Selective protectionism for indigenous industries

The government has started the New Year with another does of selective protectionism. This trend, which started a couple of years back, is likely to continue and gain momentum.

One of the major pillars or principles of the General Agreement on Trade and Tariffs (GATT) under the auspices of the World Trade Organisation (WTO) was the abolition of quantitative restrictions.

Essentially, it meant doing away with tools as import licensing that would make it difficult for the foreign goods to enter the domestic markets. India did so in 2001 and incorporated internationally accepted nine principle of restriction in the Foreign Trade Policy in 2024.

In 2021, the government added eight more principle of restriction that included preventing sudden increases in imports from causing serious injury to domestic producers or to relieve producers who have suffered such injury. Since then, the quantitative restrictions by way of minimum import prices, registration of foreign suppliers, import licensing, import monitoring system etc. have grown.

The GATT envisaged that the WTO members would regulate their imports mainly through the instrument of tariffs and that the members can vary their customs duty rates only below a certain bound rate.

India had broadly simplified the customs tariff by imposing uniform rate for all items within a chapter and mostly, for non-agriculture items, imposing 5 percent duty on basic commodities, 7.5 percent on capital goods, chemicals etc. and 10 percent on other goods. However, in recent years, duty rates have been raised on quite a few items. The government had started phasing out certain exemptions from customs duties but has now slowed down that process.

The WTO allows imposition of antidumping duties, safeguard duties, and anti-subsidy countervailing duties after due process of investigation.

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