VITC

Under the GATT, imports have to be controlled only through tariffs or customs duties and not through quantitative restrictions such as quotas, licences etc. All member countries have to abide by its provisions. There are, however, some exceptions to this rule. One such exception is that a country can take recourse to QRs on grounds of balance of payments (BOP) difficulties. It is under this exception that India has been maintaining QRs.

Till 1993, our BOP situation had been quite uneasy. Since 1994-95 there has been steady improvement in our foreign exchange (FE) reserves position:
(US$ billion)

Year ending on	Total FE reserves at the end of financial year	Total importsduring the year
31st March 1993	9.8	21.88
31st March 1994	19.3	23.31
31st March 1995	25.2	28.65
31st March 1996	21.7	36.68
31st March 1997	26.4	39.13
31st March 1998	29.4	41.48
31st March 1999	32.5	42.39
31st March 2000 (Provisional)	38.0	42.20

As may be seen, our foreign exchange reserves became quite healthy over the years when compared to our total imports. With the improvement in the balance of payments position, certain members of the WTO disputed-around 1995-our need or justification to continue Quantitative Restrictions for BOP reasons. India had no go but to agree to phase out QRs.

By 1997, India could negotiate with most of the trading partners, with the exception of USA, to arrive at a mutually agreeable solution for phasing out these QRs. Under the Agreements, the QRs were to be withdrawn over a six-year period ending 31st March 2003. USA, however, felt that the period was too long and filed a dispute against India in the WTO. The Dispute Settlement Panel of WTO which was constituted in November 1997 to adjudicate ruled against India. India filed an appeal before the Appellate Body of WTO against the findings of the Panel but the Appellate Body also upheld the findings of the Panel challenged by India. Consequently, we are now obliged to withdraw QRs. An agreement was signed between India and USA for determining the reasonable period of time, under which QRs on the remaining 1429 tariff lines were to be removed by 1st April, 2001, of which QRs on 714 were to be removed before 1st April, 2000.

Incidentally, out of the 136 members of the WTO, QRs are being maintained by only five countries other than India i.e. Tunisia, Nigeria, Pakistan, Bangladesh and Sri Lanka – and they are also in the process of phasing out the QRs. No other country maintains QRs except textile quotas which also have to be phased out by 1st January, 2005 under the Agreement on Textiles and Clothing.