Phasing Out quotas from India-

Since 1980, India has maintained trade deficits, primarily as a result of a rapid increase in
imports, particularly of bituminous materials, pearls, precious and semi-precious stones, and
jewelry, as well as mineral fuels, oils, waxes, and other fuels. The largest trade deficits in
recent years have been with China, Switzerland, Saudi Arabia, Iraq, and Indonesia. In wake
of this increasing trade deficit scenario Government of India Launched various programs to
boost Indian Exports and reduce the trade deficit.
Eg- The Merchandise Exports from India Scheme (MEIS), launched in 2015, is considered a
game-changer for the Indian merchandise industry. The scheme is mainly designed to reward
exporters for offsetting infrastructural inadequacies and associated expenses. Furthermore,
the Duty Credit Scrips and items imported or domestically procured against them will be
freely transferable. (IBEF)
Current trends

 Merchandise exports in November2022 were USD 31.99 Billion, as compared to USD

31.80 Billion in November2021. Merchandise exports for the period April-November
2022 were USD 295.26 Billion as against USD 265.77 Billion during the period April-
November 2021. (Industry, 2022)
 Merchandise imports in November2022 were USD 55.88Billion, as compared to USD
53.03 Billion in November2021. Merchandise imports for the period April-November
2022 were USD 493.61 Billion as against USD 381.17 Billion during the period April-
November 2021. (Industry, 2022)
 India’s merchandise exports exhibited a positive (y-o-y) growth in 15 out of 30 sectors in
November as comparted to the same period last year and imports have increased in 19 out
of 30 sectors (y-o-y). Among the QE commodity groups, electronic goods (54.48%),
gems and jewellery (4.61%), RMG of textiles (11.70%), drugs and pharmaceuticals
(8.66%), rice (19.16%), leather & leather products (8.68%), ceramic products &
glassware (22.64%), fruits and vegetables (25.01%), cereal preparations & miscellaneous
processed (22.75%), other cereals (53.78%), oil seeds (38.83%), oil meals (17.55%),
tobacco (101.02%), tea (27.03%) and coffee (3.21%) registered positive growth (y-o-y) in
November 2022. (Industry, 2022)

 India’s plastics exports also face challenging conditions this year due to signs of
recession in major markets including USA and Europe. India’s plastic raw material
exports have fallen as polymer producers prefer to sell in the domestic market since
price realisations within India are currently better than the export market. (Industry,
2022)
WHY PHASING OUT QUOTAS?
The Make in India initiative launched by the government in 2014 focuses on major issues
of the economy which facilitates investments, innovation, skill development in the economy
by promoting the use of goods made in India & boosting Indian made goods exports. To
achieve this aim It is very crucial to phase out export quotas from certain goods and services,
for which there is potential for growth in the country and where import substitution is
possible keeping in mind healthy competition for increased consumer satisfaction.
TOY INDUSTRY
The toy industry imports are down by 70% & exports are up by 61% over last three years as
through Make in India programme. Chinese toys were among the major products which had
flooded Indian markets not long ago. India imported toys of $451.71 million in 2018-19 to
$206.11 million in 2021. Due to introduction of Import Quotas, Import duty levy & Quality
test controls. (Agrawal, 2022).
Phasing out quotas from India, is a long-standing need of the hour. Now with the current
political and economical backdrop, it is clear that the government has taken decision to phase
out the import quotas. India, is one of the top recipients of world Trade organization
facilitation subsidies, receiving about $14.5 billion (2005) in total. The government has
decided to phase out Quotas in order to increase the country’s access to global markets &
encourage healthy industrialization.
The objective of the quota departure is to promote tradability eg. of agricultural goods &
create more competition in the agricultural market so that there is improvement in the level
of tradability. The Government is also in the process of appointing a committee to deal,
monitor & implementation of quotas and recommend ways in which it can be better
managed.
HOW G20 can promote Indian Exports?
Keeping in mind Current Trends in Trade Deficit. India gaining G20 Presidency comes as a
very big opportunity to increase the exports and foreign reserves and to eventually decrease
the trade deficit. According to PHDCCI India’s exports to G20 can be more than double to
$500 bn by 2030. This gives India a very conducive opportunity to phase out their quotas for
bringing stability at geo political conflicts, high inflation & economic growth. India's trade
imbalance with the G20 will drop from its current level of USD 107 billion to over 50% by
2030 as a result of its improved integration with the group. (Standard, 2022)
The industry group has identified 75 products that now account for USD 175 billion (or
around 40%) of India's overall exports at the "Amrit Kaal" commemorating the country's 100
years of independence.
Furthermore, The 13 Free Trade Agreements which India has signed, it holds trade surplus
only with 8 economies. Signing FTAs with markets like UK, Canada & US India’s expansion
of exports with G20.

Textile
India’s relation with the textile Industry has been deeply routed in the history. India is known
for its fine quality and texture and how it portrays the culture of the country. The demand for
Indian textile is ever growing in foreign market. It has provided the highest number of jobs
next to farming.
Multi-Fibre Arrangement (MFA) came into force in 1974 to exercise controls and
restrictions over imports of non-cotton textiles as well. Up until 1977, the first phase of MFA
offered developing nations a boost in export revenues while taking into account the
possibility of market disruption brought on by excessive imports into wealthy nations. Based
on previous exports, developed countries were given the authority to limit export levels in
these situations. The second phase of MFA, which ran from 1978 to 1981, was more stringent
than the first since it permitted justifiable, transitory deviations from its core principles. The
performance of the developing countries' exports suffered since the departures were largely
restrictive and continued in character.
The third stage of MFA, which ran from 1982 to 1986, was meant to be less onerous because
it included additional mechanisms for compensating developing nations for safeguard
measures.
The textile and apparel sectors were handled as two separate sectors, and quotas were set up
in accordance with that. In its last stage, there were growing grudges against MFA all over the
world because it had enabled rich nations to freely sell to one another and protect themselves
from all exports from developing nations that were low-cost. Accordingly, based on the
Agreement on Textiles and Clothing, the phase-out of MFA quotas was planned to take place
from 1995 through 2005. As agreed, all categories' export growth rates increased by 16%
from 1995 to 1998. (Narayanan, 2008)
The world followed a 40-year-old system that capped the poor countries’ textile exports to
rich nations, freeing trade worth $300 billion and throwing open rich western markets to
countries like India. (TOI, 2007) India aimed exports at a target of $50 billion in annual textile,
about four times the current figure of $14 billion. Then commerce minister Kamal Nath made a
statement that India will hugely benefit from lifting of quotas.
After the covid Pandemic India’s textile exports India’s textile exports dropped by 30.11 per
cent to $1,405 million in November 2022 compared to $2,010.41 million in November 2021.
Exports of cotton yarn, fabrics, made-ups, handloom products etc declined to $803.17 million
in November this year from $1,226.69 million in November last year. Global economic
slowdown has hit Indian textiles and apparel exports during the last couple of months. But the
recovery in shipment of garments indicates a sign of some respite to the Indian textile
industry. High inflation across the developed world has reduced consumers’ purchasing
capacity, which is the main cause of slowdown in the textile sector. Developing countries
including India are facing serious challenges in textile exports.
This further necessitates the phasing out of Textile Quotas from India.
Australian FTA
Australia government can allocate tariff rate quotas (TRQs) to its exporters or producers by
giving them TRQ certificates up to the quota fixed for each commodity.
Of the 51,419 MT quota allowed by the Indian government, 419 MT ELS cotton (HS code
52010020) at zero import duty is for calendar year 2022. The remaining 51,000 MT will be
quota for next year i.e., calendar year 2023.
Due to this there is an anticipated decline in cotton prices on the domestic market, but some
countered that there is a little room for a decline given the limited quota & competitive
Australian market prices.

Sugar Industry

Recently, India has surpassed Brazil to become both the world’s largest producer and
consumer of sugar. It has bee produced in India since ancient times when it spread to other
parts of the world. Today Indian Sugar industry’s annual output is worth approximately Rs.
80,000 crores The government has launched numerous timely initiatives in the sugar sector
over the past six years, allowing sugar mills to stand on their own and develop into a self-
sufficient industry. The interests of approximately 5 crore sugarcane farmer families, 5 lakh
sugar mill employees, and the entire ecosystem of the sugar sector, including ethanol
distilleries, have been taken care of by the Indian government, which has put them on a
growth trajectory. Each sugar mill receives a 60 LMT export quota from the government. The
government requests that sugar mills export quickly so that farmers can receive early
payments. At the end of Sugar Season 2022-23, it is expected that most of sugar mills will be
able to sell their production either in domestic market or in international market through
exports and will clear the cane dues of farmers in time. Thus, the policy has created a WIN
WIN situation for sugar mills in the country. (Minsitry of consumer Affairs, 2022)
Oil Industry
India is the world’s leading vegetable oil buyer, is dependent on imports of sunflower oil,
which constitutes 16% of the total edible oil imports.
There are several issues like inflation, Global Impact like the latest allocation of import quota
for tax free edible oil. Further the Russia Ukraine war has posed a bigger problem like the
sunflower oil supply remains constraint with no shipment happened in last few weeks.
This has led to surge in prices of sunflower oil making it unfavorable for Indian buyers due to
soaring prices, the wholesale prices & retail prices are over 23% & 32%, but it still remains
preferable to other popular alternatives.
So, in wake of this Government of India has issued quota for duty free edible oil purchase to
ease domestic prices. India's government has issued quota for duty-free soybean oil and sunflower
oil for importers with a ceiling of maximum 0.2 million mt for each buyer in a bid to check high
domestic prices, according to a document viewed by S&P Global Commodity Insights.

Myths
There are various Myths related to phasing out quotas, which this paper intends to address.
1. Implementing Quotas in Imports is always beneficial for the country.
It is the biggest misconception, since this concept is of very high macro level and involves
macroeconomic elements. Implementing quotas without proper research and rationality can
worsen trade and political relations with other countries.
Implementing Import quotas can give undue advantage to domestic producers to exploit the
consumers.
 2. Phasing out Quotas are not beneficial at all.
Yes, its true that phasing out quotas from developing countries can lead to worsened
conditions for domestic producers which exploits their opportunities for business. But in
contrast it actually benefits the countries serving high inflation due to monopolies or
exploitation of consumers by domestic producers due to lack of competition. FTAs with
countries where there is less quotas helps us to take comparative advantage and improve
global standing.

Bibliography
Agrawal, A. (2022). Toy Imports down by 70%. Ministry of Commere & Industry.

IBEF. (n.d.). Merchandise Export scaling New Heights. IBEF.

Industry, M. o. (2022). India's Foregin Trade. PIB Delhi.

Minsitry of consumer Affairs, F. &. (2022). Export Sugar Quota.

Narayanan, G. B. (2008). Effects of phasing out of MFA Quotas on Indian garments Exports, 1992-
2003. Regional and sectoral Economic studies.

Standard, B. (2022). Inida's export to G20.

TOI. (2007). Textile Quotas End.