The Hindu : Trends in import growth of `sensitive' products

Online edition of India's National Newspaper
Thursday, Aug 29, 2002

Business

Business

Trends in import growth of `sensitive' products

Total imports in April-June of 2002 increased (in rupee terms) by 15 per cent; yet the import of the `sensitive' items (300 tariff lines), which are monitored by the Commerce Ministry, grew (also in rupee terms) by nearly 40 per cent over that in April-June 2001. Considering that non-oil imports hardly rose in the first quarter of 2002-03, this spurt in import of the `sensitive' products may seem like the much feared flood of imports — following the removal of quantitative restrictions in April 2001 — is finally taking place.

While the Commerce Ministry's press note of optimism attributing the increase in import of the sensitive items entirely to the jump in purchases of edible oils is not entirely correct, the disaggregated picture suggests fluctuations in imports, that depend on domestic/global prices and local availability.

Edible oils accounted for import of as much as 72 per cent of the `sensitive' items that are being closely monitored. And these imports (27 tariff lines) increased by as much as 74 per cent in the first quarter, indicative of an import flood. This could swell even more if the oilseed crop in the kharif season is affected, as is likely, by the erratic monsoon of 2002. Yet, the same edible oils category showed only a marginal rise in imports in all of 2001-02, though it did form the overwhelming bulk of the total import of the sensitive items last year. In 2001-02 — when imports of these 300 tariff lines increased by just 7 per cent — the largest growth was in cotton and silk (61 per cent). Yet the same product category registered a 40 per cent decline in imports in the first quarter of the current financial year.

The products whose imports are being monitored in the Commerce Ministry's `War Room' are a heterogeneous lot. In April-June 2002, they accounted for 5 per cent of India's total imports (or about 7 per cent of non-oil imports). While agricultural and SSI products naturally dominate, some product lines are obviously being monitored because of their political clout and not economic importance. These include alcoholic beverages, marble and granite, automobiles and poultry. Since the products are so heterogeneous, their individual shares in total imports of the sensitive products also vary.

Still, the current financial year is witnessing a much more broad based growth in import of the `sensitive items.' While only 184 of the 300 tariff lines showed an import growth in 2001-02 over 2000-01, the number of product lines where imports increased in April-June 2002, over the corresponding period of 2001, was as much as 261. (Information on imports is not available in each tariff line, but across the 11 categories into which these 300 product lines have been classified.) Imports of the `sensitive' agricultural products as a whole rose by nearly 37 per cent, with edible oils, of course, dominating this growth. Another agricultural product category that saw a substantial growth in the first quarter was fruits and vegetables, where the rise was over 40 per cent. Moreover, imports of `Others' (which include sugar, wheat flour and salt) almost doubled in the first quarter. Besides cotton and silk, the agricultural products which saw a fall in imports were foodgrains (total import of a negligible Rs. 18 lakhs) and poultry (of which there were no imports as against a small Rs. 18 lakhs in April-June 2001).

Imports of the two unambiguously industrial but very different groups of products — automobiles (32 tariff lines) and sensitive SSI products (only 20 lines) — increased in the first quarter, the former by 150 per cent and the latter by 20 per cent. But both were from a small base and had showed a small decline in imports in 2001-02.

The availability of substantial foreign exchange reserves and the sluggish growth in total imports mean that from the perspective of the larger economy, any big rise in the import of the `sensitive' products does not matter. But a continuation of trends witnessed in the first quarter — if they spread across more tariff lines — could make things difficult for producers in these sectors.

CRR

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