| |
ECONOMY: IMPORTS
World In Your Store
Removal of quantitative restrictions on all imports
will transform the Indian market like never before
By Rohit
Saran, Malini Goyal And Arun Ram
Amma Naana Super Store, TTK Road, Chennai:
Heinz spaghetti with sausages in tomato sauce, 220 g for Rs 155;
H-Vollmilch low-fat milk with one-year shelf
life, 1 litre for Rs 66; Sugar-free chocolate biscuits, 184 g for Rs 98...
Rustom Stores, Colaba, Mumbai: Blue Bunny
ice cream, 1.5 litre for Rs 425; St Martin's iced tea, 240 ml for Rs 25;
Langnese honey, 500 g for Rs 165...
Steak House, Jor Bagh, Delhi: Lakeland mayonnaise,
450 g for Rs 98; Laughing Cow cheese, 180 g for Rs 45...
A sample of goodies
on the shelves of stores in the three metros on April 3, two days after
India abolished all quantitative restrictions (QRs) on imports. On payment
of customs duty, anybody can now import any amount of any product. A freedom
of economic choice that comes a full 54 years after the freedom of political
choice the country attained in 1947.
Unlike the political freedom though, the freedom
of economic choice has been given in instalments since the mid-1990s when
the government began freeing imports of consumer products. Of the 10,202
items on the government's list of tradeable products, all but 715 were
freed of QRs between 1996 and 2000. Any discerning shopper would have
noticed a steady appearance of foreign products-ranging from Danish biscuits
to Australian fruit juices-at grocery stores. But this final assault on
QRs is significant on two counts.
|
|
|
|
PROFUSION OF CHOICE: Shelves like these in a Chennai super store
are getting stacked with an array of foreign products
|
|
Symbolically, India can now claim to be an open
economy that does not ban import of any product. Till March 31, 2001,
India was one of the five countries that still imposed QRs on imports,
the other four being Bangladesh, Pakistan, Sri Lanka and Turkey. In practice,
it unleashes a change that is more visible than the impact of any other
economic reforms, including the industrial delicensing of 1991. Instead
of being restricted to some exotic food products in big cities, the imports
will now cover items of the common man's consumption and will be available
all over the country. Says Nikhil Asrani, director of Suresh Kumar &
Company, a Delhi-based importer: "With QRs finally gone, importers
will bring mass products to the market."
The availability of foreign wristwatches priced
at less than Rs 50 and calculators priced at less than Rs 100 explode
the myth that opening of imports help only the rich. "Open imports
will help all consumers, whether rich or poor," says Ila Patnaik,
senior economist at the Delhi-based NCAER. If prices of most food products
have so far been artificially high, it is because their supplies have
been random and arbitrary. With imports getting big and organised and
supplies becoming larger, prices will stabilise. Already, the Government
has directed that all pre-packaged products must carry the maximum retail
price (MRP) in Indian rupees. "A standard MRP will ease and stabilise
prices, boost sales and increase business," says V.R. Govindaswamy,
owner of the Chennai-based Amma Naana Super Store.
An unmixed blessing for consumers and traders,
open imports have aroused fears of unfair competition among some industry
segments. Textiles is one of them. Warns Arvind Poddar, president of the
Mumbai-based Federation of All India Textile Manufacturers Associations:
"Imports will mean the death of the indigenous textile industry."
The association estimates that imported textile could capture up to 10
per cent of the Indian market within a year. The others in panic are manufacturers
of toys, batteries, calculators and clocks.
Right now, such fears seem exaggerated if not
unfounded. Removing QRs from imports does not mean taking away all restrictions
on imports. Customs duty still has to be paid on all imports. Anticipating
the complete opening of imports, this year's budget had hiked customs
duties on food products, automobiles, textiles, meat and poultry products
and spices. In addition, Union Commerce and Industry Minister Murasoli
Maran has announced a series of safeguards to prevent any deluge of imports.
For instance, the import of used cars, which could have threatened the
domestic car industry, has been clamped with a host of restrictions, including
a total import duty (customs and countervailing duty) of 180 per cent
(see box). For an advance warning of an import surge, a "war room"
is being set up in the Commerce Ministry to monitor the imports of 300
sensitive items (mainly foodgrains, poultry, clothes and automobiles).
"There are adequate measures to enable Indian industry to manage
globalisation," says Arun Bharat Ram, president, Confederation of
Indian Industry.
Latest trade figures also bely the fear of an
import flood. Between April 2000 and January 2001, India's imports of
non-oil products fell by 7 per cent over the same period in the previous
year. In the financial year 1999-2000, when QRs were removed on over 1,400
products, non-oil imports rose by barely 2.5 per cent. But the biggest
buffer against an import surge is the increasing presence of multinational
brands in India. A decade-and-a-half ago the only way to own a foreign
brand in India was to import it. That's no more the case. Be it cosmetics,
food, beverages, appliances, clothing or automobile, every major international
brand is now manufactured and sold in India. That means even foreign companies
would prefer Indians to buy their made-in-India products. If Indian consumers
were to import those products, the investments these companies have made
in setting up manufacturing facilities in the country would suffer. The
hectic lobbying by foreign carmakers in India against the easy import
of cars-used as well as new-is a case in point.
The opening up of imports does provide MNCs
a significant edge over Indian companies. Now they can directly import
products or brands which they may not want to manufacture in India because
of the small market size and higher costs. "We will now be able to
bring top of the line products and do test marketing without investing
in tools and dies," says Rajeev Karwal, vice-president (marketing),
Philips India. India will be a part of the company's global launch of
the wall-hanging 32-inch plasma TV this year. At Rs 8 lakh per set, it
is a high-price low-volume product. India was left out of the global launch
of the 42-inch version of the plasma TV last year.
While they would expand choices for the rich,
open imports will also bring in some fundamental changes in the Indian
economy. A low inflation rate should be one such change. World over, countries
control inflation by allowing imports of products that are in short supply.
In India, the inflation rate of industrial products has never crossed
4 per cent in the past five years because the industry has been subjected
to price competition, both from Indian products and imports. A possible
flare-up in prices of edible oil was avoided by lowering customs duties
on its imports in the mid-1990s. However, given the current state of agriculture
in India and abnormally low prices of most agriculture commodities in
the global market, economists suggested extreme caution on imports of
foodgrains. Warns Patnaik: "Import of cheap foodgrains could hurt
the real income of farmers." For now, the Commerce Ministry has made
it compulsory to route all agriculture imports through state trading agencies.
That along with the presence of the "war room" should prevent
any sudden surge in imports.
Regular imports will also transform trading
and retailing into a big time business, generating employment and incomes.
Says C.S. Ravi, director, CII: "Trading in consumer goods, which
had been low-key and unorganised so far, will become lucrative and large."
The sheer explosion in the products and brands will boost the scale and
size of retailing.
What will make unrestricted imports inimical
for the domestic industry is the continuation of product reservation from
the small-scale industry (SSI). About 800 products are reserved for exclusive
production by the SSI. The import of all these products has now been opened.
This means SSI units will compete directly with large MNCs. There is no
guessing who will win. Today, if the Indian toy industry is on the verge
of extinction it is largely because toys are reserved for the SSI sector.
Once rid of such anomalies, free imports will
force both foreign and Indian companies to bridge the quality gap between
products sold in India and abroad. As K. Vaitheeswaran, vice-president
(marketing) of the Bangalore-based Fabmart, says, "A free market
helps the consumer. And anything that helps consumers eventually helps
the market." That's one mantra of globalisation that open imports
will force on the Indian market place.
-with Shuchi Sinha, Sandeep Unnithan and Stephen
David
|
|
METRO TODAY
Web
Exclusives