Implications of Recent Changes in Economy-Wide Industrial and Trade Policies on Small-Scale Industries in India

This paper provides an analysis of impact of select recent changes in the reservation and de-reservation policy, the Open General Licensing policy, and import tariff policy on small-scale industries (SSIs) in India. The analysis is carried out under the framework of India's commitment to agreements under the World Trade Organisation (WTO), and uses the Quick Results of the III All India Census of Small-Scale Industries in 2002-03. The paper finds: continuation of reservation policy for the SSIs is incompatible with the removal of quantitative restrictions (QRs) on imports under the WTO agreements; protection to the SSIs under import tariff policy has declined in recent years; the wedge between applied and bound import tariff is advantageous for India to maintain flexibility to use import tariff as an instrument for promotion of the SSIs, a proposal for complete reduction of import tariff by developed countries should not be accepted by India, as it would be hurtful to the competitiveness of the SSI sector; and the recent outcome of the Ministerial Meeting at Cancun has no remarkable implications for the SSI sector in India.