WTO Review of India's Trade Policy during period from 2007 to 2011: Highlights
THE Indian economy continued to expand at a fast pace during the review period, despite the mild slowdown caused by the global financial crisis in 2008/09. In the wake of the global financial crisis, growth was driven by government spending. In this respect, to face the financial crisis, the Government conducted a very proactive policy, introducing a large stimulus package consisting of increased spending, lower excise and customs duties, and subsidies.
India's process of fiscal consolidation, which began in 2004, has not resulted yet in the intended decrease in the fiscal deficit. More recently, the focus of fiscal policy has been shifted back to achieving fiscal consolidation and tax rationalization. As a result, a gradual reform of the tax structure was implemented, to reduce customs and excise duties and rely more on direct taxes, particularly corporate income tax and on service tax revenues.
However, indirect taxes, including taxes that fall solely or mainly on imports, continue to be an important source of revenue, and changes in their levels are a much used policy tool. For some time, India has intended to introduce a goods and services tax (GST) and consolidate several pieces of legislation regarding taxation. A new tax Code has been drafted to simplify the tax regime and increase reliance on direct rather than indirect taxes.
In general, the value of imports is based on the transaction value. A landing charge (for loading, unloading, and handling) of 1% is added to the c.i.f. value, to calculate the transaction value (earlier known as "assessable value"). India uses "tariff values"(reference prices), to calculate customs duty levied on imports of, inter alia , certain palm oils, as well as crude soybean oil, poppy seeds, and brass scrap. These "tariff values" must in principle be revised every two weeks and adjusted to align them with international market prices. In practice, however, some of the "tariff values" applied by India have remained unchanged since 2006.
India's WTO bound tariff levels are much higher than the applied rates, especially for many agricultural products. These gaps allow the Indian Government to modify tariff rates in response to domestic and international market conditions.
India is one of the most active users of anti-dumping measures among WTO Members. It initiated 209 anti-dumping investigations against 34 trading partners during the review period, compared with 176 in the period covered in its last Review, and it imposed 207 anti-dumping measures, compared with 177. The products involved included chemicals and products thereof, plastics and rubber and products thereof, base metals, and textiles and clothing. India did not take any countervailing actions during this period. Since its last Review in 2007, India has also imposed several safeguard measures. As a result of an amendment of the legislation, since 2010 safeguard measures may also take the form of quantitative restrictions.
Due to its strategic importance, India considers it necessary to maintain protection and offers this sector greater tariff protection than to others. Average tariff protection for agriculture (33.2%) remains, therefore, substantially higher than for manufactured goods (8.9%). India has also retained the price support system for basic commodities and implements other agricultural support programmes at the central and state level.
In general, India's tariffs are higher for processed goods than for semi-manufactures. In order to encourage investment in the manufacturing sector, India also offers a wide range of tax incentives, concessionary credit, and other types of assistance.