World Trade Organization Organisation Mondiale du Commerce Organización Mundial del Comercio

Reply: India is implementing certain programmes for strengthening marketing structure and infrastructure in the country. These relate to strengthening market price information network, strengthening Agricultural Produce (Grading and Marking) Act, 1937 to provide for grading and marking of agricultural produce and a rural warehouses construction scheme.

Details are available at the following web address: http://agricoop.nic.in/Compedium7410.pdf.

Colombia 16:

According to paragraph 12, page 128, of the Secretariat Report: "India's agricultural policies are consistent with the Government's long standing policies of protecting domestic producers from foreign competition and consumers from domestic and global price fluctuations for food staples such as wheat, rice, and vegetable oils. The Government uses tariffs and non tariff measures (NTMs) in its domestic policies to meet these objectives. The tension between the desire to raise food prices for the benefit of farmers and to lower them for the benefit of consumers leads India to intervene heavily in the farm sector with multiple policy instruments."

The Report further notes that "[c]ertain agricultural products that were previously subject to quantitative restrictions are now considered sensitive products and bear above average tariffs".

16. Would India please indicate what kinds of instrument are put in place in order to protect consumers against undue increases in the prices of food staples such as wheat, rice and vegetable oils? Could it specify the tariff subheadings and the respective tariff levels applied to the group of sensitive products?

Reply: Measures like reduction and elimination of import tariffs temporarily during period of shortage in production on account of drought and other calamities are taken to increase supplies and bring down prices. India has no categorisation of tariff lines as sensitive for the present.

In order to moderate prices, tariffs have been exempted on all crude edible oils [1508, 1509, 1510, 1511, 1512, 1513, 1514 or 1515]. Refined edible oils [1508, 1509, 1510, 1511, 1512, 1513, 1514 or 1515] attract a lower duty of 7.5%. Wheat [1001 10 90 or 1001 90 20] and rice [1006 30] attract nil basic customs duty.

(a) Measures affecting imports

Colombia 17:

According to paragraph 18, page 129, of the Secretariat Report: "Subsequent to Article XXVIII renegotiations in 2003, India introduced in its Schedule tariff rate quotas for four product groups (19 tariff lines at the HS eight digit level according to the authorities): milk and milk powder; maize (corn); rape, colza, and mustard oil; and crude sunflower seed and safflower oil. As of 2008/09, tariff quotas for crude sunflower seed oil or safflower oil have ceased to operate as the applied tariff on those products was reduced to 0 per cent (Table III.6). In 2009, India introduced a tariff quota for sugar (HS 1701.9100 or 1701.99.90) of 1 million tonnes with an in quota tariff rate of 0 per cent. Initially, sugar could only be imported through four companies but, according to the authorities, this restriction has been removed. In 2010, India increased the amount of milk that could be imported under the in quota tariff rate from the original 10,000 tonnes to 30,000 tonnes, and introduced a tariff rate quota for butter (Table III.6). Imports under TRQs are allowed only through eligible entities or designated agencies. These entities and agencies need to apply to the DGFT prior or by 1 March of each financial year proceeding the quota year. The Exim Facilitation Committee in DGFT receives, evaluates and allots the TRQ. Imports have to be completed before 31 March of the financial year for which the quota is allocated."

17. Would India please provide details concerning the provisions and methodology established for the allocation of import quotas to these entities/agencies?

Reply: Quotas are established annually and administered on an MFN basis. There is no maximum limit to be allocated per applicant. Directorate General of Foreign Trade is the competent authority to allocate the tariff quota among the eligible entities. Applications are examined upon receipt and assessed according to the criteria stated in the notifications and circulars issued by DGFT on a yearly basis. Import quotas under TRQ have been allowed primarily to the state trading enterprises to ensure monitoring and to avoid any discrimination. Details of the TRQ has been notified to WTO and can be seen at WTO document G/AG/N/IND/6 dated 7th March, 2011. Detailed procedure for allocation notified by DGFT from time to time is available in the website: http://dgft.gov.in.

Colombia 18:

According to paragraph 21, page 130, of the Secretariat Report: "Since the removal of most quantitative restrictions on imports in 2001, a mechanism has been set up to monitor imports of items considered to be sensitive. The number of sensitive items has increased since 2007, from 300 to some 415 items (Chapter III(2)(vi)). Monitored sensitive items include bamboos, cocoa, copra, cotton, milk and milk products, edible oils, food grains, fruits and vegetables, pulses, poultry, tea and coffee, spices, and sugar."

18. Would India please explain the mechanism set up to monitor imports of such items? Since this mechanism entered into operation, has there been any ban on imports of items classified as being sensitive?

Reply: Monitoring of imports of sensitive items is being done on a monthly basis. An item is included in the list on need based basis where it is felt that import of such item should be monitored. No ban/prohibition has been imposed so far.

(b) Measures affecting exports

Colombia19:

According to paragraphs 25 to 27, pp. 131 132, of the Secretariat Report: "The 11^th Five Year Plan placed special emphasis on promoting production and exports of commercial crops and agri based processed products. Plans to promote exports include, inter alia, the revitalization of plantations, and the provision of tax incentives. However, this would require the adoption of a less controlled, more long term and stable agriculture policy, instead of ad hoc reactions to short term price fluctuations, such as export bans, which have often been at the cost of farmers. According to the authorities further development of India's new agricultural commodities futures markets would also allow for better transmission of price signals and management of risks.

India imposes export restrictions and prohibitions mainly for environmental, food security, marketing, pricing, and domestic supply reasons, and to comply with international treaties. Since 2007, some agricultural products have been subject to export prohibitions, including non basmati rice, wheat, pulses, edible oils, milk powder, casein and casein derivatives, and onions (Tables II.4 and AIII.5). Goods subject to export restrictions and quotas must also be accompanied by licences from the DGFT and, when necessary, by other permits. For instance exports of cotton require in addition to an export licence an export authorization registration certificate (EARC). Export quotas apply to organic non basmati rice and organic wheat. Export prohibitions and export quotas are notified annually; they are usually in place for a specific period, during which they may be subject to changes (Chapter III(3)(v)). These changes diminish the predictability of the regime. Minimum export prices are also maintained under the Foreign Trade Policy 2009 14 to control prices and availability in the domestic market.

In addition, to these measures, India imposes export taxes, which are used to, inter alia, ensure domestic supply of raw materials for higher value added industries; promote further processing of natural resources, ensure an 'adequate' domestic price, and preserve natural resources. Export taxes are sometimes used in combination with other measures to attain short term goals. For instance, in April 2010, India introduced export licensing/EARC requirements for six months on raw cotton and cotton waste, in addition to export taxes, with the purpose of ensuring adequate domestic supply and containing cotton price increases in the domestic market."

19. Would India please explain how these measures are consistent with the WTO rules and the Agreement on Agriculture in particular? How are the minimum export prices to control prices and availability in the domestic market calculated and to which products do they apply?

Reply_:_These_are_temporary_measures_that_are_reviewed_from_time_to_time_as_regards_their_applicability_period.'>Reply:_The_various_measures_by_India_to,_inter_alia_,_ensure_domestic_supply,_are_taken_in_terms_of_relevant_GATT/WTO_provisions.'>Reply: The various measures by India to, inter alia, ensure domestic supply, are taken in terms of relevant GATT/WTO provisions.

(c) Internal measures

Colombia 20:

According to paragraph 35, page 134, of the Secretariat Report: "The Government maintains minimum support prices (MSPs) for major agricultural commodities. MSP levels and the products subject to MSPs are reviewed annually. MSPs are announced prior to each planting season. In 2009/10, India maintained MSPs on 25 crops. MSPs are fixed by the Government following the recommendations of the Commission for Agricultural Costs and Prices (CACP), which takes into takes into account several factors to fix them. MSPs aim at covering the actual expenses incurred by the farmer in cash and kind, including rent paid for leased land and imputed value of wages of family labour, rent for owned land and interest on fixed capital. Despite differences in cost of production across states, MSPs are uniform throughout the country."

20. Would India please explain what benefits are provided to farmers when Government appointed bodies intervene in the purchase of production, in the case of prices falling below the minimum support price? What have been the amounts granted by the Government under this mechanism?

Reply: Farmers get minimum assured prices under the Price Support Scheme (PSS) in case the market prices fall below this level for their entire produce.

Amounts incurred on procurement of products under PSS are available at web link agricoop.nic.in/Agristatistics.htm.

Colombia 21:

According to paragraph 37, pp. 134 135, of the Secretariat Report: "In 2009, the statutory minimum price (SMP) for sugarcane was replaced by the fair and remunerative price (FRP); a minimum price set at the central level, below which no sugar mill may purchase sugarcane from a farmer. State governments also set a state advisory price (SAP) for sugarcane. If the SAP is higher than the FRP, the state government bears the loss. In addition to the price intervention, a quota of the sugar production (at present 10 per cent), referred to as 'levy sugar', is earmarked for distribution under the Targeted Public Distribution System (TPDS). The remaining sugar may be sold under the monthly regulated release system. Exports of sugar are also controlled through a quota system."

21. Would India please provide information regarding the amount of support granted to the sugar sector in recent years and explain how such measures are consistent with the domestic support disciplines in the Agreement on Agriculture?

Reply: There is no procurement of sugarcane by public agencies. Domestic support up to 2003 04 has been notified in India's notification to the WTO, G/AG/N/IND/7 dated 9 June 2011, which covered the period 1998 99 to 2003 04.

Comment regarding agriculture notifications

On pages 133 and 134, the Report notes that India's latest notification on export subsidies was made in 2002 and that on domestic support in 2011, but that the latter covered domestic subsidies applied in 2004. The Colombian Government invites the Government of India to update its notifications on export subsidies and domestic support as soon as possible. It is important that Members should not forget that the notification mechanism is a tool for enhancing transparency, because it shows the programmes and measures applied by Members and whether they comply with the commitments undertaken.

(3) SERVICES

(i) Overview

Colombia 22:

According to paragraph 54 of the Secretariat Report: "During the period under review, India's exports of services grew at over 13.5 per cent per annum. India is a net exporter of services (Chart IV.1); its services balance showed a surplus of US$35,726 million in 2009/10 (equivalent to 2.7 per cent of GDP), US$6,257 million higher than in 2006/07. India is a leading exporter of computer and related services, including software installation and data processing, and a major supplier of back office processing services, such as abstracting and indexing, data processing, legal transcription, telemarketing, and website design."

Bearing in mind the important role played by international trade in services in India and the ongoing need to generate statistics on the sector that can provide better information for policy formulation, as well as the reference in the document under discussion to the major computer services developed in India, it can be seen that more disaggregated information on trade in these sectors exists, accordingly:

22. What mechanisms or strategies has the Government of India implemented with a view to generating disaggregated statistical figures on services?

Reply: As per provisions of Foreign Exchange Management Act (FEMA), 1999, "authorised dealers" are required to report foreign exchange transactions to Reserve Bank of India (RBI). RBI compiles the data reported upon by "authorised dealers" and publishes the same in form of balance of payment statistics.

Colombia 23:

As emphasized in this trade policy review, India has become one of the world's leading exporters of computer services.

23. What has been the impact of the finishing schools programmes in promoting and strengthening human capital in this sector? What other services sectors are benefiting from such programmes and how have these been implemented?

Reply: Finishing school concept has picked up in India since last few years and this is still evolving. No study has been carried out to ascertain the impact of finishing schools on the sector in India.

COSTA RICA

I. India Report (document WT/TPR/G/249)

1. During 2009 2010, India's exports showed a negative growth rate due to the effects of global recession. The Government announced corrective measures in the Union Budget for 2009 2010 and the Foreign Trade Policy document. These measures, together with the recovery of the global economy, enabled an export growth of 37.5% in 2010 2011. Could India explain and elaborate these measures? (Page 9, paragraph 12)

Reply: These measures are given in the highlights of the FTP (23 August 2010) and are available at DGFT website http://dgft.gov.in.

2. A liberal foreign investment regime have made India an attractive destination for foreign investment. What do you mean by a liberal investment regime? What kind of incentives are provided? (Page 12, paragraph 21)

Reply: India has put in place an attractive regime for foreign direct investment, under which FDI, up to 100%, under the automatic route, is permitted in all sectors, except a few. India does not provide incentives specifically for FDI.

3. In paragraph 28, page 15, indicates that government policies emphasize "promote an labour intensive industries to provide employment in the manufacturing sector." Could India list and explain the nature, objectives and scope of these policies? (Page 15, paragraph 28)

Reply: India has identified labour intensive sectors such as food and agro processing sector, small and medium manufacturing industries, textiles and garments and leather sector as key to employment generation. Accordingly, the policy objective is to boost and strengthen these sectors by providing tax incentives, concessional loans, technology upgradation incentives etc. and also focus on skill development of large workforce to cater to these sectors.

4. In order to reduce the impact of inflationary pressures on the economy, India reduced the import duty on rice, wheat, pulses, edible oils, butter and ghee, sugar, onions and shallots. Are these reductions in import duties permanent or has a limited validity period? If the latter, when does that period expire? (Page 17, paragraph 36)

Reply: These are temporary measures that are reviewed from time to time as regards their applicability period.

5. How did the Government of India fund the expansionist policy for increased public spending in 2008 2009 adopted to address the global crisis? (Page 17, paragraph 37)

Reply: The expansionary fiscal policies comprised tax cuts and expenditure hikes as indicated below:

Break up fiscal expansion with respect to 2007 08

(As % of GDP)

	2008 09	2009 10	2010 11 (RE)	2011 12 (BE)
Total fiscal expansion	3.49	3.84	2.54	2.05
Expenditure	1.54	1.35	1.15	0.29

6. What tax rate is charged in the case of income tax and tax on dividends? (Page 20, paragraph 50)

Reply: For tax rates in case of income tax and dividends, kindly refer to www.finmin.nic.in.

7. Could India mention whether the adoption of a prudential framework for banks, applies equally to all financial institutions or there is some discrimination with regard to foreign capital financial institutions? (Page 21, paragraph 52)

Reply: The application of prudential framework for banks and financial institutions in India is based on the specific needs, size, core functions and capabilities, etc. of the concerned entity, viz. commercial banks, cooperative banks, regional rural banks, non banking financial companies, etc. However, the prudential framework is the same for all commercial banks including foreign banks having offices in India. It may be added that conscious steps are being taken for application of framework equally albeit at a different pace as suitable to the financial institutions other than commercial banks, based on the regulatory assessment.

8. Could India elaborate on why the regional rural banks and 'local' banks (territory wise) are excluded from the application of the principles of Basel II? What makes these banks different from other commercial banks to which BASEL II applies since the agreement was signed in 2009? (Page 22, paragraph 55)

Reply: Regional rural banks (RRBs) are state sponsored, region based, and rural oriented commercial banks with local feel and pro poor focus. They have been established primarily for the purpose of developing the rural economy by providing credit and other facilities particularly to the economically weaker/disadvantaged sections of the society such as small and marginal farmers, agricultural labourers, artisans, small entrepreneurs, etc. A large number of RRBs (196) were established during the period 1975 to 1987.

Factors like limited area of operation, weak clientele base, low volumes, high overheads, loan delinquency etc. led to high accumulated losses and piling up of bad assets in the case of many RRBs. Also, RRBs were lending at low interest rates as they were financing the weaker sections and were allowed to pay a slightly higher rate of interest on deposits. As a result, financial health of most of the RRBs became weak and in the case of few RRBs, there was an erosion of public deposits, besides capital. Many RRBs were having accumulated losses and negative net worth. Hence, owing to weak financial position of sizeable number of RRB, it was not desirable to apply Basel Norms for them. Incidentally, to address the problems of poor performance of the RRBs, several RRBs were recapitalized twice between 1994 95 to 2008 09.

However, several working groups and task force have suggested introduction of CRAR in phased manner. As a step towards this, RRBs were advised to disclose their CRAR as on 31 March 2008 and thereafter every year as "notes on accounts" to their balance sheets. In September 2009, Government of India constituted a Committee under the Chairmanship of Dr.K.C.Chakrabarty, Deputy Governor, Reserve Bank of India to study the current level of capital to risk weighted assets ratio (CRAR) of RRBs and to suggest a roadmap for achieving a CRAR of 9% by March 2012. The Committee submitted its Report to the Government of India on 30 April 2010.The Committee carried out an assessment of capital requirement for all the 82 RRBs to enable them to have CRAR of at least 7% as on 31 March 2011 and at least 9% from 31 March 2012.The Committee have assessed that 40 RRBs (out of 82) will require capital infusion to the extent of Rs 2200 crore. The three stake holders of RRBs have started releasing their contribution towards recapitalization. It is expected that now capital base of RRBs will become strong and best international practice of CRAR will also become applicable for RRBs in near future.

Incidentally, even Basel I norms are also not applicable to RRBs.

As for differences from other commercial banks, RRBs are established under separate Act. They are established by the Government of India by a notification in the Official Gazette and RRB Act, 1976 provides the legislative framework for RRBs. Secondly, there are three shareholders of RRBs. i.e. GoI, state Government and sponsor bank and the share capital is subscribed by the Government of India (50%), state Government concerned (15%) and a sponsor bank (35%). They have limited avenues for raising fresh capital as like other commercial banks, they cannot raise capital from the market. Thirdly, the area of operation of commercial banks is nationwide whereas RRBs are confined to a few districts. As RRBs are operating in small pockets of various regions, insolvency, failure of one or two RRBs will not have contagion on the banking system as a whole. Also, commercial banks give loan to corporate houses whereas RRBs primarily give loans to people of small means.

9. On the issue of attracting foreign investment it is stated that in certain sectors, such as infrastructure, tax breaks and other fiscal incentives are granted. Could India specify what 'other fiscal incentives' mean? (Page 22, paragraph 56)

Reply: India has designed a number of incentives for attracting investment in the infrastructure sector. For instance, a tax holiday was granted for the enterprises being set up in the special economic zones in the country. The policy environment has been made more conducive for the spread of public private partnership in the infrastructure sector.

10. It is claimed that in 2008 there was further liberalization, under which the Government of India allowed foreign direct investment in most sectors of the economy, whether through government authorization or under the automatic procedure of Reserve Bank of India. Indicated in the footnote to page number 29 that there are sectors and activities not open to private investment. Could India mention what these sectors are and what is the authorization process   other than the automatic process? (Page 22, paragraph 57)