0
0
0
0
100
0
43
44
46
46
47
48
49
WOOLEN
TEXTILES
323.7
SILK TEXTILES
88.8
ARTSILK,SYNTHETIC
FIBERTEXTILES
928.9
JUTE,HEMP,MESTATEXTILES
68.3
CARPET
WEAVING
0.0
READY-MADE
GARMENTS
ANDMADE
UP TEXTILE
17.8
MISCELLANEOUS
TEXTILEPRODUCTS
531.1
TEXTILES
2219.4
0
0
0
0
0
0
0
0
92
0
32
0
0
26
26
34
0
0
0
0
0
0
0
0
4
100
34
0
0
0
12
33
0
0
0
0
0
0
0
0
0
0
9
0
0
0
13
7
0
0
0
0
0
0
0
0
0
0
21
0
0
0
3
9
0
0
0
0
0
0
0
0
96
100
98
0
0
25
64
83
6
0
4
100
0
76
46
17
64
66
LEATHER
FOOTWEAR
77.6
LEATHER
ANDLEATHER
PRODUCTS
EXCEPT
FOOT 186.2
LEATHER
262.7
0
0
0
0
15
10
0
0
0
0
0
0
0
0
0
76
0
22
0
0
0
0
0
0
0
0
0
76
16
33
24
86
87
0.6
1.3
1.0
2482.1
0
31
0
30
0
8
0
8
0
78
22
0.0
608.0
10097.6
296.6
_
_
0
0
0
0
0
0
0
0
0
0
0
0
0
_
18
0
27
_
__._
0
100
46
0
67
0
27
_
_
6
0
0
_
0
0
0_
91
100
98
_
_
9
0
2
_
1.9
7.8
2.6
_
IN HANDLOOMS
LEATHER
ANDtEXTILES
RUBBER
PROOUCTS
PETROLEUM
PRODUCTS
COAL
TAR
PRODUCTS
_
_
_
_
B6
so
69
_
…__
_
_
_
_
PETROLEUM
ANDCOAL
PRODUCTS
-----
-----
----
-----
----
-----
----
_
_
__-------
_
10902.1
---- _--------
_
----
0
_
_
----
-----
4
----
_
0
-----
_
----
2
-----
94
----
0
-----
_
----
_
0
-----
_
----
-----
_
1
0.2
2.8
1.0
0.9
0.6
0.0
0.1
1.3
0.6 ^
_
----__--
_
6.6
----
PACE4
___________________________________________________________________________________________________________________________________________________________
Soetor Nam
60
61
62
63
64
65
00
67
68
INOROANIC
HEAVY
CHEMICALS
ORGANIC
HEAVY
CHEMICALS
FERTILIZERS
PESTICIDES
PAINTS,VARNISHES
ANDUCCqUERS
DRUGS
ANDMEDICINES
SOAPS,COSMETICS,
GLYCERINE
SYNTHETIC
FIBERS,RESIN
OTHER
CHEItCALS
CHEMICALS
I..RVS
AA
DA
BB
CA
CB
DA
DB
DC
s
4088.0
7262.1
1879.6
433.8
113.0
1678.0
6944.7
8303.9
2731.8
30424.8
0
0
0
0
0
0
0
0
1
0
1
4
0
6
0
18
2
3
0
3
0
0
0
0
0
0
0
0
1S
1
10
62
0
18
47
62
4
8
39
23
0
1
0
0
0
0
75
0
0
15
89
21
0
74
22
21
2
73
24
84
0
0
28
0
0
0
0
0
0
2
0
0
0
0
0
0
0
4
0
0
7
66
0
0
1
16
0
S
9
81
86
85
98
9
TOTAL UNKNOIN
91
99
83
87
87
19
16
15
2
31
9
1
17
13
13
16.7
69.0
4.1
8.0
0.6
4.0
19.8
23.5
6.5
12.1
69
69
70
71
StRUCTURAL
CLAY PRODUCTS
CEMENT
OTHER
NON-METALLIC
MINERAL
PRODUCTS
of
NON-IIETALLIC
MINERAL
PRODUCTS
j
267.8
49.9
922.3
1239.9
0
0
0
0
2
100
0
6
0
0
0
0
16
0
26
22
0
0
0
0
43
0
3S
36
0
0
0
0
0
0
0
0
0
0
0
0
61
100
61
63
39
0
39
37
2.1
0.2
2.8
1.6
72
73
74
IRON,STEELANDFERRO
ALLOYS
503657
IRON,STEELCASTINO
ANDFORGING
39.0
IRONAND STEELFWODDRIES
12214.6
NON-FERROUS
BASICMETALS(INCLUDINO
ALLO 7838.1
METALS
25126.4
0
0
0
6
0
0
69
0
0
0
0
1
14
0
0
12
3
7
0
0
1
3
2
0
0
27
12
17
91
0
7
0
17
39
22
2
0
0
0
7
58
41
8
23
9
42
2
31
12
4.6
0.2
52.9
28.4
14.0
HANDTOOLS,
HARDWARE
MISCELLANEOUS
METALPRODUCTS
UETALPRODUCTS
0
0
0
0
0
0
76
78
77
601.7
2064.9
2818.6
6
2
s6
go
69
88
0
6C
0
9
0
0
0
a6
36
4.4
0
73
0
3
0
0
0
77
23
4.4
0
70
0
4
0
0
0
74
28
4.4
…----_------------------------------------------------_----------------_-----_-----------------------…-----------------_---------------
PACE6
No.
78
79
80
81
83
84
85
89
Sector Name
I URlS
TRACTORS
ANDOTHER
ACRICULTURAL
IMPLEMEN 28.6
INDUSTRIAL
MACHINERY
FORFOOD
ANDTEXTIL 2186.2
INDUSTRIAL
MACHINERY
(EXCEPT
FOOD
ANDTE 21891.1
MACHINE
TOOLS
2143.6
OTHERNON-ELECTRICAL
MACHINERY
13336.4
ELECTRICAL
INDUSTRIAL
MACHINERY
2243.0
ELECTRICAL
CABLES,
WIRES
473.8
OTHERELECTRICAL
MACHINERY
2123.3
BASICMACHINERY
44403.8
AA
0
0
0
0
0
0
0
0
0
BA
0
24
79
21
11
17
0
41
47
09
0
0
0
0
0
0
0
0
0
CA
54
28
4
11
29
46
79
20
17
C8
0
0
0
0
0
0
0
o0
0
DA
0
41
12
66
37
3
0
as
6
23
DO
82
88
OFfICECOMPUTING
ANDACCOUNTING
UACHINER1768.7
COUUMNICATION
EQUIPMENT
1376.8
COMM.A OFF.EQUIP.
3136.6
0
0
0
18
1
10
0
0
0
76
22
62
0
0
0
UACHINERY
(BASICA OFF.)
0
0
0
0
0
0
0
0
DC
0
0
0
0
0
0
0
0
0
5
0
0
0
0
0
0
0
2
60
23
0
0
0
0
0
0
0
0
0
06
74
86
6
26
14
0
TOTAL UNKNOWNuetput
54
46
0.2
94
6
20.6
94
6
264.6
87
13
11.0
76
24
23.7
67
33
6.7
79
21
2.3
96
4
31.2
87
13
26.6
133.9
6.8
12.5
47639.3
0
46
0
19
0
23
0
0
0
87
13
24.8 a
86
87
90
BATTERIES
260.6
ELECTRICAL
APPLIANCES
1406.1
ELECTRONIC
EqUIPMENT
INCLU.T.V.
6260.3
ELECTRICAL
APPLIANCES,
A ELECTRONICS 7926.9
0
0
0
0
0
1
2
2
0
0
0
0
74
33
66
62
0
0
1.
1
6
6e
37
41
0
0
0
0
0
0
0
0
0
0
1
1
80
99
97
97
20
1
3
3
3.2 O'
10.8
22.6
16.2
91
92
93
94
96
96
SHIPSANDBOATS
RAILEQUIPUENT
LOTOR
VEHICLES
MOTOR
CYCLES
ANDSCOOTERS
BICYCLES
ANDCYCLE-RICKSHAW
OTHER
TRANSPORT
EQUIPMENT
TRANSPORT
EqUIPMENT
0
0
0
0
0
0
0
0
0
3
0
0
0
1
0
0
0
0
0
0
0
1
77
63
0
99
0
36
0
0
0
0
0
0
0
0
3
36
0
0
0
16
0
0
0
0
0
0
0
0
0
0
0
0
0
0
41
0
0
0
0
0
12
41
80
92
0
99
0
83
69
20
8
100
1
100
37
1416.0
789.7
1926.0
638.0
44.8
12.2
4827.7
61.6
0.1
2.7
6.8
0.6
0.6
4.4
PACE6
__________________________________________________________________________________________________________________________________________________________
0!ctot
Sector Name
1W iS
97
WATCHES
ANDCLOCKS
398.7
98 MISCELLANEOUS
MAUUFACTURING
7637.9
60 FURNITIREANDFIXTRESAND FIXTURES-WOOW 0.8
51 Wo ANDOWOO
PROUCTS
EXCEPT
FURNITURE 201.7
62 PAPER,PAPER
PRODUCTS
ANDNEWSPRINT
6076.6
53 PRINTING,PUBLISHING
ANDALLIEDACTIVITI 866.8
67
PLASTICPRODUCTS
690.9
OTHERS
14662.6
AA
0
0
0
0
0
0
0
OA
0
10
100
0
2
0
11
BB
0
0
0
0
0
0
0
CA
35
a
0
6
10
1
16
CB
0
0
0
0
0
0
0
DA
62
32
0
61
10
1
68
DB
0
0
0
0
0
0
0
DC
0
0
0
0
0
0
0
6
0
0
0
0
36
0
0
0
6
0
8
0
26
0
0
13
S2
48
10.2
TOTAL U4tWN
97
3
48
62
100
0
a6
34
so
42
2
98
85
15
'sPtrt
6.7
19.6
0.0
1.2
16.6
8.0
3.1
TOTALMANUFACURING
*/
156359.7
0
17
2
21
7
20
7
1
9
83
17
7.9
TOTAL*/
202840.2
0
15
2
16
6
16
8
1
24
86
16
6.6
a/ Excluding gwe.
-
71 -
APPENDIXB
Disaagregated Data Base for Tariffs
data that is used to
136. This appendixpresentsthe sourcesof disaggregated
constructthe summarytablesin the paper.
of TableB.1 were basedon data from variousissuesof
137. The calculations
RevenueBudgetand of Reporton Currencyand Finance(RBI). In othertables,
numbersfrom DGCIS;whilecustomsand excise
importdata are provisional
are from Departmentof Revenue. The matchingbetweenimportsand
collections
collections
are not perfect. Some six-digitHS codesshow tariffcollections
misclassification
on the part
but relativelylittleor no imports,indicating
had to be made. In some
of one or the otheragency. Therefore,adjustments
subsectors,
where total importswere zero or insignificant
and small amounts
of collectionnumbersexist,the collectionrateswere assumedto be zero. In
high collection
such cases a smallcollectionnumberproducesmisleadingly
subsectors:3, 5, 8,
rates. Such adjustments
were made in the input-output
9, 27, 28, 31, 37, 47, 78, 95, and 96. However,more seriousproblems
occurredin itemsrelatedto importsunderthe BaggageRule (HS codes 9802Goods (Chapter99). In these two
9805) and the tariffchapterMiscellaneous
were reportedbut no importswere
categories,largeamountsof collections
given. For example,HS 990200and HS 990300,which fallsin subsector65-of Rs 669 millionand Rs 3007million
collections
Drugsand Medicines--show
respectively
but no imports;HS 980200in subsector68--OtherChemicals-showsa collectionof Rs 4161 millionbut no imports;and likewiseitem
a collectionof
Manufacturing--shows
HS 980300in subsector98--Miscellaneous
tariffcollectionratesfor
Rs 3518 millionbut no imports. In calculating
Goods itemsare
all the BaggageRule and Miscellaneous
those three subsectors,
excluded. However,they are includedin the estimationof the overalltariff
collectionrates. The same was done with respectto the importsand
whose collectionrateshad been set to zero.
collectiondata in the subsectors
-
72 -
sources:
are fromthe following
The datausedin the tariffanalysis
CustomsTariffs
(a) Customs
tariffrates- (a)BiglsEasy-Reference
Big Database
Publishing
Pvt Ltd,36C Connaught
Place,
1989-90,
New Delhi110001, India, March1989;and (b)Customs
Tariff,
New Delhi,
& CentralExcise,
Customs
of Publications,
Directorate
June1, 1989;
document
to
(b) Excisedutyrates- Sameas 1(a)plusthe companion
1(b),entitled
ExciseDuty;
of
General
data- Directorate
and exports
(c) 1987/88imports
Commercial
Intelligence
and Statistics,
Calcutta;
(d) 1987/88
customstariffcollection
data- Department
of Revenue,
New Delhi;
Ministry
of Finance,
(e) 1987/88
excisecollection
and excisable
outputdata- Statistical
YearBookCentralExcisein threevolumes,
issuedby Central
Exchange
for Assessment
Data,Directorate
of Statistics
and
Intelligence,
Central
Excise& Customs,
New Delhi;and
grossoutputvalueby sector- estimates
by Prof.Saluja.
(f) 1987/88
Table
Year
B. 1:
IMPORT
DUTYCOLLECTION
RATES(X)
Primary
Fuels
Food
Manufactures
Total
Primary
Capital Goods
Total Imports
Other
MInf.
Total
Manf.
Machinery Transport
Total
EquipmentCapital Coods
1980/81
1961/82
1962/63
1963/64
1964/65
1966/66
1966/67
1967/68
1968/69
1969/70
1970/71
1971/72
1972/73
1973/74
1974/76
1975/76
1976/77
1977/78
1978/79
1979/80
1990/81
1981/82
1982/83
1983/84
1984/86
1986/86
1986/87
1987/88
82.10 2.05
9.30
7.81
3.84
6.65
21.22
8.37
2.79
2.02
1.18
1.34
0.67
0.80
0.83
0.91
0.86
1.24
1.27
0.64
0.38
1.67
2.05
3.36
4.59
9.13
7.42
7.07
16.36
17.28
21.42
28.66
21.61
20.41
8.66
5.48
6.89
7.69
7.37
15.44
21.70
8.62
4.89
6.18
6.42
6.38
9.21
6.98
6.86
6.86
18.78
9.86
13.03
18.38
22.10
36.81
27.08
23.66
24.04
26.46
27.36
32.08
34.07
36.60
38.38
45.72
43.79
44.44
49.61
63.36
68.60
65.36
4.63
8.29
13.96
13.67
26.34
6.29
3.79
4.72
26.66
22.70
29.13
36.62
42.92
38.44
43.99
62.39
22.78
18.84
28.27
21.96
41.74
4.66 0.38
8.93
12.16
17.66
20.86
34.31
24.80
20.46
21.64
.26.38
26.67
31.49
34.63
37.44
38.39
45.43
45.19
40.06
42.36
64.71
49.08
61.72
6.14
77.44
26.92
28.33
a9.08
46.46
60.20
42.66
32.69
27.60
27.36
36.56
47.06
67.70
65.28
49.81
60.68
81.69
49.86
64.88
64.79
61.93
68.90
18.48
21.01
28.65
33.59
47.13
34.27
28.06
26.21
27.00
33.21
41.74
49.17
48.61
46.65
48.68
64.68
48.48
60.82
64.77
61.04
68.33
26.62
4.62 6.80
8.72 7.37
20.38 8.79
40.42 30.29
64.39 42.09
4.86
8.40
17.69
37v10
60.81
64.80
18.18
21.07
27.33
29.99
38.98
23.94
20.33
19.69
20.67
25.90
36.09
42.49
31.54
27.34
26.83
28.70
27.32
32.33
31.19
27.08
31.64
71.68
63.39
77.65
60.71
61.63
66.36
69.06
39.12
57.67
62.74
47.93
68.44
69.98
76.16
69.60
69.79
65.44
36.81
68.43
69.94
76.44
76.13
80.79
86.13
71.68
70.04
36.48
41.27
48.38
68.51
56.96
74.41
61.72
89.68
60.64
69.84
118.80
121.48
112.66
42.81
26.76
24.06
21.63
31.93
39.25
17.15
8.28
9.42
7.96
8.21
11.35
6.50
6.74
6.64
Sources:RevenueBudget,Ministryof Finance;
Reporton Currency
and Finance,RBI,variousissues.
Table
1
2
a
4
6
7
e
9
10
11
13
14
16
16
17
20
21
22
1987/88 CUSTOMS
TARIFFSTRUCTURE
BY SUBSECTOR
N OU INA L _
ROTECtIVETARIFF TOTALTARIFF
PACE1
S--ctor
B. 2:
-------------Mean Std.Dev. Mean Std.Dev.
Sector-No
PADDY
WHEAT
JAWAR
BAJRA
MAIZE
GRAM
ANDPULSES
SuMARCANE
CROUNDNUT
JUTE
COTTON
COFFEE
RUBBER
COCONUT
TOBACCO
OTHERCROPS
OTHERLIVESTOCK
PRODUCTS
FORESTRYAHD LOGGING
FISHINO
ACRItULTURE
________________
F --
--
0.0
0.0
0.0
0.0
0.0
82.7
146.0
106.0
86.0
76.0
100.0
106.0
87.9
246.0
111.7
46.3
67.0
99.4
87.8
________-------________---_______- -- - -- - -- 9_5
----.
0.0
0.0
0.0
0.0
0.0
7.2
0.0
0.0
0.0
80.0
0.0
0.0
7.0
0.0
86.7
47.9
42.8
23.6
49.5
0.0 0.0
0.0 0.0
0.0
0.0
0.0
0.0
0.0
0.0
82.7
7.2
146.0
0.0
106.0
0.0
86.0
0.0
87.3 42.3
100.0
0.0
136.8 0.0
106.9
0.8
246.0
0.0
118.0 36.6
46.3 47.9
78.7 62.8
99.4 23.6
90.3 50.7
__-------_________-----_______--------
TRADE-WEICHTED
TARIFF
-E
Protecttve Total
0.0
0.0
0.0
0.0
0.0
29.4
0.0
0.0
86.0
46.2
100.0
106.0
91.9
246.0
63.6
39.8
18.6
0.3
37.4
0.0
0.0
0.0
0.0
0.0
29.4
0.0
0.0
85.0
46.3
100.0
136.8
97.6
246.0
63.8
39.8
19.0
0.3
39.7
COLL£CTION
SHARE
ON RATE
SHAPE
SProtectivo Total IMPORTSOUTUT
1.2
0.1
0.0
30.6
0.0
13.4
0.0
0.0
0.0
8.8
0.0
38.2
36.6
11.2
48.9
21.1
12.7
0.9
21.7
________--_-_________
-----
1.2
0.1
0.0
30.6
0.0
13.4
0.0
0.0
0.0
8.8
0.0
41.1
44.4
11.2
49.0
21.3
12.8
0.9
22.0
_-___--
0.0
0.0
0.0
0.0
0.0
1.3
0.0
0.0
0.0
0.0
0.0
0.3
0.0
0.0
0.7
0.9
1.1
0.0
4.3
____
---
8.6
S.6
0.7
0.2
0.3
2.1
1.8
1.2
0.1
0.9
0.2
0.1
0.6
0.2
9.3
2.9
1.9
0.9
33.5
-----______
PACE2
S
cto -----------------------No.
Sctor
PROTECTIVE
TARIFF TOTALTARIFF
Mean __-----Std.Dev. --------------Mean Std.Dev.
Name
TRADE-WEIGHTED
TARIFF
--------_
--------Prot..ctlve
Total
COLLECTION
RATE
---------Protecttve ___-_-__Total
SHARE SHA E
IYPItTS OU%'UT
28
COALANDLICNITE
96.0
0.0
96.9
13.7
85.0
85.0
24
CRUDEPETROLEUM,
NATURALGAS
ENERCY
4.3
5.1
0.9
1.4
99.3
92.6
15.2
13.2
131.0
116.1
28.1
28.3
69.0
60.7
69.0
80.7
69.4
65.8
60.3
66.8
13.8
14.6
0.9
2.4
92.6
86.0
13.0
0.0
92.6
86.0
13.0
0.0
85.2
85.0
0.0
0.0
86.0
86.0
0.0
0.0
86.0
0.0
19.8
94.6
0.0
0.0
20.9
101.4
86.0
86.0
86.2
85.0
96.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.0
0.0
0.0
78.2
81.2
i1.1
10.4
80.3
82.7
13.0
13.0
64.8
68.3
72.0
74.3
65.9
62.4
67.0
63.5
0.1
0.1
0.1
0.2
116.0
0.0
116.0
0.0
116.0
116.0
191.5
192.3
0.0
0.1
116.0
106.6
108.6
0.0
28.0
26.7
115.0
111.3
111.7
0.0
80.2
28.6
116.0
20.3
20.8
116.0
23.4
23.9
0.0
17.1
18.1
0.0
19.7
20.7
0.0
1.8
1.8
0.0
0.8
0.3
99.6
24.3
103.7
26.3
24.2
27.6
20.6
23.1
1.9
0.6
103.8
18.8
114.3
28.4
101.6
122.6
47.3
47.3
0.8
1.5
246.0
0.0
19.1
0.0
23.1
120.3
0.0
246.0
46.6
0.0
120.9
314.1
146.0
284.4
18.6
37.8
0.0
111.1
111.1
2.4
18.7
37.4
0.0
114.4
120.7
2.9
0.0
1.9
0.0
1.1
0.0
0.0
0.7
3.6
0.8
8.3
0.6
O.8
80.7
89.8
26
26
IRON ORE
MANOANESEORE
BAUXITE
COPPERORE
OTHER METALLICMINERALS
METALLICUINERALS
27
28
29
30
31
32
LIMESTONE
MICA
OTHERNON-METALLIC
MINERALS
NON-METALLICMINERALS
MINERALS
a3
36
36
37
38
39
40
SUOAR
HYDROGENATEDOIL (VANASPATI)
EDIBLE OIjZ CriER THAN VANASPATI
TEA AND COFFEE PROCESSING
MISCELLANEOUSFOOD PRODUCTS
_---------------------------------
98.1
146.0
131.9
224.3
146.0
136.1
BEVERAGES
TOBACCO PRODUCTS
FOOD, BEVERAGE,TOBACCO
-
----------------------------------
- --
-
- --
--
260.2
9.0
107.8 22.9
166.0 18.7
142.9 33.0
241.2 110.8
214.1 20.2
43.9
-
- --
-
147.1
-
--------
49.1
---------------------------------
60.6
0.0
129.9
321.8
231.9
60.3
------------
-
- --
61.2
-
- -------------
3.9
-
------------
11.0
-
- -
-
_
PACE3
Sector
--o
PROTECTIVE
TARIFF
-
Sector Nam
Man
Sti.Dov.
TOTALTARIFF
Meoan Std.D.v.
42
43
44
45
46
47
48
49
COTTON
TEXTILES,KHADI
WOOLEN
TEXTILES
SILK TEXTILES
ARTSILU, SYNTHETIC
FIBERTEXTILES
JUTE,HEMP,MESTA
TEXTILES
CARPET
WEAVING
READY-MADE
GARMENTS
A TEXTILEGOODS
MISCELLANEOUS
TEXTILEPRODUCTS
TEXTILES
64
66
LEATHER
FOOTWEAR
146.0
0.0
181.8
0.0
LEATHER
A LEATHER
PRODUCTS
EXCEPT
FOOTWEAR
90.7 --- 67.8
107.4 81.4
---LEATHER
96.6 86.2
116.4 80.3
-__________________________
_ ___________________________________-_____--…_____________________________________
LEATHER
ANDTEXTILES
… _____________________
_________-
C6
so
69
RUBBER
PRODUCTS
PETROLEUM
PRODUCTS
COALTARPRODUCTS
PEtOEII
OLP-UTSii;oa;oi7i1
N-~~~~~~W
Rzfs--
128.8
106.7
118.7
146.3
120.3
139.1
144.6
140.6
139.0
136.2
-----
----------------------
-
------------------ --------
20.6
40.8
24.4
17.4
20.0
14.2
7.6
17.6
19.6
26.6
-
149.1
123.4
118.7
188.4
162.6
205.3
146.1
170.2
161.6
168.4
31.4
60.3
24.4
41.0
26.0
31.6
9.4
22.1
34.6
144.6
84.6
103.9
166.4
142.0
0.0
66.6
97.4
126.6
37.6
3a.3
F1.8
.---.----____.________________________________________________________
.,__________-__________________-_--
.
119.8
-
170.4
------------
3.1
7.2
18.3
152.6
3.9
0.0
32.8
66.8
79.8
0.1
0.1
0.0
0.4
0.0
0.0
0.0
0.2
1.0
5.2
0.4
0.3
3.3
0.4
0.2
1.1
1.3
12.1
28.9
3.8
11.2
30.3
4.7
12.2
0.0
0.1
_________
0.1
0.4
0.6
0.9
156.3
6.3
36.3
182.8
24.3
42.4
_
44.1
-
SHARE SHARE
IMP8RTSOUUT
2.6
6.8
15.4
83.4
3.4
0.0
26.6
46.6
48.0
_________
-------
193.0
143.9
101.8
178.6
97.6
103.9
267.2
161.4
0.0
70.7
121.2
181.6
COLLECTION
RATE
------Protective
Total
146.0
181.8
27.3
32.3
_______________----_____________--62.0
76.4
89.4
------
140.6 16.4
105.7 30.4
74.2 24.2
s.o
TRADE-WEIGHTED
TARIFF
ProtectivTotal
_______
_ ___
72.6
_ ____
_
_
_
_
1.1
13.0
0.2
4.6
0.1
0.8
4.2
0.4
2ii63.
6.4 .
-- ________
87.3
7.9
43.1
i.i
133.9
27.1
49.6
PACE4
^ ctor
PROTECTIVE
TARIFF TOTALTARIFF
Man
Stfd.Dev. Mean Std.Dv
SSctorName
0.
60
INORGANIC
HEAVYCHEUICALS
ORGANIC
HEAVY
CHEMICALS
FERTILIZERS
PESTICIDES
PAINTS,VARNISHES
ANDULCQUERS
ORUGS
AND NEDICINES
a/
SOAPS,
COSMETICS,
GLYCERINE
SYNTHETIC
FIBERS,RESIN
OTHER
CHEMICALS
*/
CHEMICALS
a/
61
62
63
64
a6
6S
67
6
69
111.3
123.6
0.0
11S.0
189.3
119.6
160.7
129.5
110.1
118.2
STRUCTURAL
CLAY PRODUCTS
CEMENT
OTHERNON-METALLIC
MINERALS
PRODUCTS
GEMS
b/
70
71
72
73
74
76
76
77
141.6
22.7
167.7
88.6
0.0
0.0
147.3
0.0
243.2
82.0
143.5 80.0
264.6 107.9
178.3 56.3
146.8 53.1
156.3 60.6
38.2
121.6
0.0
115.0
192.5
107.9
106.6
94.3
119.7
93.9
47.6
151.2
0.0
147.3
260.2
122.1
136.7
149.5
154.0
123.7
141.6
43.3
168.1 24.9
188.0 39.6
42.7
5.8
83.7
106.0
129.1
45.0
106.9
185.9
185.2
46.0
115.3 38.0
106.0 0.0
136.7 16.3
42.7
S.8
COLLECTION
RATE
Protcti-ve
Totel
32.6
35.3
1OS.7 123.2
1.6
34.3
91.7
35.6
62.6
71.2
122.2
70.5
2.1
18.3
121.9
37.3
66.5
116.4
150.7
87.8
SH0E
IUPiTS
S- E
OUUT
1.8
3.3
0.8
0.2
0.1
0.8
2.7
2.8
1.2
13.7
0.8
0.4
1.6
0.2
0.7
1.4
1.0
0.9
1.4
8.1
68.4
25.0
65.6
0.1
88.0
25.9
80.1
0.1
0.1
0.0
0.4
9.0
0.4
0.9
0.3
0.8
64.5
79.7
9.6
2.4
34.1
63.6
79.4
81.6
71.0
38.1
76.6
88.1
97.1
80.5
2.3
0.0
6.5
3.5
11.3
3.6
0.6
0.7
0.9
6.8
HAND TOLS, HARDWARE
119.4 32.6
163.6 42.0
79.6
111.9
63.6
83.0
MISCELLANEOUS
METALPRODUCTS
141.6 64.0
101.3 62.3
102.7
134,6
40.4
49.6
METAL
PRUCTS
131.0 46.3
1i8.0
66.3
97.7
129.6
45.4
67.0
…
_
…… _
___________________________---_________---_-___---_-----------------t--------------------------------
0.3
0.9
1.2
0.4
1.6
1.9
NON-METALLIC
MINERALS
PRODUCTS
cl
- -
18.2
28.6
0.0
0.0
20.6
17.2
14.0
40.1
31.3
36.8
TRADE-WEIGHTED
TARIFF
Protective
Totl
-
-
----
-
-
-
-
--
-
- -
-- --
--
IRON.STEELANDFERRO
ALLOYS
IRON,STEELCASTINGAMD FORGING
IRONANDSTEELFOUNDRIES
NON-FERROUS
BASICMETALS
(INCLUDINALLOYS
METALS
…-
30.7
126.3
-- -- --
-- --
---
92.2
127.0
128.2
109.7
117.2
-
- - -- -
64.9
14.7
37.9
30.4
40.6
171.0
- - --
- -- -
98.0
161.1
139.2
133.2
132.9
53.4
- -
- -- --
64.0
16.9
36.9
S6.9
41.8
52.1
49.2
-- --
-- --
-- --
-- - --
38.4
132.S
114.2
79.0
88.1
-
---
--
49.7
167.4
124.3
95.7
100.6
- --
-
- -__
4
PAGE6
S.ctora*~~~~~~
ctorNe-N o
No.
__ No. S__Sector-Nuw
7?
79
80
81
83
84
es
69
82
88
O6
67
90
__________--
PROTECTIVE
TARIFF TOTALTARIFF
TARIFF
~~~~~~
~ St.d.D.v.--- TRADE-WEIGHTED
…E
F*~~~Men
Std.O.v.
Mean
Protective Total
-----___--
TRACTORS
& OTHER
AGRI.IMPLEMENTS
81.6 10.3
100.9 17.6
INDUSTRIAL
MACHINERY
FORFOOD
AND TEXTILES 63.4 15.4
90.1 27.1
INDUSTRIAL
MACHINERY
(NON-FOOD
& TEXTILE) 61.7
16.0
90.4 27.3
MACHINE
TOOLS
87.2
9.2
89.7
8.6
OTHERNON-ELECTRICAL
MACHINERY
93.8 40.1
110.6 68.8
ELECTRICAL
INDUSTRIAL
MACHINERY
91.9 21.7
109.7 88.8
ELECTRICAL
CABLES,WIRES
76.0 0.0
127.6 0.0
OTHER
ELECTRICAL
MACHINERY
68.1
22.6
119.1 25.9
.___
---------------------------……-…
------------------------------------------------------------------------------------------BASICMACHINERY
89.0 29.4
103.6 44.4
…-…-------------…-i-i;.
---OFiiCECOUPUTING
AND ACCOUNTINC
MACHINERY 113.6
14.9
COMUUUICATION
EqUIPMENT
122.7 26.6
COMUNiCATIONS
i OFFICE
EQUIPMENT
118.2i
21.
--- PROJECTIMPORTSd/
80.0 0.0
ii7
158.2-- i-.16.4 ------164.1 56.7
--- …--
-
-
-
-
--------------------
…-
-
118.0
87.0
93.3
85.6
120.7
117.6
127.6
124.4
110.9
ii:
111.9-108.0
i-o.
161.3
126.6
158.6 41.2i110
-
1404
-…--~~~~~--
80.0
ALL MACHINERY
(BAS.#COUM.OFF..PROJ.)
92.2 28.8
-~~~~~~~~~~~~~~~~~~~~BATTERIES
146.0 0.0
ELECTRICAL
APPLIANCES
111.8 23.9
ELECTRONIC
EqUIPMENT
INCLUDING
T.V.
96.8 27.8
ELECTRICAL
APPLIANCES
A ELECTRONICS
106.1 28.5
…
93.1
82.4
88.8
74.8
100.0
92.9
75.0
94.8
93.3
0.0
80.0
109.6 43.9
------
206.7
165.6
129.4
144.6
-
-
-
14.0
66.9
36.2
47.9
----------------------
89.6
-
-
--
0.4
0.3
0.3
0.4
1.8
1.8
0.7
0.2
--5.4
29.9
41.8
86.8
62.6
0.0
0.e
102.4
104.1
101.4
62.9
67.8
--------
184.4
144.6
126.9
131.1
-
0.0
0.0
33.7
1.0
26.6
1.9
49.4
1.0
47.6
6.0
69.6
1.0
38.7
0.2
63.3--------------- 1.0
46.5
12.1
i6.i1
3- - -- ii1
- .
-7
-
----------
145.0
97.6
95.0
97.1
-
-
--------- …
19.7
25.2
59.6
62.1
-
-
-
E
H
W -__'T
0.0
33.1
24.6
48.9
40.1
60.5
28.3
60.6
40.4
80.0
--
-
COLLECTION
RATE
Protective
TotallUhT
rttv
_
A
27.8
80.5
71.8
63.0
.
0.6
0.6
i.4
.
7.9
21.3
-------
0.1
0.6
2.8
3.6
.
-
19
0.0
0.2
-----
0.3
0.4
0.9
1.6
o
PACE6
PAGEr
ePROTECTIVE
N;o.
Sector Hame
9l
92
93
94
95
96
SHIPSANDBOATS
RAIL EQUIPMENT
MOTOR
VEHICLES
MOTOR
CYCLES
ANDSCOOTERS
BICYCLES
ANDCYCLE-RICKSHAW
OTHER
TRANSPORT
EUIPUMENT
65
57
- - -- -
86.6
62.4
103.9
106.8
4.7
6.7
45.0
117.3
96.7
WATCHESAND CLOCKS
113.8
MISCELLANEOUS
MANUFACTURING
a/
109.8
FURNITIRE
ANDFIX1IURES
AND FIXTURES-WOODEN
14C.0
10M ANDWOODPROCUCTS
EXCEPT
FIMNITURE
106.2
PAPER,PAPER
PROOUCTS
ANDWN RINT
125.0
PRINTING.PUBLISHING
ANDALLIEDACTIVITIES 86.6
PUSTICPRODUCIs
144.1
-- --
- --
OTHERSo/
…------------------
Manufacturing:
:dj3
-
46.3
89.7
11.4
6.6
78.3
76.3
36.7
60.1
63.6
5s0
83.7
72.3
40.1
40.0
144.8
73.5
112.6
111.3
79.1
40.1
40.0
181.6
89.9
40.8
43.8
0.0
23.3
83.2
69.7
13.4
140.0
140.1
206.3
118.4
164.8
100.1
199.1
66.8
60.1
0.0
33.2
48.7
80.3
36.4
121.3
43.6
146.0
69.6
67.8
11.0
148.1
148.4
57.7
206.3
73.1
70.9
11.6
213.8
--
- --
-
-
_---- --
115.2 41.6
…
et/
tOtAL:
*dJuatedal
UnadJusted
-- -
TRADE-WEICHTED
TARIFF
Protective
Total
110.0
109.8
140.3
140.2
55.0
146.3
.e.7
60.5
oC.0 86.7
TRANSPORT
EQUIPMENT
97
98
60
61
62
TAdlIFF TOTALTARIFF
Std.D.v.
Mean Std.Dev.
Mean
-- -- --
-- --
147.4
-- -- --
--
-- - --
67.5
------------------------------------------------
-
--
-- --
-- --
63.2
-- --
68.6
26.8
33.9
68.1
0.0
0.0
51.9
0.6
0.4
0.9
0.3
0.0
0.0
2.2
0.1
0.4
2.3
0.4
0.3J
0.1
3.6
93.3
24.7
166.6
34.0
17.6
6.6
93.6
102.0
30.6
211.8
36.6
21.8
7.1
133.8
0.2
3.4
0.0
0.1
2.3
0.4
0.3
0.2
1.2
0.2
0.6
1.0
0.9
0.6
8e.0
-- --
-- --
14c.0
w.s
77.6
116.0 36.6
141.2
60.4
72.3
a
dxclulng
Chaprs
soualno
tz
Ie
ai;:rs
osfifn
*nd 99
i9 In whic
T0put
was 4xportel.
*e 90a in 1987/80.
loot
h
SHE
SHARE
hF TS WUT
84.6
38.0
78.9
37.2
0.0
0.0
69.7
-- --
-- --
26.0
…-------
a 119.6
Ust" ac.o
fl
-- --
COLLECTION
RATE
Protective
Total
-- --
- --
-
32.4
-
- -
- - - - - --
6.6
…------
94.0
56.5
4.7
-
60
71j)(le
b7l~~~~~~~~~~~~~I:
41:I (17644?
(194 00
49.6
66.7
100.0 100.0
54.7
61.9
(22728)
(104473
Imports
and custbmscollectlonn
did not match.amount*of custo
- 80 Table
B.3:
INDIA'S
1Sf/SO (s)
EXCISETAX STRUCTURE,
PAGE1
N_.
5"ctot~~~_
Sector
Nam..
__
RTATTUTR
E
Xi
T
EXbCfSAL8E
SeteL,sJCAIRTAEGii62TN
ExCI..TRATE
-__k__
____
UT
1
2
3
4
6
7
8
9
10
11
13
14
1S
1S
17
20
21
22
PADDY
WHEAT
JAWAR
5AJRA
MAIZE
GRAM
ANDPULSES
SUGARCANE
OROUNDNUT
JUTE
COTTON
COFFEE
RUBBER
COCONUT
TOBAtCO
OTHERCROPS
OTHERLIVESTOCK
PRODUCTS
ANDLOGGING
FORESTRY
FISHING
AGRICULTURE
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
7.0
0.0
0.0
16.0
10.3
0.0
0.9
0.0
6.6
0.0
1.4
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.7
0.0
0.0
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.3
0.0
0.0
152.1
15.2
0.0
13.3
12.0
9.8
0.0
11.2
0.4
0.1
0.1
0.1.
0.0
1.0
0.0
0.1
23
24
COALANDLIGNITE
GAS
CRUDE
PETROLEUM,
NATURAL
5.1
17.4
0.0
1.9
0.0
26.1
0.0
7.5
11.7
0.8
26.1
3.0
ENERGY
26
26
27
28
29
IRONORE
MANGANESE
ORE
BAUXITE
COPPERORE
OTHERMETALLICMINERALS
METALLICMINERALS
30
31
32
LIMESTONE
MICA
OTHERNON-METALLICMINERALS
NON-METALLICMINERALS
MINERALS
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.4
OA
0.0
0.0
0.0
0.1
0.0
1.3
2.8
7.5
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.6
0.0
1.4
4.8
0.0
0.0
2.1
1.0
0.0
0.0
18.3
.8
0.0
0.0
11.1
8.7
3.5
1.0
16.9
5.7
8.0
12.0
4.a
- 81
PACE2
SANo.
33
36
36
37
38
39
40
42
*3
44
46
46
47
48
49
64
56
Sectr Naome
SUGAR
HYDROGENATEDOIL (VANASPATI)
EDIBLE OILS OTHERTHAN VANASPATI
TEA ANDCOFFEEPROCESSING
MISCELLANEOUSFOOD PRODUCTS
BEVERAGES
TOBACCO
PRODUCTS
FOOD, BEVERAGE,TOBACCO
COTTON TEXTILES, KHADI
WOOLEN '.EXTILES
SILK TEXTILES
ART SILK, SYNTHETICFIBER TEXTILES
JUTE, HEMP, MESTA TEXTILES
CARPET WEAVING
READY-MADE
CARMENTS A TEXtILECOODS
MISCELLANEOUSTEXTILE PRODUCTS
TEXTILES
LEATHERFOOTWEAR
LEATHERA LEATHERPRODUCTS
EXCEPTFOOTWEAR
LEATHER
LEATHER AND TEXTILES
F6
So
69
60
61
62
63
64
6S
66
67
68
69
70
71
ECISYRAPE
RUBBERPRODUCTS
PETROLEUM PRODUCTS
COAL TAR PRODUCTS
PETROLEUM
AND COALPRODUCTS
INORGANICHEAVYCHEMICALS
ORGANICHEAVYCHEMICALS
FERTILIZERS
PESTICIDES
PAINTS, VARNISHESANDLACQUERS
DRUGSAND MEDICINES
SOAPS, COSMETICS,GLYCERINE
SYNTHETICFIBERS, RESIN
OTHERCHEMICALS
CHEMICALS
STRUCTURAL
CLAY PRODUCTS
CEMENT
OTHERNON-UETALLICMINERALSPRODUCTS
GEMS
NON-METALLICMINERALSPRODUCTS
-
SRbWliNT EXcikffifLiUT
_F_R_LI_TTUT/
4.8
1.6
4.7
4.1
10.3
3.9
0.2
4.0
18.0
13.7
6.4
5.6
55.3
28.3
2.6
72.4
7.7
9.6
28.2
7.6
0.9
4.6
70.7
7.4
10.0
61.7
34.3
22.3
9.3
9.0
200.3
33.2
e.8
7.9
0.0
17.5
11.5
27.3
1.6
0.0
0.0
12.6
0.4
0.5
6.9
14.F
0.0
103.7
32.3
19.1
21.8
4.2
0.0
12.1
1.3
2.5
0.6
0.0
0.6
0.6
13.0
9.1
0.3
4.1
1.7
28.2
16.1
14.F
28.3
6.8
9.1
0.0
1.4
0.7
0.0
202.2
202.2
0.0
0.7
0.4
0.1
3.9
28.6
13.5
23.4
20.5
16.0
21.9
24.8
16.6
8.6
16.7
70.1
43.8
19.8
47.8
35.4
37.8
2.6
84.9
14.0
15.1
0.0
14.3
18.6
10.5
44.9
21.8
10.1
6.6
0.1
1.7
3.6
0.0
11.4
23.8
16.8
6.2
23.1
0.6
12.5
13.8
11.1
8.8
6.6
9.6
16.9
36.0
12.4
16.9
80.8
40.2
0.7
19.8
57.9
0.4
67.0
66.1
s0.38.9
12.0
30.8
24.7
8.0
31.7
21.8
24.9
19.4
2C.3
82.2
162.8
86.4
21.9
16.7
20.7
76.0
asv
,
S,cto,r
72
73
74
75
78
77
Sector Name
- 82~
J11WRATE IR 9i
IRON, STEEL AND FERRO ALLOYS
IRON, STEEL CASTING AND FORGING
IRON AND STEEL FOUNDRIES
NON-FERROUSBASIC METALS (INCLUDINGALLOYS
METALS
HAND TOOLS, HARDWARE
MISCELLANEOUS
METALPRODUCTS
METAL PRODUCTS
YdPr
EXCbERU
T
8.0
12.0
6.1
11.4
8.0
2.4
0.1
14.7
6.8
44.7
10.4
23.9
12.1
6.3
1.3
61.6
66.8
16.0
16.6
16.3
4 4
2.9
3.2
14.4
10.6
11.4
30.0
27.7
28.4
78
79
80
91
83
84
86
89
TRACTORS AND OTHER AGRICULTURALIMPLEMENTS
INDUSTRIAL MACHINERY
FOR FOODAND TEX)ILES
INDUSTRIAL MACHINERY(EXCEPTFOODAND TEXT
MACHINETOOLS
OTHERNON-ELECTRICAL
MACHINERY
ELECTRICALINDUSTRIAL MACHINERY
ELECTRICALCABLES,WIRES
OTHERELECTRICALMACHINERY
BASIC MACHINERY
14.0
15.0
15.2
15.5
13.0
14.7
30.0
18.0
14.6
2.1
6.3
8.8
2.8
10.6
6.5
6.9
22.9
7.9
7.0
12.6
12.5
9.6
14.7
12.3
11.7
14.6
13.2
82
88
OFFICE COMPUTING AND ACCOUNTINGMACHINERY
COMMUNICATION
EQUIPMENT
COMMUNICATIONS
& OFFICE EQUIPMENT
PROJECTIMPORTS
19.2
16.1
17.7
17.2
4.0
4.7
17.7
14.9
16.3
ALL MACHINERY(BAS.*CODUM.OFF... PROJ.)
14.t
7.4
BATTERIES
ELECTRICALAPPLIANCES
ELECTRONIC EQUIPMENT INCLUDINGT.V.
ELECTRICALAPPLIANCES A ELECTRONICS
26.0
24.6
17.1
20.8
11.6
7.9
7.8
8.5
20.2
46.1
21.0
24.0
S7.2
17.6
87.3
86.4
12.8
14.3
21.8
13.0
0.0
ll.S
lC.l
21.3
5.1
7.4
11.5
2.6
l.6
0.1
12.4
16.8
13.9
10.7
6.9
C.8
0.1
172.2
31.2
63.5
107.2
37.6
27.5
67.8
6.8
14.2
23.3
7.6
16.9
6.9
22.7
0.9
1.4
2.6
4.3
6.3
0.0
4.7
1.5
9.1
16.9
19.1
10.8
7.6
22.4
69.4
14.9
16.6
22.4
61.3
0.5
21.1
14.1
2.9
11.5
25.4
14.6
7.0
21.0
33.3
13.5
4.6
21.0
21.3
86
87
90
91
92
93
94
95
96
97
98
60
81
62
63
57
SHIPS AND BOATS
RAIL EQUIPMENT
MOTOR VEHICLES
MOTORCYCLESANDSCOOTERS
BICYCLESAND CYCLE-RICKSHAw
OTHERTRANSPORT
EQUIPMENT
TRANSPORT
EQUIPMENT
WATCHES
AND CLOCKS
MrSCELLANEOUS
UANUFACTURrNG
FURNITUREAND FIXTURESAND FIxTURES-WOODEN
WOODAN& ,JOODPRODUCTS
EXCEPTFURNITURE
PAPER, PAPERPROOUCTS
ANDNEWSPRINT
PRINTINC, PUBLISHING ANDALLIED ACTrviTIEs
PLASTIC PRODUCTS
OTHERS
Manufacturing
TOTAL
29.7
49.7
68.4
27.6
72.2
44.3
69.3
167.7
69.6
97.6
27.0
30.7
13.4 66.7
Policy Research Working Paper Series
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