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According to official
spokesmen, the evidence on trends in imports into India indicate that
fears that import liberalisation would result in an import surge were
misplaced. Rather, in their view, Indian producers have clearly been
able to hold their own against international competition. The evidence
does indeed point to some sluggishness in the growth of the dollar value
of India’s non-oil imports in recent years. While India’s
total import bill in dollar terms rose consistently through the 1990s
starting from its 1991-92 low, the rate of growth has definitely decelerated
since 1996-97 (Chart 1). Further, the deceleration after 1995-96 is
much more pronounced in the case of non-oil imports which are the commodities
in which an import surge, if any, was expected in the wake of liberalisation.
Chart 1 >>
There is of course one
good reason to expect a deceleration in import growth after 1995-96,
and this is the deceleration in production and investment in the industrial
sector. The evidence does suggest that after a mini-boom in the industrial
sector starting with the recovery in 1993-94, industrial growth slipped
in the years since 1996-97. From a peak of 13.0 per cent in 1995-96,
the rate of industrial growth fell to 4.1 per cent in 1998-99, recovered
to 6.7 per cent and fell again to 4.9 per cent in 2000-01. And it is
also true that the three years 1993-94 to 1995-96 were years of high
import growth, while the years after that witnessed a deceleration in
import growth. Thus, output movements in the principal sector dependent
on imports for capital equipment, intermediates and components, i.e.
industry, appear to substantially explain movements in India’s
import bill as well.
This argument, while
of considerable merit, tells only part of the story. To start with,
there was one year after 1996-97 when industrial output was once again
buoyant, viz. 1999-2000. But that was a year in which there was no reversal
in the sluggishness in non-oil import growth. Second, aggregate figures
suggest that the import intensity of domestic production, which did
indeed rise during the first half of the 1990s, has remained more or
less constant since then. India’s import to GDP ratio, which rose
sharply from 8.1 per cent in 1991-92 to 11.5 per cent in 1995-96, has
in fact marginally declined between then and 1998-99 (cahrt 2). Evidence
of a rise in the first two quarters of 1999-2000 has been followed by
that of a fall in the third quarter, which is the last for which GDP
figures are available. The fact that import intensity has declined indicates
that the growth slowdown, while it would have dampened import inflows,
was in itself only part of the explanation for the trend in imports
after 1995-96.
Chart 2 >>
It is, of course, true
that the trends in aggregate imports provide an unsatisfactory picture
of the impact of liberalisation on imports, since they include imports
of oil and oil products. Trade in petroleum, oil and lubricants is less
affected by liberalisation and more by movements in domestic demand,
and the value of such trade is susceptible to unexpected changes because
of the volatility that oil prices have tended to display.
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