Import Monitoring Mechanism

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TOPIC: General Studies 2

• Government policies and schemes

In News: Media reports over the last few days have been reporting that the government is planning to raise non-tariff barriers on a number of products by putting in place product-specific monitoring systems or by allowing them only through licensing by adding them to the restricted list. 

• Financial dailies have been reporting that various ministries including commerce, finance, along with line ministries are discussing the plan and a series of meetings are taking place in view of Prime Minister Narendra Modi’s call for Atmanirbhar Bharat which would mean reduce import dependency and boost local manufacturing. 
• Earlier, the government had raised custom duties in over 100 items in its latest budget for 2020-21 in February. Since 2014 the government has raised customs duties in over 3,600 tariff lines.

Background: This comes in the backdrop of PM Modi’s speech wherein he spoke about how the coronavirus pandemic had created an opportunity for India to become self-reliant and called on the country to try to use locally manufactured products as much as possible.

What is Import monitoring mechanism?

The government is mulling creating product-specific monitoring systems for some of the goods. 

• The import monitoring system will monitor for value, volume, and quality technicalities along with the country of origin.
• Once the monitoring mechanism is approved by the ministry, it will be formalized by the Directorate General of Foreign Trade (DGFT).

A similar import monitoring system exists for steel products since 2019, known as the Steel Import Monitoring System. The system monitors certain product lines of steel for value, volume, quality, and country of origin. Along with this, the government is also planning to include a number of products in the restricted list to curb imports after having added 4-wheeler and 2-wheeler vehicle tyres under the list recently. 

The steps will also help in reducing imports of a number of goods from China, with which India has the biggest trade gap. The ministries will first look to focus on sectors like textile, food processing, leather, furniture, footwear, leather, air conditioner, TV, refrigerators, and toys.

What is the volume of trade with China?

Possible curbs on imports from China in the form of tariff or non-tariff barriers are being discussed within the government, which is said to be considering a list of imported items for the various restrictive measures.

China accounts for a sizable portion of India’s top imports, especially where intermediate products or components and raw materials are concerned. It has also been the top exporter of products like electrical machinery, equipment and their parts, nuclear reactors, organic and inorganic chemicals, fertilisers as well as vehicles, their parts and accessories. In several cases, China’s contribution is much higher than the second-largest exporter countries of these products to India.

Between April 2019 and February 2020, China accounted for around 14 per cent of India’s total imports; the main items being components for smartphones and automobiles, telecom equipment, plastic and metallic goods, active pharmaceutical ingredients (APIs), and other chemicals. In pharmaceuticals particularly, India depends heavily on China for crucial ingredients. In 2018-19, around 68 per cent of India’s $3.56 billion worth of bulk drugs or API imports were from China.

Connecting the Dots:

1. Will banning Chinese imports hurt India’s exports? Examine.
2. Discuss the policy measure for industry to increase local production so that Indians can go ‘vocal for local’?