Economist’s Column SELF DESTROYING EXIM POLICY

Economist Column Self destructing EXIM policy

The exim policy was declared by the BJP led Central government on the last day of the last financial year. It is not necessary that an exim policy is to be announced in each year. The last policy was declared a few years ago. However, this year’s exim policy is of an additional importance as the WTO restrictions are now going to be applicable. The particular feature that is of immense significance is that of the decision to withdraw quantitative restrictions on 714 commodities from the first day of the current financial year. It is also to be noted that restrictions from a total of 1429 commodities would be removed by 2001. The restrictions on the rest 715 commodities would be removed in the next financial year. The history of the negotiations between USA and India is well known. India was to phase out quantitative restrictions within 2006 as reported by Indian government to Worlkd Trade Organisation. But US was impatient. It wanted to have the restrictions removed by 2001. WTO listened to US and India succumbed.

The argument that was shown during that time was that India has faviourable balance of payments position. So it would not hurt India if it goes in for a ‘slight’ trade liberalisation. Although the balance of payments position improved from 810 crores US dollars in 1998 to 750 crores of US dollars in 1999, but the matters were not as simple as the figures show. The current account deficit did not decrease. In fact the current account deficit increased from 310 crores US dollars to 350 crores US dollars within one year. Import of foreign capital and foreign direct investment was required to meet the external imbalance. So what was known as a favourable balance was indeed not a favourable one. BJP led Indian government then kept momb as they also wanted to reap popularity by putting or being able to put favourable of payments