RESTRICTED 
WORLD TRADE WT/BOP/9 
BOP/328 
17 November 1995 
ORGANIZATION 
(95-3592) 
Committee on Balance-of-Payments Restrictions 
CONSULTATION WITH INDIA UNDER ARTICLE XVIII: 12 (b) 
OF THE GATT 1994 AND THE RELATED UNDERSTANDING 
Basic Document supplied by India 
SECTION I 
Macro economic trends in the Indian economy 
1. Faced with severe macro economic imbalances, Government initiated major structural reforms 
in trade, industry, financial and public sectors in July 1991 in order to improve efficiency and 
productivity of Indian industries and to impart dynamism to the overall growth process. Several macro 
stabilization policies like controlling inflation and money supply, reduction of fiscal deficit and 
strengthening balance of payments, were also initiated along with liberalization and deregulation of 
trade and related sectors. External Sector reforms and introduction of unified market determined 
exchange rate enhanced the competitiveness of Indian industry. Policies concerning foreign and domestic 
investments were also liberalized and industrial licensing abolished for a wide range of products. As 
a part of trade policy reforms, both tariffs and licensing restrictions were reduced significantly except 
for a few products which are important on considerations of health, security, safety and environment. 
Peak tariff levels were reduced from 355 per cent in 1991 to 50 per cent in 1995 and the negative list 
of imports was pruned successively. 
2. The remarkable progress made by the Indian Economy since the difficult days of the 1991 
economic crisis can be gauged by a few simple comparisons, The overall economic growth in terms 
of real GDP at factor cost improved from 0.9 per cent in 1991-92 to 4.3 per cent in each of the year 
1992-93, 1993-94 and further to 6.2 per cent in 1994-95 and is expected to be around 6 per cent in 
1995-96. Industrial production, which virtually stagnated in 1991-92 increased by 6 per cent in 1993-94 
and further to 8.4 per cent in 1994-95 and recorded a growth rate of 13.3 per cent in the first quarter 
of 1995-96. Foodgrains production which declined to 168 million tonnes in 1991-92 attained a record 
high of 192 million tonnes in 1994-95. The infrastructural sectors, namely, electricity, coal, steel, 
cement, crude oil and petroleum production with a weight of nearly 30 per cent in the industrial 
production recorded a growth rate of 5.2 per cent in 1993-94, 7.8 per cent in 1994-95 and further 
10.4 per cent in the first half of 1995-96. The additional employment generation which was only 3 
million in 1991-92 is estimated to have increased to about 6 million on an average during 1992-93 
and 1993-94 and further to 7.2 million in 1994-95. 
3. As far as the external sector is concerned, exports increased at the rate of 3.8 per cent in US 
$ terms in 1992- 93; 20 per cent in US $ terms in 1993-94 and 18.3 per cent in 1994-95. The rate 
of growth of imports was 12.7 per cent in 1992-93; 6.5 per cent in 1993-94 and 22.9 per cent in 
1994-95. With industrial recovery, imports are increasing at a faster rate than exports resulting in 
the continuance of an adverse balance of trade to the extent of US $ 3345 million in 1992-93; US $ 
1068 million in 1993-94 and US $ 2355 million in 1994-95. WT/BOP/9 
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4. The restoration of macro economic stability and revival of growth in output and employment 
are not free from threat. The Central Government fiscal deficit continues to be high and this is reflected 
in continuing inflationary pressures. The borrowing requirements of a high fiscal deficit are a source 
of pressure on interest rates and adversely affect availability of resources for productive investment, 
especially at a time when a strong industrial recovery has revived private sector demand for investable 
funds. Inadequate supply of quality infrastructure especially power is also an important constraint 
which could prevent the economy from achieving its full growth potential. The trade balance continues 
to be adverse and there is no clear and consistent trend towards a decline in its magnitude. The external 
environment is becoming increasingly competitive and protectionist tendencies can be discerned in 
the trade policies of major trading nations. Unless the external environment is favourable, the export 
growth could falter and thus bring the balance of payments under renewed stress. 
5. Hence the macro trends indicate a strong economic recovery since 1991-92, though medium-term 
prospects have to contend with weaknesses in infrastructure sectors, a continued relatively high fiscal 
deficit and a substantially adverse balance of trade. This indicates that macro-economic stability will 
require continuing vigilance and alertness. 
SECTION II 
Current Status of the Balance of Payments 
(a) Current Account 
6. During the year 1994-95, imports rose significantly to record a growth rate of 22.9 per cent 
in US $ terms as compared to 6.5 per cent in 1993-94. While imports of Petroleum, Oil and Lubricants 
(POL) benefited from an increase in indigenous production and by the softness in international crude 
oil prices which remained broadly at the level of the preceding year, the non-POL imports surged. 
The growth rate in non-POL imports at 28.4 percent in US $ terms reflected the strong revival of 
domestic industrial production activity and the export performance linked to imports. Imports of 
intermediate products rose sharply, in consonance with the expanding needs of the industrial sector 
which was recovering from a sluggish phase. The imports of consumption goods such as edible oils 
and pulses also rose as the demand outstripped supply. Imports of capital goods rose buoyantly 
highlighting the strong complementarity between the pattern of industrial recovery, investment and 
import demand. 
7. The large increase in imports was however not matched by the rate of growth in exports which 
declined to 18 per cent in 1994-95 compared to 20 per cent in 1993-94 in US $ terms. Manufactured 
goods as a group recorded an appreciable improvement in the share of total exports. Products which 
recorded the highest growth rates were electronic goods, textiles, yarn, fabrics, ready-made garments, 
marine products, chemicals and allied products and leather and manufactures. On the other hand, the 
growth of exports of engineering goods and gems and jewellery, two major items of India's exports, 
was modest, compared with the earlier periods. 
8. The performance of invisibles improved in 1994-95, following the introduction of a market 
determined exchange rate regime. For the second year in succession, during 1994-95, there was a 
larger inflow of remittances from Indians working abroad, triggered by a decline in transactions routed 
through unofficial channels. The incentives provided by the market determined exchange rate appear 
to have deterred diversion of remittances into illegal channels. This trend is evidenced by the stability 
in the market exchange rate. The performance of exports and invisible earnings enabled only a partial 
financing of the surge in imports. Hence the current account deficit widened from US $ 315 million WT/BOP/9 
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in 1993-94 to about US $ 2315 million in 1994-95. The year 1995-96 is expected to end with a current 
account deficit of about $ 5 billion. 
(b) Capital Account 
9. As in 1993-94, the capital account was dominated in 1994-95 by inflows of foreign investment, 
both direct and portfolio, which amounted to nearly US $ 5 billion. The long-term debt creating flows 
comprising external assistance, commercial borrowings, NRI deposits, IMF transactions and debt 
repayments to Russia taken together recorded a modest increase during the year. The annual increase 
in the stock of external debt outstanding declined from $7.9 billion in 1990-91 to $2.7 billion in 1993-94. 
The proportion of short-term debt in total external debt has come down from 10.2 per cent in 1990-91 
to less than 4 per cent in 1993- 94. However, external debt as a percentage of GDP is still high at 
34.1 per cent in 1994-95 compared to 37.0 per cent in 1993-94 and 37 per cent in 1992-93. The inflows 
of foreign investment and Non- Resident deposits have contributed to an accretion to reserves of the 
order of US $ 5.7 billion during 1994-95. At the end of the year, the RBI's foreign currency assets 
at US $20.8 billion stood cover for about 8 months of imports. India's current level of reserves at 
about 6 months of imports are high when compared to the past and to most developing countries, but 
must be viewed in the new market framework: IMF Article VIII status on current account convertibility 
along with virtually complete capital account convertibility for Non-Residents. In the context of new 
uncertainties created by capital account liberalization, these reserves cannot be considered as exceptionally 
high. 
10. Debt service payments which averaged about US $8.0 billion year in the last three years, rose 
to about US $11.0 billion in 1994-95. The debt service ratio is expected to increase marginally in 
1994-95 over 1993-94, but it is likely to show significant decline compared with the previous years. 
(c) Exchange rate of the Rupee 
11. The unification of the exchange rate and the removal of exchange restrictions on imports through 
the abolition of foreign exchange budgeting in the beginning of 1993-94 constituted the first major 
step toward current account convertibility. The Budget for 1994-95 indicated the next step in the 
direction and accordingly the Reserve Bank announced relaxations in payment restrictions in the case 
of a number of invisibles transactions. The final step towards current account convertibility was taken 
in August 1994 by further liberalization of invisibles payments and acceptance of the obligations under 
Article VIII of the IMF, under which, India is committed to forsake the use of exchange restrictions 
on current international transactions as an instrument in managing the balance of payments. 
12. The stability of the Rupee against the US dollar noticed since July 1993' at around Rs.31.37 
per US dollar continued throughout 1994-95. However, the nominal effective exchange rate of the 
Rupee depreciated somewhat in the first three quarters of 1994-95, as the dollar depreciated against 
major currencies. But with inflation in India being much higher than in the major industrial countries, 
the real effective exchange rate of the Rupee rose since the latter half of 1993 resulting in some erosion 
of India's export competitiveness. 
13. Since September 1995 there has been significant volatility in India's market-determined exchange 
rate and some depreciation in the nominal rate with respect to the US dollar. WT/BOP/9 
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SECTION III 
Balance of Payments Prospects 
14. As indicated in Section I of this paper, both macro economic stability and the external trade 
and payments situation in 1995-96 and beyond needs close monitoring. On the import front, while 
the POL imports have been moderate during 1993-94 and 1994-95, they are likely to be higher in 
1995-96 partly due to a rise in international oil prices and partly on account of the anticipated increase 
in POL consumption. The prospects for moderation in the oil import bill in the years to come, depend 
much on the international oil price movements and sustaining the improvement in domestic production 
witnessed in recent years. Non-POL imports during April-September, 1995 have recorded a growth 
rate of over 36 percent. The continued improvement in industrial production and the prospects for 
pick up in investment activities is likely to result in the growth of non-POL imports during 1995-96 
to be at least as high as in the preceding year. In the years to come, imports can be expected to record 
a growth rate which will be in alignment with the rate of expansion of the economy and show an 
increased degree of price sensitivity. If the rate of growth of imports (33 per cent in US $ terms) 
during April- September 1995 is any indication, imports in 1995-96 are likely to grow at a much higher 
rate than in 1994-95 and also compared with the growth of exports. This is likely to result in an increase 
in the deficit in the balance of trade. 
15. This underscores the need for sustaining the dynamic performance in exports of recent years 
in future. While the domestic policy environment is supportive, the external environment for our exports 
is still not very conducive, with major trading nations increasingly resorting to protectionist measures 
in the form of quota restrictions, anti dumping measures, labour standards criteria, environmental and 
human rights linkages and the threat of unilateral trade measures. 
16. As regards the capital account, gross disbursements of external assistance have remained sluggish 
in recent years and any augmentation in these flows would depend upon higher commitments of 
multilateral and bilateral concessional assistance to India as well as on progress in the decentralized 
approach which is currently being pursued in the utilisation of aid funds. The objective of prudent 
debt management demands limits on commercial borrowings. Amortization of commercial borrowings 
resorted to in the past would be sizeable in the next 4,5 years with a peak in 1996-97 on account of 
repayment of India Development Bonds. Repurchases from the IMF are expected to peak in 1995-96 
and decline thereafter. 
17. Inflows of foreign direct investment are likely to rise mainly due to the fructification of proposals 
for direct investments that are currently under consideration. Other investment (portfolio) flows may 
become increasingly responsive to market conditions in India and abroad, the flexibility and resilience 
of the domestic financial sector in contending with these flows and perceptions regarding macro-economic 
fundamentals. 
18. The above analysis leads to the conclusion that the balance of payments situation although 
comfortable at present need not necessarily remain so in the next 2-3 years. As indicated above, exports, 
to a large extent, hold the key to the viability of the balance of payments in the coming years. With 
the external environment facing India's exports being not conducive and imports growing at a rate 
faster than exports, the adverse trade balance is likely to continue in the near future. Until the balance 
of trade shows sustained improvement, net invisible flows attain sustained and significant positive 
balance and net private capital flows achieve a path of sustained growth, it cannot be said that there 
is a structural transformation of India's balance of payments. In the present situation, it is important WT/BOP/9 
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that we are allowed to continue with the liberalization and structural reforms policies at a pace and 
sequence suited to Indian conditions, at this stage. 
19. Dispensing with the balance of payments cover at this stage therefore appears to be premature 
and could prove to be counterproductive for the process of liberalization. 
SECTION IV 
India's foreign trade regime 
(a) Legal and Administrative basis of the import restrictions 
20. The erstwhile Imports and Exports (Control) Act, 1947 has been replaced by a new act called 
the Foreign Trade (Development and Regulation) Act, 1992. This Act empowers the Central Government 
to prohibit, restrict, or otherwise control imports. In exercise of the powers conferred by this Act, 
import licenses and customs clearance permits, wherever necessary, will be issued by the Office of 
the Director-General of Foreign Trade (DGFT), New Delhi and its regional offices in India. Import 
of gold, silver, currency and currency notes, bank notes and coins is controlled by the Reserve Bank 
of India, under the Foreign Exchange Regulations Act. 
21. The Foreign Trade (Exemption from Application of Rules in certain cases) Order 1993, inter alia, 
specifies the nature of import transactions not covered by import licenses. 
22. Imports and exports are regulated through the Import and Export Policy revised by the 
Government in March every year. 
23. Since 1992, the Government announced an Import and Export Policy for a five year period 
with the objective of providing a stable regime of economic policies, which would minimise year to 
year uncertainties in major policies and help industry to plan their economic activities in a longer term 
perspective. In March, 1992 the Import Export Policy for 1992-97 was announced. Amendment to 
the Policy, where necessary, is notified by means of Public Notices by the DGFT from time to time. 
24. The policy and procedures governing import of various items are laid down in the Export-Import 
Policy Book which is valid for a specified period. The Handbook of Import-Export Procedures is also 
published as a supplement to the Ex-Im Policy. As stated above, the current Export and Import Policy 
and Handbook of Procedures are valid for a period of five years, i.e., upto 31 March 1997. 
(b) Methods used for restricting Imports 
25. One of the main objectives of the Ex-Im policy of the Government of India since 1991 has 
been to phase out quantitative restrictions in the form of licensing and other discretionary controls 
regulating India's foreign trade. 
26. According to the Export and Import Policy for 1992-97, all capital goods, raw materials, 
intermediates, components, consumables, spares, parts, accessories, components and other goods may 
be imported without any restriction except to the extent that such imports are regulated by the Negative 
List of Imports or any other provisions of the policy or any other law in force. The Negative List 
of Imports consists of prohibited items, restricted items and canalized items. Import of prohibited 
items contained in the Negative List of Imports is not allowed under any circumstances, whereas the 
canalized items can be generally imported through the designated canalizing agencies. Imports of WT/BOP/9 
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canalized items may also be permitted against a licence granted by the Director-General of Foreign 
Trade. As regards restricted items, imports may only be allowed against specific import licences or 
in accordance with a Public Notice issued for the purpose. Second-hand capital goods may also be 
imported without a licence by actual users with effect from 30 March 1994. 
27. Almost all of India's trading partners receive MFN treatment in the issue of import licences. 
The exceptions to this are Iraq, Fiji and Yugoslavia (Serbia and Montenegro) on account of U.N. 
sanctions in case of Iraq and Yugoslavia. In these cases import licences cannot be issued or licences 
can only be issued againsttied aid and foreign credits and under rupee payment area which are available 
only for imports from specified countries. 
28. The restrictions on the import of Negative List items are on grounds of health, safety, security 
and environmental protection policies and agreements. In respect of certain items, the conditions for 
import have been specified in a general way in Public Notices issued for this purpose and the need 
for licensing in individual cases has been eliminated. 
29. Imports into India are not restricted through maintenance of quotas. The instrument used for 
restricting imports is import licensing. 
30. Quantitative restrictions on imports of most Intermediate inputs and capital goods have been 
eliminated. Import restrictions apply only to a negative list and products not on the negative list are 
freely importable at Market exchange rate. In keeping with the needs of the economy and the emerging 
trade balance, the negative list is also being successively pruned. In July 1991 out of 5021 H.S. tariff 
lines (6 digit), 80 per cent i.e., 4000 lines were subject to import licensing restraints. As a result of 
regular pruning of negative list more than 3000 Tariff lines covering raw materials, Intermediates and 
capital goods are free of import licensing requirements. 
31. The Negative List of Imports now comprises three prohibited items, 62 restricted items including 
specified consumer goods and seven canalized items. 
32. The three prohibited items are tallow, fat and/or oils of animal origin, animal rennet, and wild 
animals including their parts and products of ivory. 
33. The list of restricted items under the Negative List includes specified consumer goods precious, 
semi- precious and other stones; insecticides and pesticides; electronic items; drugs, pharmaceuticals, 
chemicals and allied items; hazardous wastes and hazardous chemicals; items relating to the small-scale 
sector; certain miscellaneous items; and special items required for hotels, the tourism industry and 
sports bodies. 
34. The list of canalized items includes some petroleum products, fertilizers, specified edible and 
non- edible oils, seeds and cereals. 
35. Import of restricted items covered by the Negative List may be made against a licence or in 
accordance with Public Notices issued for this purpose. In the case of import of ships, trawlers and 
boats, aircraft and helicopters, automobiles and newsprint, no licence is required but imports are allowed 
subject to published conditions. Import of second-hand goods and machinery is also permitted freely 
by actual users. 
30. Freely Tradeable Special Import Licences Imports of 75 specified restricted items (including 
certain consumer goods) is, however, permitted freely against freely transferable Special Import Licences WT/BOP/9 
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granted to Export Houses, Trading Houses, Star Trading Houses or Super-Star Trading Houses, exporters 
of electronic goods an d deemed exporters and manufacturers who have acquired prescribed quality 
certification on the basis of their foreign exchange earnings. One-time facility for import of cars is 
available to Export Houses, Trading Houses, Star Trading Houses or Super-Star Trading Houses against 
their own Special Import Licence. Government have recently issued a public notice correlating the 
Import licensing requirements to the 8 digit H.S. classification. There are in all 11,587 lines covered 
under the classification out of which 6463 lines are in the freely importable list and 1487 lines are 
importable under the freely tradeable Special Import Licences. It is Government's intention to gradually 
expand the list of items under the freely importable and SIL tariff lines. 
37. Imports for Export Production For import of items required for export production, exporters 
are issued duty- free import licences for import of items including those under negative list under the 
Duty Exemption Scheme. Capital Goods which are otherwise freely importable can, under the Export 
Promotion Capital Goods (EPCG) Scheme, be imported at a concessional rate of customs duty/zero 
custom duty subject to an export obligation to be fulfilled over a period of time. These licences in 
fact provide easier access to imported goods at concessional terms for export production, thereby 
amounting to relaxation of the existing import controls in case of export production and compensating 
the exporters for the disadvantages of import restrictions. 
38. Duty Exemption Scheme;- Under this scheme, exporters can import duty free imported inputs 
which go into export products without resorting to the mechanism of claiming duty draw back at a 
later stage. This scheme, has been recently modified and enlarged. The modified Duty Exemption 
Scheme now covers the following categories of licences: 
(i) Advance Licence: 
(a) Value-Based Advance Licence; 
(b) Quantity-Based Advance Licence; 
(ii) Pass Book Scheme; 
(iii) Advance Intermediate Licence/Value-Based advance intermediate Licence; and 
(iv) Special Imprest Licence. 
39. The basis and conditions for issue of these types of licences vary. Hence licences issued under 
one category cannot be combined with those issued under another category.Duty free licences bear 
a suitable export obligation for the purpose of achieving the objective of the scheme. The purposes 
and scope of the categories of licences mentioned above are as follows: 
(i) Advance Licences 
40. An advance Licence is granted for the duty free import of inputs given the fulfilment of a 
specified time- bound export obligation and value addition. Advance Licences may either be value 
based or quantity based. WT/BOP/9 
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(a) Value-Based Advance Licences 
41. Under a value-based advance licence, any of the inputs specified in the licence may be imported 
within the total c.i.f. value indicated for those inputs, except for notified sensitive items. The sensitive 
items may be imported only to the extent of the quantity or value specified in the licence. 
(b) Quantity-Based Advance Licences 
42. The quantity-b*ased advance licence will indicate the names and description of items to be 
imported and exported, the quantity of each item of import or in case where the quantity cannot be 
indicated the value of the items, the c.i.f. value of imports and quantity and f.o.b. value of exports. 
The quantity of each item of import shall be allowed in accordance with the standard input-output norms 
as mentioned above based on the quantity of goods to be exported. In respect of items for which no 
norms exist in the statement of standard input-output norms, the quantitative norms may be approved 
by the competent authority. These licences are transferable subject to laid down conditions. 
(ii) Passbook Scheme 
43. It is a new scheme which has been introduced w.e.f. 1st April, 1995. Manufacturer Exporters 
and Export Houses/Trading Houses/Star Trading Houses/Super-Star Trading Houses are eligible to 
make applications under this Scheme to the designated authorities in each of the Customs Houses at 
Delhi, Bombay, Calcutta and Madras. The scheme applies to the export products for which standard 
input- output norms have been published. On export of goods, the Pass Book holders become eligible 
for credit equivalent to the basic duty payable on the inputs used for the manufacture of the relevant 
export product. The Pass Book is valid for 2 years and the credit available therein can be used for 
a period of 3 years for the payment of Customs duty on import of permissible items. 
(iii) Advance Intermediate Licence 
44. Such licences are quantity based and are issued to registered manufacturer exporters for import 
of basic inputs for manufacture and supply of intermediate products under a tie-up arrangement, to 
another manufacturer-exporter, called the ultimate exporter, holding the Advance Licence, for further 
processing into the final product for export. The objective of the scheme is to integrate the production 
activities of the two indigenous manufacturers, with the optimum utilization of the indigenous 
infrastructure to achieve a higher value addition. Imports are allowed in accordance with the standard 
input-output norms as mentioned above. 
(iv) Special Imprest Licence 
45. The Special Imprest Licence is granted for duty free import of necessary inputs to 
main/sub-contractor for the manufacture and supply of products to projects financed by multilateral 
or bilateral agencies/ Funds as notified by Department of EA, EOU/EPZ Unite Electronic Hardware 
Technology Parks (EHTPs), fertilizer plants, any project notified by the Ministry of Finance, Department 
of Economic Affairs and also to such projects in the power, oil and 
gas Sector to which the benefit is extended by Ministry of Finance. The Special Imprest Licence is 
a quantity based licence. WT/BOP/9 
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(v) Value Based Intermediate Licences 
46. Steel producers supplying steel to the exporters of Engineering goods under the Engineering 
Products Export (Replenishment of Iron and Steel Intermediate) Scheme are eligible to make applications 
for these licences. Applications can be made both on production programme basis in anticipation of 
the supply orders as well as after making the supplies, on the strength of Release Advices. After the 
supplies have been completed and the DEEC Book redeemed, the licences or the material imported 
thereunder can be transferred among the producers of Iron and Steel Intermediates. 
47. A duty-free licence holder (including a transferee) may, instead of making imports also procure 
the raw materials etc., from indigenous sources through Advance Release Order/Back to back inland 
letter of credit. The ARO is issued against quantity-based licences as well as value- based advance 
licences where the quantity of the item has been specified. 
48. Export Promotion Capital Goods (EPCG) Scheme:- Under the EPCG Scheme, capital goods 
which are otherwise freely importable may be imported at a concessional rate of customs duty of 
15 per cent or the same may be sourced from the domestic manufacturers subject to an export obligation 
of four times the c.i.f. value of imports. The domestic manufacturers, permitted to supply the capital 
goods under this scheme to an EPCG licence holder, can also import the requisite components at a 
concessional rate of customs duty of 15 per cent. Besides, the scheme is also available to the service 
providers for rendering services for which the payments are received in freely convertible currency. 
On 1.5.95, in addition to the import at a concessional customs duty of 15 per cent, another window 
for the import of capital goods at zero duty, against an obligation of 6 times the value of imports on 
F.O.B. basis or 4 times the value of imports on N.F.E. basis to be discharged in a period of 8 years, 
has been opened. 
49. The exporters of specified gems and jewellery products are eligible for grant of replenishment 
licences at the rate and for the items mentioned in the Export and Import Policy to import and replenish 
their inputs. Such licences are transferable. 
50. Export Houses/ Trading Houses/ Star Trading Houses/ Super-Star Trading Houses (defined 
as those companies and exports of which have averaged Re 10, 50, 250 and 750 crores or net foreign 
exchange earnings of Re 6, 30, 125 and 400 crores in the preceding three years and have been Re 15, 
75, 300 and 1,000 crores or net foreign exchange earnings of Re 12, 60, 150 and 600 crores in the 
previous year) are entitled to Special Import Licences at 4,5,6 and 11 per cent of the f.o.b. value of 
exports made or at 6,8.5,11 and 16 per cent of net foreign exchange earnings on exports in the preceding 
licensing year. 1 per cent extra SIL is also permitted to exporters of SSI, Handloom and Handicraft 
products including hand knotted carpets, silk products and sports goods provided the export of these 
products is more than 50 per cent of their total export. 
51. The import of items appearing in the restricted list of Imports under the Negative List (other 
than those imports which are prohibited or canalized) may be allowed against Specific Import Licences 
or in accordance with the Public Notices issued for this purpose. Such items are subject to Actual 
User Conditions unless this condition is dispensed with in particular cases. 
52. Actual User Condition :- Capital goods, raw materials, intermediates, components, consumables, 
spares, parts, accessories, instruments and other goods, which are importable without any restriction, 
may be imported by any person whether he is an Actual User or not. However, if such imports require 
a licence, the Actual User alone can import such goods unless the Actual User Condition is specifically 
dispensed with by a licensing authority. WT/BOP/9 
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53. The time-limit for processing various types of applications varies and it may be between two 
and 30 days. 
54. Import licences, wherever required, are issued with a specified period of validity for shipment 
of goods. It is up to the importer to import goods any time during the validity period of the import 
licence. Generally, the goods should be shipped from the exporting country, only after the import 
licence is issued, and licences cannot ordinarily be granted for the goods which have already arrived 
at the port. 
55. Import applications are submitted to the Office of the Director General of Foreign Trade, 
New Delhi or its regional offices, as the case may be. The practice of routing licence applications 
through the sponsoring authorities has been dispensed with. 
56. Applications for import licences are to be submitted by 28 February of the licensing year ending 
on 31 March unless otherwise specified. 
57. The licensing authority may refuse to grant an import licence 
i) if the applicant has contravened any law relating to customs or foreign 
exchange; 
ii) if it has been decided by the Central Government to canalize imports and 
distribution thereof through special or specialized agencies; 
iii) if any action against the applicant is pending under the Foreign Trade 
(Development and Regulation) Act, 1992, or rules and orders made thereunder; 
iv) if he applicant fails to pay any penalty imposed on him under the said Act; 
v) if the applicant is not eligible for a licence in accordance with any provisions 
of the Export and Import Policy; and 
vi) if no foreign exchange is available for the purpose. 
The reasons for refusal are generally given to the applicant. 
(c) Treatment of imports from different sources including information on the use of bilateral 
agreements: 
58. Licences for imports are valid for import from any country having trade relations with India. 
The restrictions if any are applied on a non-discriminatory basis. At present India does not have trade 
relations with Fiji, Iraq and Yugoslavia (Serbia and Montenegro). The Government of India has signed 
trade agreements with a number of foreign countries. These are generally MFN type agreements. 
These agreements do not involve specific commitments on import of any goods, nor do they limit the 
imports either in terms of items or value. The Government of India does not direct the importers to 
buy from any particular source. 
59. With certain countries, India had concluded special payments and trade arrangements which 
provided for payments for all commercial and non-commercial transactions in non-convertible Indian WT/BOP/9 
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rupees through a central clearing account. These arrangements have now been replaced by hard currency 
arrangements except in a few cases (Russia, Romania, Czech Republic, Slovak Republic) in which 
India has entered into arrangements for the liquidation of Rupee balances through the export of goods 
from India to these countries against these balances held by them. 
(d) State trading 
60. Import of certain essential items like cereals, edible oils, fertilizers and petroleum products, 
are canalized through public sector agencies and as the State Trading Corporation, Minerals and Metals 
Trading Corporation etc. The concerned agencies import these commodities on the basis of the foreign 
exchange made available in their favour for this purpose. The policy for canalization of certain items 
through the designated public sector agencies has been evolved with a view to effecting economical 
imports for the actual users, particularly small users, by securing the most favourable terms of payments 
and trade. Purchases by the public sector agencies are guided by the normal commercial considerations 
and are entirely non-discriminatory in nature. 
61. Government's policy is to progressively move away from canalization. Hence at present there 
are only 7 canalized items. 
(e) Changes in import policy since 1992 and the General policy in the use of restrictions for 
BOP reasons 
62. The policy changes now being implemented imply a substantial reduction in the extent of licensing 
and in the number and types of licences. In 1991 imports were regulated by means of a positive list 
of freely importable items. Such items were, on what was called the Open General Licence or OGL. 
From 1992, however, imports are regulated by means of a limited negative list. This is a major change 
in policy towards relaxation of import controls. The number of items in the restricted list of imports 
is now 62. The number of canalized items has also come down substantially to 7 in 1995. 
63. The Negative List of Imports has thus been considerably pruned since 1991. It now contains 
only 3 prohibited items, 62 restricted items, and 7 canalized items. Even among the restricted items, 
many are importable without a licence but in accordance with certain conditions. The number of items 
importable against Special Import Licences has also been increased to "5 supplemented by 313 textiles 
items. Most restrictions are on grounds of security, health or the environment and very few now on 
grounds of BOP. 
64. With these changes, raw materials, intermediates and capital goods have been made freely 
importable. Some raw materials continue to be canalized but in most of these cases, requirements 
beyond those provided by the canalizing agency can be made through licences. Testing and repairs 
of capital goods has been made easy. Capital goods may now be sent abroad for repairs, testing, quality 
improvement or upgradation of technology without a licence. 
65. Many goods of mass consumption have been made freely importable. 
66. Electronic Data Interchange (EDI) is being progressively introduced to substantially reduce 
the time taken for processing applications and issuing licences. 
67. Procedures have been further simplified so that they are easy to understand and administer. WT/BOP/9 
BOP/328 
Page 12 
68. The import licensing requirements listed in the Exim policy (1992-97) have been correlated 
to H.S. classification of products. This would provide clarity and greater simplicity to the import process 
and also remove an element of uncertainty and discretion in the import regime. 
69. It is the policy of the Government to move to a situation where imports of essential raw materials 
and components needed for industrial production are entirely regulated through appropriate tariffs. 
As regards consumer goods, the broad approach is to first allow relaxations in a phased manner through 
the mechanism of freely tradeable SILs and subsequently transfer them to a purely tariff based regime. 
Canalization of inputs which has already been significantly reduced is proposed to be further reduced 
progressively. However, in view of the uncertainty in the Balance of Payments position arising from 
domestic liberalization and the external fluctuations, containment of import growth within prudent limits 
will be necessary and phasing out of the negative list of imports will have to be done in a carefully 
phased and socio-politically sustainable manner. WT/BOP/9 
BOP/328 
Page 13 
ANNEX I 
INDIA'S FOREIGN TRADE, 1980-94 
(US $ Million) 
YEAR 
1980-81 
1981-82 
1982-83 
1983-84 
1984-85 
1985-86 
1986-87 
1987-88 
1988-89 
1989-90 
1990-91 
1991-92 
1992-93 
1993-94 
1994-95 
; Apr-Aug(P) 1995-
96 
Apr-Aug(P) 
1994-95 EXPORT 
8485 
8703 
9107 
9450 
9878 
8905 
9745 
12089 
13970 
16626 
18143 
17865 
18537 
22238 
26299 
12302 
9613 %CHANGE 
7.9 
2.6 
4.6 
3.8 
4.5 
-9.9 
9.4 
24.1 
15.6 
19.0 
9.1 
-1.5 
3.8 
20.0 
18.3 
28.0 
10.6 IMPORTS 
15869 
15172 
14787 
15310 
14412 
16067 
15727 
17156 
19497 
21272 
24073 
19411 
21882 
23306 
28654 
14278 
10412 %CHANGE 
41.6 
-4.4 
-2.5 
3.5 
-5.9 
11.5 
-2.1 
9.1 
13.6 
9.1 
13.2 
-19.4 
12.7 
6.5 
22.9 
37.1 
16.4 B.O.T 
-7381 
-6469 
-5680 
-5860 
-4534 
-7162 
-5982 
-5067 
-5527 
-4643 
-5930 
-1546 
-3345 
-1068 
-2355 
-1976 
-799 
P:Provisional WT/BOP/9 
BOP/328 
Page 14 
ANNEX II 
INDIA'S FOREIGN EXCHANGE RESERVES 
(Rs. Crores) 
At the end of 
1985-86 
1986-87 
1987-88 
1988-89 
1989-90 
1990-91 
1991-92 
1992-93 
1993-94 
JUNE 
SEPTEMBER 
DECEMBER 
MARCH 
1994-95 
APRIL 
MAY 
JUNE 
JULY 
AUGUST 
SEPTEMBER 
OCTOBER(P) 
NOVEMBER(P) 
DECEMBER(P) SDRs 
Million 
of SDRs 
115 
139 
70 
80 
82 
76 
66 
12 
77 
133 
43 
73 
77 Rupees Crore 
161 
232 
125 
161 
184 
200 
233 
55 
339 
586 
192 
314 
339 Gold 
274 
274 
274 
274 
281 
6828 
9039 
10549 
12794 
11946 
11520 
12373 
12794 
35 
31 
31 
44 
2 
2 
47 
1 
1 156 
138 
141 
199 
8 
8 
218 
7 
7 12616 
12682 
12839 
12851 
12664 
13028 
13011 
12814 
12665 Foreign Currency 
Assets 
7384 
7645 
7287 
6605 
5787 
4388 
14578 
20141 
47287 
20483 
23869 
30747 
42287 
47284 
48548 
51429 
55045 
55430 
59002 
62191 
61198 
60841 Total 
7819 
8151 
7686 
7040 
6252 
11416 
23850 
30745 
60420 
33016 
35580 
43434 
60420 
60056 
61368 
64409 
68095 
68102 
72098 
75420 
74018 
73512 
P: Provisional WT/BOP/9 
BOP/328 
Page 15 
ANNEX m 
INDIA'S FOREIGN EXCHANGE RESERVES 
(US$ million) 
At the end of 
1991-92 
1992-93 
1993-94 
June 
September 
December 
March 
1994-95 
April 
May 
June 
July 
August 
September 
October (P) 
November (P) 
December (P) SDRs 
Million 
of SDRs 
66 
12 
77 
133 
43 
73 
77 US$ Million 
94.52 
18.99 
108.09 
186.98 
61.22 
100.12 
108.09 Gold 
3,666.93 
3642.61 
4,079.71 
3,811.74 
3,673.46 
3,946.47 
4,075.72 Foreign Currency 
Assets 
5,913.99 
6,954.76 
15,078.76 
6,535.73 
7,611.28 
9,804.52 
15,078.76 Total 
9,675.44 
10,616.36 
19,266.56 
10,534.45 
11,345.96 
13,850.11 
19,266.56 
35 
31 
31 
44 
2 
2 
47 
1 
1 49.72 
43.99 
44.94 
63.43 
2.55 
2.55 
69.49 
2.23 
2.23 4,021.67 
4,042.71 
4,093.76 
4,096.58 
4,036.97 
4,153.01 
4,147.59 
4,084.79 
4,037.29 15,072.99 
15,475.93 
16,394.32 
17,547.01 
17,669.74 
18,808.41 
19,824.99 
19,508.44 
19,394.64 19,144.38 
19,562.63 
20,532.02 
21,707.02 
21,709.26 
22,963.97 
24,042.07 
23,595.46 
23,434.16 
P: Provisional WT/BOP/9 
BOP/328 
Page 16 
ANNEX IV 
INDIA'S OVERALL BALANCE OF PAYMENTS 
Item 
1 
A. Current Account 
1. Exports, f.o.b. 
2. Imports, c.i.f. 
3. Trade Balance 
4. Invisibles, net 
a) Non factor services 
b) Investment Income 
c) Private Transfers 
d) Official Transfers 
5. Current Account Balance 
B. Capital Account 
1. External Assistance, net 
a) Disbursements 
b) Amortisation 
2. Commercial Borrowings,net ** 
a) Disbursements 
b) Amortisation 
3. Short term credit, net 
4. NRI Deposits, net 
5. Foreign Investment 
6. Rupee Debt Service 
7. Other Capital.net @ 
8. Total Capital Account 
C. Overall Balance[A(5)+B(8)] 
D. Monetary Movements [E+F + G] 
E. IMF, Net 
F. SDR Allocation 
G. Reserves and Monetary Gold 
(Increase-, Decrease+ ) Rupees crore 
Quick Estimates 
1994-95 
2 1993-94 
3 Preliminary Actuals 
1992-93 
4 1991-92 
5 1990-91 
6 US dollar million 
Quick Estimate 
1994-95 
7 1993-94 
8 Preliminary Actuals 
1992-93 
9 1991-92 
10 1990-91 
11 
84032 
96422 
-12390 
5853 
-1551 
-13288 
19467 
1225 
-6537 71210 
75241 
-4031 
3043 
2437 
-12554 
11999 
1161 
-988 54762 
68863 
-14101 
1337 
2698 
-10503 
8089 
1053 
-12764 44922 
51417 
-6495 
4258 
3134 
-9397 
9381 
1140 
-2237 33153 
50086 
-16933 
-435 
1758 
-6732 
3711 
828 
-17368 26763 
30709 
-3946 
1864 
^94 
-4232 
6200 
390 
-2082 22700 
23985 
-1285 
970 
777 
-4002 
3825 
370 
-315 18869 
23237 
-«68 
842 
1128 
-3422 
2773 
363 
-3526 18266 
21064 
-2798 
1620 
1207 
-3830 
3783 
460 
-1178 18477 
27914 
-9437 
-243 
979 
-3752 
2069 
461 
-9680 
3925 
9630 
-5705 
1353 
9862 
-8509 
1036 
2659 
15370 
-3297 
4013 
25059 
18522 
-18522 
-3588 
-
-14934 5333 
-10409 
-5076 
-3576 
9953 
-6377 
-2510 
2949 
12893 
-2337 
8304 
28208 
27220 
-27220 
599 
-
-27819 5750 
10173 
-4423 
-1094 
3583 
-4677 
-3174 
6097 
1787 
-2335 
4933 
11964 
-800 
800 
3363 
-
-2563 7394 
10714 
-3320 
3807 
7852 
-4045 
-1277 
1008 
375 
-2785 
1483 
10005 
7768 
-7768 
2077 
-
-9845 3965 
6095 
-2130 
4035 
7630 
-3595 
1829 
2756 
122 
-2140 
2330 
12,897 
-4471 
4471 
2178 
-
2293 1250 
3067 
-1817 
431 
3141 
-2710 
330 
847 
4895 
-1050 
1282 
7985 
5903 
-5903 
-1146 
-
-4757 1700 
3318 
-1618 
1140 
3173 
-2033 
-800 
940 
4110 
-745 
2647 
8992 
8677 
-8677 
191 
-
-8868 1859 
3302 
-1443 
-358 
1167 
-1525 
-1079 
2001 
585 
-878 
836 
2966 
-560 
560 
1288 
-
-728 3037 
4366 
-1329 
1456 
3133# 
-1677 
-515 
290 
154 
-1240 
786 
3968 
2790 
-2790 
786 
-
-3576 2210 
3397 
-1187 
2249 
4253 
-2004 
1074 
1536 
68 
-1193 
1244 
7188 
-2492 
2492 
1214 
-
1278 
Data on commercial borrowings (including trade credits) for 1993-94 and 1994-95 furnished by the Ministry of Finance, are 
tentative and would be subject to revisions as details are drawn from the returns. Subsequent revisions in these data would therefore 
necessitate corresponding changes in the balance of payments and external debt statistics. 
# Includes India Development Bonds 
@ Includes delayed export receipts and errors and omissions arising out of the application of dual exchange rates applicable under 
the Liberalised Exchange Rate Management System (LERMS). 