A Nation Of Shopkeepers

For an agreement that will have a serious impact on Indian industry, trade, agriculture and economy, the government’s deal with the World Trade Organisation (WTO) lifting quantitative restrictions (QRs) on the import of 1,429 items neither generated media attention nor political debate. The deal was negotiated between N.N. Khanna, special secretary, ministry of commerce, and Susan G. Esserman of the WTO on December 16 when Parliament was in session. But the Vajpayee government did not feel the need to take the House into confidence.

Indeed, Esserman’s letter to Khanna states that the "agreement between our two governments" will "come into force from December 28, 1999." This was four days after the conclusion of the winter session of Parliament. Though the deal had been formalised, the otherwise efficient commerce ministry saw no reason to issue a press statement. It took another 15 days for the news to filter out from Washington, courtesy a press statement from the WTO, that the trade agreement had been reached.

While bypassing the democratic process may be seen as a masterstroke of a pro-reforms government, the agreement is making sections of Indian industry see red. So much so that small-scale industries as well as middle-level businessmen have been scurrying to the Left parties for succour!

D. Raja, general secretary of the CPI, talks of how representatives of small-scale associations have been pleading their case with him. "The small-scale sector is already in a bad shape. After the WTO agreement, they and many Indian businessmen and farmers will be wiped out," he says.

The 1,429 items on which QRs have been lifted include basic agricultural produce like wheat, rice, maize and all other cereals and dairy products. Fresh vegetables like cauliflower and cucumber and common fruits figure in the list. So do coconut, coconut oil and other edible oils, fruit squashes, pickles and chutnies.

Earlier, the WTO and its impact were seen as a distant happening discussed only at anti-globalisation fora. Now, they have become a reality. Under the agreement, from April 1 this year, quantitative restrictions on 715 items on the list will have to be lifted. The deadline for lifting QRs on the other 714 items is April 1 next year. In effect, starting this year the 1,429 products, whose import were restricted to conserve foreign exchange and protect jobs and livelihood, will flood the Indian markets.

The haste with which the government has signed the agreement and agreed to its speedy implementation has come in for criticism from former finance minister P. Chidambaram, himself a champion of the free market. His objection: the European Union and other countries had agreed to a phasing out of import restrictions by March 2003. But the Indian government, bowing to pressure from the US, has advanced the lifting of QRs by three years.

The products/produce which will make it to the first list to be announced by April 1 this year remain a mystery. The commerce industry, according to sources, is working overtime to get a fix on the list. According to an official, the first list may not hit the farmers, but eventually, he points out, "Indian industry as well as the farming community will have to face the challenges. The smaller players will be simply squeezed out."

Despite the impact across a broad spectrum, the government has not initiated any discussion or prepared industry or the farming sector to face the change. While the richer farmers can sell their land and turn into traders, those with smaller holdings will succumb before an unchained import lobby, say critics of the WTO’s style of operations.

No sector seems to have been left untouched in the agreement. Candles, glue, shaving brushes, rubber, household furniture, sanitaryware, kitchenware, toilet paper, paints, distempers, letterpads, notebooks, leather goods, marble blocks, tin-plate containers, asbestos sheets, paints, brass and copper utensils, combs, ceramic ware, lpg cylinders, ceiling fans, inverters, hair-removing appliances, bulbs, jeeps, trucks, cars are on the list. Even brooms have not been spared.

While practically every industry will be affected, the textile industry as well as weaving and spinning cooperatives will face a stiff challenge should imports be given a free run. Close to 400 items listed in the agreement include woven fabrics, man-made fibres, readymade goods, knitted or crocheted fabrics, cotton fabrics, bedsheets and handkerchiefs. The labour-intensive spinning cooperatives in Tamil Nadu are already trying to gear up for the foreign competition. P.W.C. Davidar, state director of handloom and textiles, has initiated programmes to educate handloom weavers on how the market equations could change once the WTO factor comes into effect.

Even the automobile industry will have to face the influx of imported reconditioned second-hand cars. Union commerce minister Murasoli Maran has been assuring the automobile manufacturers that only five-year-old cars will be cleared for imports. But, this is the very condition imposed on India by the WTO. Incidentally, India’s appeal to the WTO’s appellate authority in October last year was dismissed and the country stands committed to allowing the second-hand imports.

In recent months, Maran has been talking about being severe on any dumping on the country. But WTO critics point out that the provisions on anti-dumping have become very complex. It is difficult for a developing country to monitor the production costs of a developed country. To source such information may not be easy and the developed country could exert pressure on the former not to pass any punitive strictures against its products.

The biggest fallout in India will be a drop in labour opportunities. Since the manufacture of many items on the QR list is the preserve of the small-scale sector, big Indian companies are not interested in them. So when the foreign companies move in, it is highly unlikely that the small-scale sector will have the marketing muscle to take them on. This would only lead to large-scale unemployment. Notes M.K. Pandhe, general secretary, citu: "The consequence of signing this agreement will be the collapse of the Indian industry. Thousands of people will be left jobless and the common people will have to pay the price."

Adds Madhusudhan Khambte, president of the Small Scale Industries Association of Maharashtra: "Imports should be in the hi-tech sector and not in consumer goods. As a result of the government’s policy, 40 per cent of ssis have already closed down. Now more units are likely to be affected. This is like an invitation to the East India Company to come in through the back door. Already, Indian manufacturers of hosiery are on the road. How many more have to be driven to such desperation before the government wakes up?"

One result of the agreement is that, with imported goods cheaper than its local equivalent, industrial houses would be forced to stop manufacturing them. For example, Bajaj Appliances no longer depends on the small-scale industry for the manufacture of its products. The company now imports finished products - Bajaj, the manufacturer, has become a sales and marketing outfit. In the days to come, many Indian companies would turn to trading, thus adding to the employment crisis. Supporters of the free-market economy, however, believe it is all for the country. They say there will be a flight of capital from developed countries to developing countries and that the consumer will be the final beneficiary of the increased competition.

Surprisingly, despite the signing of the agreement, there has been little political debate. The Left parties have made some noises and small and middle-level businessmen submitted memorandums. As for the Congress, it is yet to get a fix on the deal. The cwc will first decide on the stand to be taken on the secretive manner in which the agreement was signed. But the deed having been done, there seems very little the system can do to halt the influx of imports.