WTO Slams India's Trade Policy On Food Items.

NEW DELHI: The World Trade Organisation has slammed India for its protective trade policy on food items that prevents exports at a time when world is facing record food prices.

In its review of India's trade and economic policies, the WTO observed that India was one of the highest user of anti-dumping and a frequent user of safeguard measures against imports from other countries. "Trade policy seems to be lacking an overall thrust and is being conducted mostly on a sector or product basis," it said.

India uses trade policy to attain short-term goals such as containing inflation, although it aims to provide a stable trade policy environment to reach its long-term goals, the report said. This use of trade policy for shortterm non-trade-related objectives may detract from the stability sought, as it requires constant fine-tuning of policies to attain these short-term goals.

Focusing on two farm products, cotton and onions, the report highlighted how the government changed its policies frequently to meet its domestic needs, restricting, canalising, prohibiting and allowing free exports of the product within a short period.

"This has resulted sometimes in actions with an anti-export bias (such as setting minimum export prices or applying export taxes), in contrast with the asserted general goal of seeking export expansion," it said. The country also links the use of import restrictions and licensing, and other non-tariff measures, or NTMs, to domestic policies.

For example, NTMs are relaxed when imports are necessary to alleviate inflation or shortages. State trading is also used as a policy tool, to ensure, a "fair" return to farmers, food security, the supply of fertiliser to farmers, and the functioning of domestic support price systems, the report said.

Between January 2006 and December 2010, India initiated 209 anti-dumping investigations against 34 trading partners, compared with 176 reported in its last review. On December 31, 2010, 207 anti-dumping measures were in force, compared with 177 on June 30, 2006. Since its last review in 2007, India has also imposed several safeguard measures, the report notes.

On the positive side, India's average applied tariff rate declined to 12% in 2010-11, from 15.1% in 2006-07. Commenting on India's FDI policy, the report said that while the economy seems to be more open to FDI as a result of the recent policy changes, even where FDI is allowed up to 100% and under the automatic route, specific conditions or permits apply, which could in some cases be more restrictive than an explicit investment cap.

Source : economictimes.indiatimes.com