Import Impediments in India

During the upcoming visit of Indian Commerce Minister Anand Sharma to the USTR in March, a main topic of discussion will be bilateral trade facilitation between the U.S. and India. One area of improvement is India’s comparatively restrictive trade and regulatory environment. This year, the World Bank ranked India 133 (out of 183 economies) in terms of the ‘ease of doing business.’ Significant tariff and nontariff barriers impede imports of U.S. products and are a cause of great frustration to exporters.

On the tariff side, large disparities exist between bound and applied rates in India. According to the USTR’s 2009 National Trade Estimate Report on Foreign Trade Barriers, India’s bound tariffs on agricultural goods are among the highest worldwide, ranging from 100% to 300%. Indian applied tariffs are generally lower, but due to the high disparities between bound and applied rates, U.S. exporters face great uncertainty. India has the ability to raise its applied rate to bound rate levels in order to manage prices and supply.

On the nontariff side, significant barriers include quantitative restrictions, import licensing, mandatory testing and certification for a large number of products, as well as complicated and lengthy customs procedures. For example, foreign companies can receive immediate certification for imported products, as long as the Bureau of Indian Standards has first inspected and licensed the production plant. Many U.S. industries complain that these inspection and licensing costs are significantly high and restrict trade. Lengthy customs procedures are a result of extensive mandatory documentation, which leads to frequent processing delays.

Customs valuation is another issue that the U.S. would like to address. According to U.S. exporters, India’s valuation methodologies are not reflective of actual transaction values and lead to increased tariff rates. Lack of transparency and ineffective data management provide further irritation to exporters and trade organizations. India has historically failed to comply with standard transparency requirements, such as notification of new procedures to WTO Committees. Concerning data, India lacks a single data set for exports and imports, which leads to inaccessibility of records.

The number of U.S exports to India has increased within the last year, but further improvement will depend on Indian trade liberalization, which could move forward with the minister’s visit in March.