Introduction
The development strategy during the Ninth Five Year Plan takes cognisance of the need for a more open economy, involving larger foreign capital inflows and also imports. The process is helping to modernise industry and reduce costs of production. Priority has been given to reforms in the tariff structure.
The reopening of negotiations for the agreement on agriculture and industrial tariffs is likely to come up in the near future. At present, emphasis has been on reduction in average tariff rates without taking into consideration the peak rates prevailing in some of the developed countries. The present study aims to suggest an alternative tariff structure for agriculture and industrial sectors for the discussions. The idea is to develop a rational position in future so that the dispersion in average tariff rates is also taken into account. In addition, the study looks at the impact of rationalization of tariff structure in India on the imports and customs revenue, along with suggestions for inter-sectoral adjustments in tariffs.
Section-I looks at the status of tariff structure in India. Section-II looks at the status in India in comparison with some selected countries.
1. Tariff Structure – India
1.1 Present Tariff Structure
The tariff structure in India was highly complex till early 1990s. The average tariff duty in 1991-92 was 128% along with a very large number of separate tariff rates across commodity groups and also coupled with many exemptions. With the initiation of the reforms process, the average tariff rates were reduced and the structure has been somewhat rationalised.
During 1999-2000, the basic duty rates in India are mostly 0,5,15,25,35,40, and only 20 commodity groups are in the range of 100-230% (out of 5135 commodities based on 6-digit HS classification). The latter group of commodities of over 100% tariffs are imposed on certain spirits, beverages, and alcoholic products; carpets and selected cosmetic items. The average basic import duty is 32.54%, with a standard deviation (SD) of 13.25 and co-efficient of variation (CV) of 40.71. If a surcharge of 10% is included on all commodities which have a basic duty of less than 40%, as imposed in the Budget for the year 1999-2000, the average comes to 34% (SD-13.56, CV-38.16). The ratio of peak tariff rates to the average ratio comes to around 7 during the current year. At the same time, the agricultural and industrial average tariff rates are not markedly different (33-34%), as may be seen in Table-1. The dispersion in agriculture, as reflected by both SD and CV, is much higher than that in industrial sector.
|
Table 1 : Tariff Structure in India |
||
Basic |
Basic+Sur. |
|
1999-00 |
1999-00 |
|
| All Commodities | ||
| Avg. | 32.54 |
34.24 |
| SD | 13.25 |
13.06 |
| CV | 40.72 |
38.14 |
| Agriculture | ||
| Avg. | 32.44 |
33.64 |
| SD | 27.67 |
27.5 |
| CV | 85.31 |
81.77 |
| Mining | ||
| Avg. | 20.2 |
21.82 |
| SD | 11.26 |
11.7 |
| CV | 55.73 |
53.63 |
| Industry | ||
| Avg. | 32.87 |
34.65 |
| SD | 8.88 |
8.61 |
| CV | 27.02 |
24.86 |
| Computed from Budget Document, 1999-2000 | ||
1.2 Tariff Structure and Imports
A simple econometric exercise to look at the relation of imports and tariff structure was undertaken taking value of imports for the 99 commodity groups at 2 digit HS classification and the average tariff rates prevailing for these commodity groups from 1991-92 to 1998-99 in India. Various functional forms were attempted to estimate the relationship between imports (in $ terms) and the tariff rates during this period. These included imports as a function of tariffs, and imports as a function of tariffs and gross domestic product (GDP) but the relationship was weak. In the latter case, the R2 was better but the ‘t’ values were insignificant for most commodity sectors. This indicated a multi-collinearity problem, as was also suggested in the high correlation co-efficient between the independent variables in the variance – covariance matrix. Next, the relative share of imports to GDP as a function of tariff was attempted in linear and as a double log function.
|
BASE CASE |
Table 2 |
|||||||
|
Regression Results and Imports and Revenue under Existing Tariff Rates |
||||||||
2
digit |
a |
b |
t value(b) | R2 | Avg. |
M/GDP |
Total |
Total |
|
1 |
-7.650 |
0.480 |
3.690 |
0.730 |
34.2 |
0.003 |
0.9 |
1.4 |
|
2 |
-6.870 |
0.600 |
0.960 |
0.320 |
16.5 |
0.006 |
2.0 |
1.4 |
|
3 |
0.590 |
-2.255 |
5.230 |
0.901 |
16.5 |
0.003 |
1.1 |
0.8 |
|
4 |
-1.150 |
-0.760 |
-0.840 |
0.120 |
35.7 |
0.021 |
7.4 |
11.5 |
|
5 |
-3.060 |
-0.300 |
-4.400 |
0.790 |
15.5 |
0.021 |
7.3 |
4.9 |
|
6 |
-3.210 |
-0.640 |
-0.950 |
0.150 |
10.1 |
0.009 |
3.3 |
1.4 |
|
7 |
0.470 |
-0.270 |
-2.870 |
0.620 |
14.5 |
0.777 |
274.6 |
173.7 |
|
8 |
0.850 |
-0.240 |
-1.830 |
0.400 |
40.0 |
0.965 |
341.2 |
593.9 |
|
9 |
-1.290 |
-0.340 |
-2.300 |
0.510 |
32.3 |
0.084 |
29.9 |
42.0 |
|
11 |
-3.480 |
-0.900 |
-1.420 |
0.290 |
38.5 |
0.001 |
0.4 |
0.7 |
|
12 |
-3.050 |
0.020 |
0.110 |
0.000 |
33.1 |
0.051 |
18.0 |
25.8 |
|
13 |
-1.340 |
-0.300 |
-1.920 |
0.420 |
33.7 |
0.091 |
32.2 |
47.2 |
|
14 |
-5.430 |
-0.170 |
-0.980 |
0.160 |
16.5 |
0.003 |
1.0 |
0.7 |
|
15 |
5.650 |
-1.330 |
-3.040 |
0.650 |
37.1 |
2.328 |
823.0 |
1327.1 |
|
16 |
-7.900 |
-0.240 |
-0.220 |
0.010 |
40.0 |
0.000 |
0.1 |
0.1 |
|
17 |
7.850 |
-2.520 |
-2.780 |
0.610 |
31.2 |
0.441 |
155.9 |
211.5 |
|
18 |
1.900 |
-1.530 |
-3.570 |
0.720 |
39.9 |
0.024 |
8.4 |
14.6 |
|
19 |
-7.060 |
1.160 |
8.830 |
0.940 |
38.6 |
0.060 |
21.0 |
35.3 |
|
20 |
3.910 |
-2.898 |
3.350 |
0.740 |
40.0 |
0.001 |
0.4 |
0.7 |
|
21 |
2.350 |
-0.970 |
-3.280 |
0.620 |
56.8 |
0.209 |
73.7 |
182.0 |
|
22 |
2.870 |
-1.170 |
-2.420 |
0.540 |
129.8 |
0.059 |
21.0 |
118.6 |
|
23 |
-1.740 |
-0.250 |
-0.990 |
0.160 |
37.0 |
0.071 |
25.2 |
40.5 |
|
24 |
1.510 |
-1.460 |
-3.530 |
0.710 |
40.0 |
0.021 |
7.3 |
12.8 |
|
25 |
0.180 |
0.050 |
0.380 |
0.030 |
29.3 |
1.418 |
501.2 |
639.6 |
|
26 |
0.060 |
-0.250 |
-3.240 |
0.680 |
8.4 |
0.624 |
220.4 |
80.6 |
|
27 |
3.650 |
-0.080 |
-0.320 |
0.020 |
24.6 |
29.777 |
10527.1 |
11269.6 |
|
28 |
1.420 |
-0.070 |
-0.380 |
0.030 |
37.9 |
3.208 |
1134.0 |
1870.5 |
|
29 |
3.700 |
-0.520 |
-2.310 |
0.520 |
36.6 |
6.219 |
2198.4 |
3503.0 |
|
30 |
-1.860 |
0.180 |
0.680 |
0.080 |
37.2 |
0.298 |
105.5 |
170.6 |
|
31 |
1.010 |
0.020 |
0.130 |
0.000 |
25.4 |
2.929 |
1035.5 |
1143.2 |
|
32 |
1.260 |
-0.490 |
-8.590 |
0.940 |
37.1 |
0.600 |
212.1 |
342.5 |
|
33 |
-1.870 |
-0.120 |
-0.390 |
0.030 |
43.5 |
0.555 |
196.3 |
371.3 |
|
34 |
0.470 |
-0.500 |
-13.620 |
0.970 |
40.0 |
0.253 |
89.4 |
155.6 |
|
35 |
-0.960 |
-0.420 |
-4.020 |
0.760 |
38.5 |
0.083 |
29.2 |
48.9 |
|
36 |
-7.450 |
0.480 |
1.480 |
0.300 |
38.5 |
0.003 |
1.2 |
2.0 |
|
37 |
-0.010 |
-0.170 |
-3.480 |
0.710 |
27.5 |
0.564 |
199.2 |
238.3 |
|
38 |
1.780 |
-0.470 |
-4.670 |
0.810 |
37.3 |
1.082 |
382.6 |
620.8 |
|
39 |
1.770 |
-0.200 |
-1.570 |
0.330 |
38.5 |
2.829 |
1000.1 |
1674.9 |
|
40 |
1.900 |
-0.500 |
-4.770 |
0.820 |
38.8 |
1.073 |
379.5 |
640.5 |
|
41 |
-0.850 |
-0.010 |
-0.300 |
0.020 |
17.8 |
0.415 |
146.8 |
113.6 |
|
42 |
-3.480 |
-0.360 |
-0.880 |
0.140 |
40.0 |
0.008 |
2.9 |
5.0 |
|
43 |
-1.470 |
-0.830 |
-2.260 |
0.510 |
18.3 |
0.021 |
7.3 |
5.8 |
|
44 |
-0.380 |
0.070 |
0.310 |
0.140 |
30.8 |
0.869 |
307.3 |
412.0 |
|
45 |
-5.570 |
0.170 |
1.950 |
0.430 |
38.5 |
0.007 |
2.5 |
4.2 |
|
47 |
0.045 |
-0.101 |
0.469 |
0.099 |
5.5 |
0.881 |
311.3 |
74.5 |
|
48 |
-1.070 |
0.270 |
0.740 |
0.100 |
38.9 |
0.922 |
325.9 |
551.9 |
|
49 |
-1.440 |
0.170 |
0.370 |
0.030 |
17.4 |
0.385 |
136.1 |
102.8 |
|
50 |
-0.320 |
-0.190 |
-0.420 |
0.030 |
38.5 |
0.363 |
128.3 |
214.9 |
|
51 |
-0.970 |
0.110 |
0.480 |
0.040 |
32.6 |
0.556 |
196.6 |
278.9 |
|
52 |
0.780 |
-0.610 |
-1.620 |
0.350 |
37.0 |
0.241 |
85.3 |
137.1 |
|
53 |
-0.070 |
-0.720 |
1.590 |
0.330 |
39.2 |
0.066 |
23.5 |
40.1 |
|
54 |
-0.070 |
-0.240 |
-0.930 |
0.150 |
39.5 |
0.386 |
136.4 |
234.3 |
|
55 |
3.050 |
-0.930 |
-5.200 |
0.840 |
39.8 |
0.687 |
243.0 |
420.2 |
|
56 |
0.690 |
-0.770 |
-4.370 |
0.790 |
40.0 |
0.116 |
41.2 |
71.6 |
|
57 |
4.650 |
-2.580 |
-5.500 |
0.860 |
40.9 |
0.007 |
2.6 |
4.6 |
|
58 |
0.230 |
-0.780 |
-3.860 |
0.750 |
39.4 |
0.072 |
25.3 |
43.4 |
|
59 |
4.620 |
-1.480 |
-7.990 |
0.930 |
40.0 |
0.432 |
152.7 |
265.7 |
|
60 |
-1.600 |
-0.520 |
-3.010 |
0.640 |
40.0 |
0.030 |
10.5 |
18.2 |
|
61 |
-1.560 |
-0.920 |
-3.030 |
0.650 |
40.0 |
0.007 |
2.5 |
4.3 |
|
62 |
-1.430 |
-0.990 |
-1.760 |
0.380 |
40.0 |
0.006 |
2.2 |
3.8 |
|
63 |
-1.730 |
-0.080 |
-0.270 |
0.010 |
39.4 |
0.132 |
46.7 |
80.0 |
|
64 |
-1.950 |
-0.150 |
-0.870 |
0.130 |
40.0 |
0.082 |
28.9 |
50.3 |
|
65 |
-0.040 |
-1.960 |
-3.720 |
0.730 |
40.0 |
0.001 |
0.2 |
0.4 |
|
66 |
-0.330 |
-0.760 |
-3.070 |
0.650 |
40.0 |
0.044 |
15.4 |
26.8 |
|
68 |
-1.500 |
-0.230 |
-2.620 |
0.580 |
39.9 |
0.096 |
33.8 |
58.7 |
|
69 |
0.980 |
-0.250 |
-1.960 |
0.440 |
37.3 |
1.078 |
381.1 |
618.7 |
|
70 |
-0.360 |
-0.250 |
-2.230 |
0.500 |
40.0 |
0.277 |
98.1 |
170.7 |
|
71 |
1.690 |
0.290 |
2.370 |
0.530 |
29.5 |
14.456 |
5110.4 |
6549.1 |
|
72 |
2.360 |
-0.200 |
-1.820 |
0.400 |
37.5 |
5.129 |
1813.3 |
2961.0 |
|
73 |
0.680 |
-0.100 |
-1.100 |
0.190 |
38.5 |
1.370 |
484.4 |
811.2 |
|
74 |
2.050 |
-0.360 |
-6.540 |
0.900 |
38.5 |
2.087 |
737.8 |
1235.7 |
|
75 |
-0.540 |
-0.170 |
-1.730 |
0.370 |
16.5 |
0.362 |
127.9 |
91.8 |
|
76 |
2.690 |
-0.900 |
-5.650 |
0.860 |
27.5 |
0.746 |
263.8 |
315.6 |
|
79 |
0.760 |
-0.580 |
-1.980 |
0.440 |
38.5 |
0.257 |
91.0 |
152.4 |
|
80 |
0.480 |
-0.530 |
-3.910 |
0.750 |
27.5 |
0.279 |
98.6 |
118.0 |
|
81 |
-0.840 |
-0.260 |
-3.960 |
0.760 |
37.9 |
0.168 |
59.3 |
97.8 |
|
82 |
0.230 |
0.410 |
7.090 |
0.910 |
29.6 |
5.047 |
1784.1 |
2295.7 |
|
83 |
-0.880 |
-0.450 |
-3.290 |
0.680 |
40.0 |
0.079 |
27.9 |
48.5 |
|
84 |
5.330 |
-0.680 |
-15.180 |
0.980 |
28.2 |
21.291 |
7527.0 |
9246.5 |
|
85 |
3.430 |
-0.480 |
-5.180 |
0.840 |
32.4 |
5.820 |
2057.4 |
2895.2 |
|
86 |
-2.410 |
0.140 |
0.260 |
0.010 |
35.3 |
0.148 |
52.3 |
80.3 |
|
87 |
1.485 |
-0.317 |
2.916 |
0.680 |
39.5 |
1.377 |
486.8 |
835.8 |
|
88 |
2.224 |
-0.559 |
1.345 |
0.475 |
16.7 |
1.918 |
678.2 |
491.5 |
|
89 |
-1.200 |
0.130 |
0.520 |
0.050 |
16.8 |
0.435 |
153.6 |
112.2 |
|
90 |
0.710 |
0.020 |
0.320 |
0.020 |
31.2 |
2.179 |
770.3 |
1044.4 |
|
91 |
-2.000 |
-0.144 |
1.497 |
0.310 |
35.7 |
0.081 |
28.6 |
44.4 |
|
92 |
-3.05 |
-0.57 |
-1.08 |
0.19 |
38.5 |
0.006 |
2.1 |
3.5 |
|
93 |
-3.85 |
-0.71 |
-1.46 |
0.3 |
40.0 |
0.002 |
0.5 |
1.0 |
|
94 |
3.7 |
-1.67 |
-5.6 |
0.86 |
40.0 |
0.085 |
30.2 |
52.5 |
|
95 |
2.67 |
-1.44 |
-6.3 |
0.89 |
27.5 |
0.122 |
43.2 |
51.7 |
|
96 |
-0.92 |
-0.29 |
-4.91 |
0.83 |
40.0 |
0.137 |
48.3 |
84.1 |
|
97 |
-4.17 |
-0.78 |
-1.64 |
0.35 |
34.3 |
0.001 |
0.3 |
0.5 |
|
98 |
1.75 |
0.04 |
0.23 |
0.01 |
39.2 |
6.664 |
2356.0 |
4018.5 |
|
99 |
-0.63 |
-0.14 |
-0.51 |
0.05 |
0.0 |
0.533 |
188.3 |
0.0 |
Alternatively, the functions tried were :-
(Mi/GDP) = a + b*(Ti)
(Mi/GDP) = a * (Ti)b
where Mi is imports in US $ million and Ti is tariff rate in the ith commodity groups respectively seen at the 2 digit level.
The latter function yielded a better fit and hence was chosen for further analysis. Here, the b co-efficients directly give the elasticity of the imports to GDP ratio for ith commodity group with respect to tariff rates for that commodity group. Using these elasticities the import to GDP ratio for financial year 1999-2000 were projected taking the actual tariff rates from the budget document, 1999-2000. Given the growth rates of GDP projected for 1999-2000 from the Plan document, the levels of imports were estimated for the year. On the basis of these estimated imports and the given tariff rates, the total revenue was also looked at. The exemptions allowed under different heads have not been included. It may be mentioned that a comparison of the actual revenue collection to the potential revenue based on the prevalent tariff rates during the years for which data was available i.e. 1991-92 to 1997-98 showed a lower revenue collection than potential. The ratio varied from 59% to 86%, which at least partly can be explained by a plethora of exemptions under different categories.
The projections based on the current status indicate that the imports during 1999-2000 would be of the order of US $ 47983 million. This would imply an increase of 14.6% over the actual US $ 41887 million during 1998-99. The revenue corresponding to these imports would be Rs. 63272 crore in 1999-2000. The detailed results are in Table 2.
It was observed that the elasticities were greater than 1 for only thirteen sectors where the change in tariff led to a higher percentage change in imports. These included activities of preparations of vegetables, fruit, nuts or other parts of plants; fish and crustaceans; animal or vegetable fats and oils and its products; preparation of cereals, flour and other products; beverages, spirts and vinegar; tobacco and manufactured tobacco substitutes; impregnated, coated and laminated textile fabrics and textile articles for industrial use; toys, games and sports requisites; carpets and other textile floor coverings; sugars and sugar confectionery; headgear and parts thereof; furniture, bedding and allied articles, lighting, fittings, illuminated articles, prefabricated buildings; cocoa and cocoa preparations. For all other sectors, the elasticities are less than one. In certain cases the elasticities were positive. Here any reduction rate would lead to a reduction in imports and also a decline in revenue.
|
Table 3 |
||||
|
SCENARIO 1 (Avg. Tariff half the Base Case and Peak to Avg. Factor of 5) |
||||
| 2 digit Commodity Groups |
Avg. |
M/GDP |
Total |
Total |
1 |
17 |
0.002 |
0.7 |
0.5 |
2 |
17 |
0.006 |
2.0 |
1.5 |
3 |
17 |
0.003 |
1.1 |
0.8 |
4 |
17 |
0.037 |
13.0 |
9.6 |
5 |
17 |
0.02 |
7.1 |
5.2 |
6 |
17 |
0.007 |
2.3 |
1.7 |
7 |
17 |
0.745 |
263.2 |
194.7 |
8 |
17 |
1.185 |
419.0 |
309.9 |
9 |
17 |
0.105 |
37.1 |
27.5 |
11 |
17 |
0.002 |
0.9 |
0.6 |
12 |
17 |
0.05 |
17.7 |
13.1 |
13 |
17 |
0.112 |
39.6 |
29.3 |
14 |
17 |
0.003 |
1.0 |
0.7 |
15 |
17 |
6.565 |
2321.1 |
1716.4 |
16 |
17 |
0 |
0.1 |
0.0 |
17 |
17 |
2.035 |
719.3 |
531.9 |
18 |
17 |
0.088 |
31.0 |
22.9 |
19 |
17 |
0.023 |
8.1 |
6.0 |
20 |
17 |
0.014 |
4.8 |
3.5 |
21 |
80 |
0.149 |
52.8 |
183.9 |
22 |
80 |
0.105 |
37.0 |
128.8 |
23 |
17 |
0.086 |
30.6 |
22.6 |
24 |
17 |
0.072 |
25.6 |
18.9 |
25 |
17 |
1.379 |
487.7 |
360.6 |
26 |
5 |
0.71 |
251.0 |
54.6 |
27 |
17 |
30.672 |
10843.3 |
8018.6 |
28 |
17 |
3.393 |
1199.5 |
887.0 |
29 |
17 |
9.269 |
3277.0 |
2423.4 |
30 |
17 |
0.259 |
91.6 |
67.8 |
31 |
17 |
2.906 |
1027.2 |
759.6 |
32 |
17 |
0.88 |
311.0 |
230.0 |
33 |
17 |
0.11 |
38.8 |
28.7 |
34 |
17 |
0.388 |
137.2 |
101.5 |
35 |
17 |
0.116 |
41.2 |
30.5 |
36 |
17 |
0.002 |
0.8 |
0.6 |
37 |
17 |
0.612 |
216.2 |
159.9 |
38 |
17 |
1.566 |
553.5 |
409.3 |
39 |
17 |
3.331 |
1177.7 |
870.9 |
40 |
17 |
1.622 |
573.3 |
423.9 |
41 |
17 |
0.415 |
146.9 |
108.6 |
42 |
17 |
0.011 |
3.9 |
2.9 |
43 |
17 |
0.022 |
7.7 |
5.7 |
44 |
17 |
0.834 |
294.8 |
218.0 |
45 |
17 |
0.006 |
2.2 |
1.6 |
47 |
5 |
0.889 |
314.3 |
68.4 |
48 |
17 |
0.737 |
260.6 |
192.7 |
49 |
5 |
0.311 |
110.1 |
24.0 |
50 |
17 |
0.424 |
149.9 |
110.8 |
51 |
17 |
0.518 |
183.0 |
135.3 |
52 |
17 |
0.387 |
137.0 |
101.3 |
53 |
17 |
0.121 |
42.9 |
31.7 |
54 |
17 |
0.472 |
167.0 |
123.5 |
55 |
17 |
1.515 |
535.4 |
396.0 |
56 |
17 |
0.225 |
79.6 |
58.8 |
57 |
17 |
0.07 |
24.7 |
18.3 |
58 |
17 |
0.138 |
48.8 |
36.1 |
59 |
17 |
1.532 |
541.7 |
400.6 |
60 |
17 |
0.046 |
16.4 |
12.1 |
61 |
17 |
0.016 |
5.5 |
4.1 |
62 |
17 |
0.014 |
5.1 |
3.8 |
63 |
17 |
0.141 |
50.0 |
36.9 |
64 |
17 |
0.093 |
32.9 |
24.3 |
65 |
17 |
0.004 |
1.3 |
1.0 |
66 |
17 |
0.083 |
29.5 |
21.8 |
68 |
17 |
0.116 |
41.1 |
30.4 |
69 |
17 |
1.312 |
463.9 |
343.0 |
70 |
17 |
0.344 |
121.5 |
89.8 |
71 |
17 |
12.325 |
4357.2 |
3222.2 |
72 |
17 |
6.01 |
2124.6 |
1571.1 |
73 |
17 |
1.487 |
525.7 |
388.7 |
74 |
17 |
2.801 |
990.3 |
732.3 |
75 |
17 |
0.36 |
127.3 |
94.1 |
76 |
17 |
1.15 |
406.7 |
300.8 |
79 |
17 |
0.413 |
146.2 |
108.1 |
80 |
17 |
0.36 |
127.3 |
94.1 |
81 |
17 |
0.207 |
73.1 |
54.0 |
82 |
17 |
4.021 |
1421.7 |
1051.3 |
83 |
17 |
0.116 |
41.0 |
30.3 |
84 |
17 |
30.067 |
10629.3 |
7860.4 |
85 |
17 |
7.925 |
2801.8 |
2071.9 |
86 |
17 |
0.134 |
47.2 |
34.9 |
87 |
17 |
1.798 |
635.8 |
470.1 |
88 |
5 |
3.76 |
1329.1 |
289.1 |
89 |
5 |
0.371 |
131.3 |
28.5 |
90 |
17 |
2.153 |
761.0 |
562.8 |
91 |
17 |
0.09 |
31.8 |
23.5 |
92 |
17 |
0.009 |
3.3 |
2.5 |
93 |
17 |
0.003 |
1.0 |
0.7 |
94 |
17 |
0.356 |
126.0 |
93.2 |
95 |
17 |
0.244 |
86.3 |
63.8 |
96 |
17 |
0.175 |
62.0 |
45.8 |
97 |
17 |
0.002 |
0.6 |
0.4 |
98 |
17 |
6.445 |
2278.5 |
1685.0 |
99 |
0 |
0.533 |
188.3 |
0.0 |
1.3 Alternative Scenario
In view of the WTO negotiations, the average tariff rates are required to be brought down from the existing level of 34%, as seen before. The dispersion is, however, not very high when seen in relation to the rates prevalent in some developed countries, particularly those in USA, Canada, Japan, EU, etc. In view of this, an exercise was undertaken to see the impact on imports and revenue, given the existing elasticities as obtained from above. Two scenarios are looked at (i) where the average tariff rates are reduced by half and the peak rate to the average ratio is 5, and (ii) where the average tariffs are halved and related to elasticity of imports ratio to tariffs.
In Scenario-1, the existing tariffs at the 99 commodity level in 1999-2000 were adjusted to suggested levels of 0,5,17,80 percent for different commodity groups. This resulted in overall average duty rate of about 17.5%, SD of 9.8 and CV of 55.9. The ratio of peak to average would come to 5. With this structure, the average industrial rates came to 15.9, SD of 3.61 and CV of 22.68. The level of imports and revenue collection were then projected based on these tariff rates for different commodity groups. The results from this exercise have been shown in Table-3. It may be observed that the total import bill would increase to an estimated US $ 57534 million. The revenue would decline to an estimated Rs. 41538 crore. This would imply an increase in imports of 19.9% from the present level of US $ 47983 million (estimated) in 1999-2000 and a decline of revenue by 34%. Thus, though the tariffs are halved and brought closer to the levels existing in other developing countries, the imports would not jump significantly, as commonly apprehended, due to low elasticity in most sectors. The decline in revenue is, of course, much higher.
In Scenario-2, the tariff rates in the commodity groups were related to their respective elasticities and also taken to be more uniform i.e., prevailing at 15% and 25%, and 40% in exceptional commodity groups (Misc. edible preparations; Beverages, spirits and vinegar; and Arms and ammunition and parts thereof) where the present actual rates are high. For the commodities with a relatively high and negative elasticities of imports share to tariff rates i.e. £ (-) 0.75, the tariff rates were fixed at 25%. For all other commodity groups, tariff rates were taken to be 15%. Some commodity groups have positive elasticities in imports share to the tariff rates. In such cases, a tariff rate of 25% was taken for the commodity group which had an elasticity of ³ (+) 0.75 and 15% rate for others.
The overall average tariff rate was similar to as in Scenario-1 i.e. the average of 18.4%. The SD is 5.9 and CV is 32.1. The industrial tariffs in Scenario-2 are comparatively lower than the all commodity rates, with greater uniformity in the tariff structure, with the average of 16.0%, SD of 4.4 and CV of 27.6. The overall peak to average ratio in this scenario was about 2.2. The impact on imports in Scenario-2 shows imports to increase to US $ 56504 million i.e. 19.8% over the (estimated) base line situation, which is quite similar to the status as in Scenario-1. The revenue would decline to Rs. 38403 crore which is 40% lower than the base line. The detailed results are in Table 4.
|
Table 4 and Peak to Avg. Factor of 2.5) Based on Elasticity |
|||||
2
digit |
b |
Avg. |
M/GDP |
Total |
Total |
20 |
-2.898 |
25 |
0.004 |
1.6 |
1.7 |
57 |
-2.58 |
25 |
0.026 |
9.1 |
9.9 |
17 |
-2.52 |
25 |
0.77 |
272.2 |
296.0 |
3 |
-2.255 |
25 |
0.001 |
0.4 |
0.5 |
65 |
-1.96 |
25 |
0.002 |
0.6 |
0.7 |
94 |
-1.67 |
25 |
0.187 |
66.2 |
72.0 |
18 |
-1.53 |
25 |
0.049 |
17.2 |
18.7 |
59 |
-1.48 |
25 |
0.866 |
306.1 |
332.9 |
24 |
-1.46 |
25 |
0.041 |
14.6 |
15.8 |
95 |
-1.44 |
25 |
0.14 |
49.5 |
53.9 |
15 |
-1.33 |
25 |
3.931 |
1389.7 |
1511.3 |
22 |
-1.17 |
40 |
0.236 |
83.3 |
144.9 |
62 |
-0.99 |
25 |
0.01 |
3.5 |
3.8 |
21 |
-0.97 |
40 |
0.293 |
103.5 |
180.1 |
55 |
-0.93 |
25 |
1.058 |
374.1 |
406.8 |
61 |
-0.92 |
25 |
0.011 |
3.8 |
4.2 |
11 |
-0.9 |
25 |
0.002 |
0.6 |
0.7 |
76 |
-0.9 |
25 |
0.813 |
287.4 |
312.6 |
43 |
-0.83 |
25 |
0.016 |
5.6 |
6.1 |
58 |
-0.78 |
25 |
0.102 |
36.1 |
39.3 |
97 |
-0.78 |
25 |
0.001 |
0.4 |
0.5 |
56 |
-0.77 |
25 |
0.167 |
59.1 |
64.3 |
4 |
-0.76 |
25 |
0.027 |
9.7 |
10.5 |
66 |
-0.76 |
25 |
0.062 |
22.0 |
23.9 |
53 |
-0.72 |
15 |
0.133 |
46.9 |
30.6 |
93 |
-0.71 |
40 |
0.002 |
0.5 |
1.0 |
84 |
-0.68 |
15 |
32.738 |
11573.6 |
7551.8 |
6 |
-0.64 |
15 |
0.007 |
2.5 |
1.6 |
52 |
-0.61 |
15 |
0.418 |
147.8 |
96.5 |
79 |
-0.58 |
15 |
0.445 |
157.2 |
102.5 |
92 |
-0.57 |
15 |
0.01 |
3.6 |
2.3 |
88 |
-0.559 |
15 |
2.034 |
719.2 |
469.3 |
80 |
-0.53 |
15 |
0.385 |
136.0 |
88.7 |
29 |
-0.52 |
15 |
9.893 |
3497.4 |
2282.0 |
60 |
-0.52 |
15 |
0.049 |
17.5 |
11.4 |
34 |
-0.5 |
15 |
0.413 |
146.0 |
95.3 |
40 |
-0.5 |
15 |
1.726 |
610.3 |
398.2 |
32 |
-0.49 |
15 |
0.935 |
330.6 |
215.7 |
85 |
-0.48 |
15 |
8.416 |
2975.3 |
1941.4 |
38 |
-0.47 |
15 |
1.661 |
587.1 |
383.1 |
83 |
-0.45 |
15 |
0.123 |
43.4 |
28.3 |
35 |
-0.42 |
15 |
0.123 |
43.4 |
28.3 |
42 |
-0.36 |
15 |
0.012 |
4.1 |
2.7 |
74 |
-0.36 |
15 |
2.93 |
1035.9 |
675.9 |
9 |
-0.34 |
15 |
0.11 |
38.8 |
25.3 |
87 |
-0.317 |
15 |
1.871 |
661.5 |
431.6 |
5 |
-0.3 |
15 |
0.021 |
7.4 |
4.8 |
13 |
-0.3 |
15 |
0.116 |
41.1 |
26.8 |
96 |
-0.29 |
15 |
0.182 |
64.2 |
41.9 |
7 |
-0.27 |
15 |
0.77 |
272.3 |
177.7 |
81 |
-0.26 |
15 |
0.214 |
75.5 |
49.3 |
23 |
-0.25 |
15 |
0.089 |
31.5 |
20.6 |
26 |
-0.25 |
15 |
0.54 |
190.7 |
124.5 |
69 |
-0.25 |
15 |
1.354 |
478.6 |
312.3 |
70 |
-0.25 |
15 |
0.355 |
125.3 |
81.8 |
8 |
-0.24 |
15 |
1.221 |
431.8 |
281.8 |
16 |
-0.24 |
15 |
0 |
0.1 |
0.0 |
54 |
-0.24 |
15 |
0.487 |
172.1 |
112.3 |
68 |
-0.23 |
15 |
0.12 |
42.3 |
27.6 |
39 |
-0.2 |
15 |
3.416 |
1207.6 |
787.9 |
72 |
-0.2 |
15 |
6.162 |
2178.4 |
1421.4 |
50 |
-0.19 |
15 |
0.434 |
153.5 |
100.1 |
14 |
-0.17 |
15 |
0.003 |
1.0 |
0.6 |
37 |
-0.17 |
15 |
0.625 |
220.9 |
144.1 |
75 |
-0.17 |
15 |
0.368 |
130.0 |
84.8 |
64 |
-0.15 |
15 |
0.095 |
33.5 |
21.9 |
91 |
-0.144 |
15 |
0.092 |
32.4 |
21.1 |
99 |
-0.14 |
15 |
0.533 |
188.3 |
122.9 |
33 |
-0.12 |
15 |
0.365 |
128.9 |
84.1 |
47 |
-0.101 |
15 |
0.796 |
281.3 |
183.6 |
73 |
-0.1 |
15 |
1.506 |
532.3 |
347.3 |
27 |
-0.08 |
15 |
30.98 |
10952.4 |
7146.4 |
63 |
-0.08 |
15 |
0.143 |
50.5 |
32.9 |
28 |
-0.07 |
15 |
3.423 |
1210.0 |
789.5 |
41 |
-0.01 |
15 |
0.416 |
147.1 |
96.0 |
12 |
0.02 |
15 |
0.05 |
17.7 |
11.5 |
31 |
0.02 |
15 |
2.898 |
1024.7 |
668.6 |
90 |
0.02 |
15 |
2.147 |
759.1 |
495.3 |
98 |
0.04 |
15 |
6.413 |
2267.2 |
1479.3 |
25 |
0.05 |
15 |
1.371 |
484.6 |
316.2 |
44 |
0.07 |
15 |
0.827 |
292.2 |
190.7 |
51 |
0.11 |
15 |
0.511 |
180.5 |
117.8 |
89 |
0.13 |
15 |
0.428 |
151.4 |
98.8 |
86 |
0.14 |
15 |
0.131 |
46.4 |
30.3 |
45 |
0.17 |
15 |
0.006 |
2.1 |
1.4 |
49 |
0.17 |
15 |
0.375 |
132.7 |
86.6 |
30 |
0.18 |
15 |
0.253 |
89.6 |
58.5 |
48 |
0.27 |
15 |
0.713 |
251.9 |
164.4 |
71 |
0.29 |
15 |
11.886 |
4201.9 |
2741.7 |
82 |
0.41 |
15 |
3.82 |
1350.5 |
881.2 |
1 |
0.48 |
15 |
0.002 |
0.6 |
0.4 |
36 |
0.48 |
15 |
0.002 |
0.8 |
0.5 |
2 |
0.6 |
15 |
0.005 |
1.9 |
1.2 |
19 |
1.16 |
25 |
0.036 |
12.7 |
13.8 |
It may be seen from above that a reduction in tariffs will result in decline in revenue, which may partly be compensated by higher levels of dutiable imports and lower incentive for underinvoicing, misdeclaration and smuggling. Secondly, the extent of diversion of imports into exempt channels will decrease as tariff rates are brought down, as has been experienced in many developing countries undergoing reforms.
2. Tariff Structure – India and Other Countries
2.1 Present Status of Tariff Structure
The status of tariff structure in India was compared with other selected countries using the latest Global Trade Analysis Project (GTAP) data base as indicated in McDougall and Elbehri (1998). Table-5 gives the detailed commodity-wise tariff structure in countries like Australia, Japan, Korea, Canada, USA, Great Britain, Sweden and the EFTA composite region. GTAP gives 43 commodity groups. Tariff structure in India during 1999-2000 has been adjusted to bring it in line with the commodity group given in the GTAP data base. Table-6 shows the aggregated status of average duty rates and the dispersion prevailing in these countries for all commodities along with the break up of industrial, agriculture and mining sectors separately. It may be observed that the average duty rates in India during 1999-2000 fall from 34.24 when seen as per 99 commodity groups to 29.7 when aggregated to the 43 commodity groups to match the data for other countries as per GTAP classification. The CV declined from 38.14 to 33.28 with this change in aggregation.
The comparative study of India with these countries shows that the average duty rates range from 4.18% in Canada to 67.15% in Japan and 70.90% in the EFTA region. The sector-wise analysis shows that the average rates are much higher in agriculture sector than mining and industry in most of the developed countries examined here. The average rates are highest for food items like cereals, dairy and meat products and also sugarcane, particularly in developed countries of Japan, Korea, Great Britain, Sweden and EFTA countries. In these countries, the tariff rates in the mining and industrial sectors are low. On the other hand, in India, the agricultural tariffs are much lower as compared to these countries, even though industrial and mining tariff rates still prevail much higher. As far as the CV is concerned, it is very high for most of the countries reaching 226.92 in Japan, 231.04 in Sweden, with the highest being 318.74 in Canada. In India, the CV is relatively low, as also seen before. The overall ratio of the peak tariff rate in the selected developed countries to the average is similarly very high and is over 10 for countries like USA and Britain, and 20.58 in Canada.
Table 5 Average import tariffs, by commodity in Selected Countries |
|||||||||
Commodity Groups |
A U S |
J P N |
K O R |
C A N |
U S A |
G B R |
S W E |
E F T |
IND |
Paddy rice |
1.2 |
503 |
25.6 |
0 |
0.3 |
128.2 |
111.7 |
0 |
0 |
Wheat |
0 |
535.1 |
59.2 |
0.3 |
1.8 |
3.1 |
0.4 |
235.1 |
0 |
Cereal grains n.e.c. |
0 |
450 |
195.3 |
0.2 |
0 |
5.8 |
12.9 |
160.4 |
29.8 |
Vegetables, fruit, nuts |
2.2 |
5.9 |
33.5 |
0.2 |
1.3 |
2.5 |
1.7 |
67.4 |
27.2 |
Oil seeds |
0 |
0 |
7.4 |
0 |
0 |
0 |
0 |
501 |
33.1 |
Sugarcane, Sugar beet |
2 |
142.9 |
51.7 |
7.3 |
63.8 |
75.9 |
76 |
277 |
NA |
Plant-based fibres |
3.3 |
42 |
2 |
3.2 |
0.1 |
37.9 |
33.9 |
68 |
NA |
Crops n.e.c. |
6 |
1.1 |
5.9 |
0.1 |
3.6 |
1.4 |
1.2 |
49.8 |
28.5 |
Cattle, sheep, etc. |
0 |
48.1 |
4.9 |
0 |
0 |
53.5 |
97.3 |
205.1 |
34.2 |
Animal prods. n.e.c. |
0 |
1 |
4 |
0 |
0.3 |
0.3 |
0.2 |
24.9 |
10.4 |
Raw milk |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
NA |
Wool, Silk-worm cocoons |
0 |
0 |
10.7 |
0 |
8.4 |
0 |
0 |
50.9 |
22.8 |
Forestry |
0 |
0 |
1.5 |
0 |
0 |
0 |
0 |
0.2 |
31.5 |
Fishing |
0 |
4.4 |
12.9 |
0 |
0.3 |
4 |
1.4 |
0.3 |
16.5 |
Coal |
0 |
0 |
1 |
0 |
0 |
0.4 |
0.3 |
0.2 |
16.5 |
Oil |
0 |
0.7 |
5 |
8.6 |
0.2 |
0 |
0 |
0.7 |
14.7 |
Gas |
4.8 |
0 |
2.8 |
0 |
0 |
0 |
0 |
0.3 |
NA |
Minerals n.e.c. |
0.6 |
0 |
1.8 |
0 |
0.1 |
0 |
0 |
0 |
22.4 |
Cattle, sheep, etc., meat prods. |
0 |
48.1 |
40.3 |
0 |
0 |
64.4 |
43.6 |
205.1 |
16.5 |
Meat prods. n.e.c. |
0.3 |
61.2 |
40.3 |
5.8 |
1.8 |
1.1 |
3.1 |
187.3 |
39.6 |
Vegetable oils and fats |
0 |
0 |
4.8 |
0 |
0 |
0 |
0 |
501 |
37.1 |
Dairy prods. |
12.8 |
350.5 |
100.9 |
86.1 |
51.8 |
20.5 |
4.7 |
265.1 |
35.6 |
Precessed rice |
1.2 |
503 |
126.8 |
0 |
0.3 |
19.5 |
64.6 |
0 |
NA |
Sugar |
3.1 |
142.9 |
4.9 |
7.3 |
63.8 |
61.9 |
23 |
227 |
31.2 |
Food prods.n.e.c. |
3.6 |
6.8 |
17.9 |
4.2 |
1.9 |
2.8 |
2.2 |
2.8 |
41.6 |
Beverages, tobacco prods. |
5.3 |
3.7 |
35.3 |
6.9 |
19 |
3.6 |
2.7 |
4.1 |
99.8 |
Textiles |
21.5 |
3.5 |
7.1 |
5.6 |
7.3 |
2.3 |
1.1 |
1.5 |
39.1 |
Wearing apparel |
6.6 |
6.8 |
8 |
18 |
11.6 |
7.2 |
4.7 |
4.5 |
40 |
Leather prods. |
19.3 |
9.6 |
5.8 |
12 |
8 |
2.8 |
2 |
2.9 |
31.7 |
Wood prods. |
7.2 |
0.9 |
6.9 |
1 |
0.7 |
0.9 |
0.5 |
0.4 |
27.8 |
Paper prods.,publishing |
6.5 |
0.5 |
4.1 |
0.2 |
0.4 |
0.7 |
0.3 |
0.1 |
34.8 |
Petroleum, coal prods. |
0.1 |
2.7 |
4.3 |
1.3 |
3.5 |
0.5 |
0.1 |
0.2 |
28.1 |
Chemical, rubber,plastic prods. |
7.7 |
2.2 |
7.5 |
1.5 |
2.9 |
1 |
0.4 |
0.4 |
37 |
Mineral prods. N.e.c. |
9.8 |
1.6 |
7.4 |
1.4 |
5 |
1.3 |
0.7 |
0.4 |
35.2 |
Ferrous metals |
7 |
1.6 |
6 |
2.2 |
2.8 |
0.7 |
0.3 |
0.3 |
37.7 |
Metals n.e.c. |
5.6 |
0.4 |
5 |
0.5 |
0.7 |
0.8 |
0.5 |
0.4 |
33 |
Metal prods. |
12.6 |
1 |
8 |
1.7 |
2.6 |
1.5 |
0.7 |
0.4 |
32.8 |
Motor vehicles, parts |
15.6 |
1.3 |
8.8 |
0.8 |
1.4 |
1.3 |
1.1 |
0.5 |
39.5 |
Transport equipment n.e.c. |
3.5 |
2.4 |
2.7 |
0.7 |
1.6 |
0.7 |
0.6 |
0.8 |
24.7 |
Electronic equipment |
4.9 |
0.9 |
8 |
0.4 |
1.1 |
2.6 |
1 |
1.2 |
32.3 |
Machinery, equipment n.e.c. |
9.4 |
0.2 |
8 |
1.1 |
2.3 |
1.5 |
0.7 |
0.4 |
29.1 |
Manufactures n.e.c. |
11.7 |
1.3 |
7.7 |
1.3 |
2.4 |
3 |
1.6 |
0.6 |
35.2 |
Electricity |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
Source : GTAP Database |
|||||||||
AVG. |
4.5 |
67.1 |
21 |
4.2 |
6.4 |
12 |
11.6 |
70.9 |
29.7 |
STD.DEV. |
5.5 |
152.4 |
37.6 |
13.3 |
15.3 |
26.4 |
26.7 |
129.1 |
16.2 |
CV |
121.5 |
226.9 |
179.5 |
318.7 |
241.4 |
220.2 |
231 |
182 |
54.6 |
Max |
21.5 |
535.1 |
195.3 |
86.1 |
63.8 |
128.2 |
111.7 |
501 |
99.8 |
Ratio Max. /Avg. |
4.7 |
8 |
9.3 |
20.6 |
10 |
10.7 |
9.7 |
7.1 |
3.4 |
|
Source : Derived from GTAP Database, Version 4 |
|||||||||
A U S |
Australia (1993) |
||||||||
J P N |
Japan (1996) |
||||||||
K O R |
Republic of Korea ( 1995) |
||||||||
C A N |
Canada (1996) |
||||||||
U S A |
United States of America (1996) |
||||||||
G B R |
Great Britain |
||||||||
S W E |
Sweden |
||||||||
E F T |
EFTA (Composite Region) (includes Iceland, Norway and Switzerland) |
||||||||
IND |
India (1999-2000) |
||||||||
|
Table 6 : Average import tariffs, by commodity and importing region |
|||||||||
A U S |
J P N |
K O R |
C A N |
U S A |
G B R |
S W E |
E F T |
IND |
|
|
All Commodities |
|||||||||
AVG. |
4.5 |
67.1 |
21 |
4.2 |
6.4 |
12 |
11.6 |
70.9 |
29.7 |
STD.DEV. |
5.5 |
152.4 |
37.6 |
13.3 |
15.3 |
26.4 |
26.7 |
129.1 |
16.2 |
CV |
121.5 |
226.9 |
179.5 |
318.7 |
241.4 |
220.2 |
231 |
182 |
54.6 |
Max |
21.5 |
535.1 |
195.3 |
86.1 |
63.8 |
128.2 |
111.7 |
501 |
99.8 |
Ratio Max. /Avg. |
4.7 |
8 |
9.3 |
20.6 |
10 |
10.7 |
9.7 |
7.1 |
3.4 |
|
Agriculture |
|||||||||
AVG. |
2 |
135.5 |
36.8 |
5.8 |
10.4 |
23 |
22.8 |
144.4 |
30.5 |
STD.DEV. |
3.1 |
197.9 |
49.5 |
18.6 |
21.2 |
34.8 |
35.2 |
154.6 |
21.8 |
CV |
159.2 |
146.1 |
134.5 |
321.4 |
204.3 |
151.6 |
154.2 |
107 |
71.6 |
Max. |
12.8 |
535.1 |
195.3 |
86.1 |
63.8 |
128.2 |
111.7 |
501 |
99.8 |
Ratio Max. / Avg. |
6.6 |
3.9 |
5.3 |
14.9 |
6.1 |
5.6 |
4.9 |
3.5 |
3.3 |
|
Industry |
|||||||||
AVG. |
9 |
2.4 |
6.8 |
3 |
3.2 |
2 |
1.1 |
0.9 |
30.8 |
STD.DEV. |
6.1 |
2.6 |
2.8 |
5 |
3.3 |
1.7 |
1.1 |
1.2 |
10.3 |
CV |
68 |
108.6 |
41.7 |
166.6 |
103.2 |
88.8 |
103 |
129 |
33.3 |
Max. |
21.5 |
9.6 |
12.9 |
18 |
11.6 |
7.2 |
4.7 |
4.5 |
40 |
Ratio Max. / Avg. |
2.4 |
4 |
1.9 |
6 |
3.7 |
3.7 |
4.4 |
4.9 |
1.3 |
|
Mining |
|||||||||
AVG. |
1.9 |
0.6 |
3.3 |
1.7 |
0.8 |
0.3 |
0.2 |
0.3 |
22.9 |
STD.DEV. |
2.6 |
1.1 |
1.7 |
3.4 |
1.4 |
0.3 |
0.2 |
0.2 |
7.7 |
CV |
141.4 |
166.1 |
51.5 |
196.3 |
183 |
119 |
138.2 |
78.9 |
33.6 |
Max. |
5.6 |
2.7 |
5 |
8.6 |
3.5 |
0.8 |
0.5 |
0.7 |
33 |
Ratio Max. / Avg. |
3 |
4.3 |
1.5 |
5 |
4.7 |
2.8 |
3.3 |
2.3 |
1.4 |
|
Source : Derived from GTAP Database, Version 4 |
|||||||||
A U S |
Australia (1993) |
||||||||
J P N |
Japan (1996) |
||||||||
K O R |
Republic of Korea ( 1995) |
||||||||
C A N |
Canada (1996) |
||||||||
U S A |
United States of America (1996) |
||||||||
G B R |
Great Britain |
||||||||
S W E |
Sweden |
||||||||
E F T |
EFTA (Composite Region) (includes Iceland, Norway and Switzerland) |
||||||||
IND |
India (1999-2000) |
||||||||
2.2 Alternative Scenario
An exercise was undertaken to look at the impact of reduction in tariff rates in selected developed countries, on the lines discussed in the alternate scenario for India. In Case-1, the tariffs were reduced to half for certain agricultural commodities in countries like Japan, Korea, Great Britain, Sweden, EFTA, and also for some sectors in USA and Canada. Tariff structure in Australia was not altered since the rates are anyway low. In Case-2, the agricultural tariffs were reduced such that the ratio of peak to the average rates came down to around 5 for these selected countries. The results are given in Table-7 and 8 respectively.
It may be seen that in Case-1, reduction in the agricultural tariffs would bring down the overall tariff from 67.1% to 36.5% in Japan, 21% to 16.1% in Korea, 12% to 9.7% in Great Britain, 11.6% to 8.3% in Sweden and 70.9% to 38.9% in EFTA countries and in USA from 6.4% to 4.4%. In case of Canada, tariff rate was halved for dairy products only and this brought down the overall average from 4.2 to 3.2. The dispersion as seen by the CV declines somewhat marginally in all these countries.
In Case-2, when the peak to average ratios were brought to around 5, it may be observed that the overall average rates fall to 16.8% in Japan, 15.7% in Korea, 2.6% in Canada, 3.6% in USA, 7.4%, 5.8% in Sweden and 20% in EFTA countries. Here the fall in dispersion, as seen by the CV is much more pronounced in all the countries.
It may be mentioned that the results of the analysis are based on 43 commodity classification given by GTAP. In this classification, the share of agricultural commodities, where the bulk of the reductions are suggested, constitutes around 50% of the total number of commodities. The results will look very different if different levels of aggregation are taken and the average tariff rates and dispersion in alternative scenarios suggested here.
It is important to emphasize development of a criteria for finalisation of tariff structure which is fair and rational. The basis could be average tariff rates, co-efficient of variation or even the peak to average rate. Countries like India and many other LDCs have relatively high but similar average rates for both agricultural and industrial imports. Reduction of tariffs in these LDCs is being underlined. On the other hand, as seen above, many of the developed countries have very high agricultural (average) tariffs along with very low industrial tariffs. Some of these developed countries could be asked to limit the dispersion and reduce peak rates, particularly agricultural tariff rates. It is these aspects which need to be focused while negotiating reduction of tariff rates.
|
Table 7 Adjusted Average Import Tariff - Case I |
|||||||||
A U S |
J P N |
K O R |
C A N |
U S A |
G B R |
S W E |
E F T |
IND * |
|
Paddy rice |
1.2 |
250 |
25.6 |
0 |
0.3 |
65 |
55 |
0 |
0 |
Wheat |
0 |
270 |
59.2 |
0.3 |
1.8 |
3.1 |
0.4 |
120 |
0 |
Cereal grains n.e.c. |
0 |
225 |
100 |
0.2 |
0 |
5.8 |
12.9 |
80 |
13.1 |
Vegetables, fruit, nuts |
2.2 |
5.9 |
33.5 |
0.2 |
1.3 |
2.5 |
1.7 |
67.4 |
15.8 |
Oil seeds |
0 |
0 |
7.4 |
0 |
0 |
0 |
0 |
250 |
17 |
Sugarcane, Sugar beet |
2 |
70 |
51.7 |
7.3 |
35 |
40 |
40 |
140 |
NA |
Plant-based fibres |
3.3 |
42 |
2 |
3.2 |
0.1 |
37.9 |
33.9 |
68 |
NA |
Crops n.e.c. |
6 |
1.1 |
5.9 |
0.1 |
3.6 |
1.4 |
1.2 |
49.8 |
15.9 |
Cattle, sheep, etc. |
0 |
48.1 |
4.9 |
0 |
0 |
53.5 |
50 |
100 |
15 |
Animal prods. n.e.c. |
0 |
1 |
4 |
0 |
0.3 |
0.3 |
0.2 |
24.9 |
10.7 |
Raw milk |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
NA |
Wool, Silk-worm cocoons |
0 |
0 |
10.7 |
0 |
8.4 |
0 |
0 |
50.9 |
17 |
Forestry |
0 |
0 |
1.5 |
0 |
0 |
0 |
0 |
0.2 |
17 |
Fishing |
0 |
4.4 |
12.9 |
0 |
0.3 |
4 |
1.4 |
0.3 |
17 |
Coal |
0 |
0 |
1 |
0 |
0 |
0.4 |
0.3 |
0.2 |
17 |
Oil |
0 |
0.7 |
5 |
8.6 |
0.2 |
0 |
0 |
0.7 |
17 |
Gas |
4.8 |
0 |
2.8 |
0 |
0 |
0 |
0 |
0.3 |
NA |
Minerals n.e.c. |
0.6 |
0 |
1.8 |
0 |
0.1 |
0 |
0 |
0 |
13.8 |
Cattle, sheep, etc., meat prods. |
0 |
48.1 |
40.3 |
0 |
0 |
64.4 |
43.6 |
100 |
17 |
Meat prods. n.e.c. |
0.3 |
61.2 |
40.3 |
5.8 |
1.8 |
1.1 |
3.1 |
95 |
17 |
Vegetable oils and fats |
0 |
0 |
4.8 |
0 |
0 |
0 |
0 |
250 |
17 |
Dairy prods. |
12.8 |
175 |
50 |
45 |
25 |
20.5 |
4.7 |
140 |
17 |
Precessed rice |
1.2 |
250 |
65 |
0 |
0.3 |
19.5 |
64.6 |
0 |
NA |
Sugar |
3.1 |
70 |
4.9 |
7.3 |
35 |
61.9 |
23 |
115 |
17 |
Food prods.n.e.c. |
3.6 |
6.8 |
17.9 |
4.2 |
1.9 |
2.8 |
2.2 |
2.8 |
26.4 |
Beverages, tobacco prods. |
5.3 |
3.7 |
35.3 |
6.9 |
19 |
3.6 |
2.7 |
4.1 |
59 |
Textiles |
21.5 |
3.5 |
7.1 |
5.6 |
7.3 |
2.3 |
1.1 |
1.5 |
17 |
Wearing apparel |
6.6 |
6.8 |
8 |
18 |
11.6 |
7.2 |
4.7 |
4.5 |
17 |
Leather prods. |
19.3 |
9.6 |
5.8 |
12 |
8 |
2.8 |
2 |
2.9 |
17 |
Wood prods. |
7.2 |
0.9 |
6.9 |
1 |
0.7 |
0.9 |
0.5 |
0.4 |
15 |
Paper prods.,publishing |
6.5 |
0.5 |
4.1 |
0.2 |
0.4 |
0.7 |
0.3 |
0.1 |
14.9 |
Petroleum, coal prods. |
0.1 |
2.7 |
4.3 |
1.3 |
3.5 |
0.5 |
0.1 |
0.2 |
17 |
Chemical, rubber,plastic prods. |
7.7 |
2.2 |
7.5 |
1.5 |
2.9 |
1 |
0.4 |
0.4 |
17 |
Mineral prods. N.e.c. |
9.8 |
1.6 |
7.4 |
1.4 |
5 |
1.3 |
0.7 |
0.4 |
17 |
Ferrous metals |
7 |
1.6 |
6 |
2.2 |
2.8 |
0.7 |
0.3 |
0.3 |
16.9 |
Metals n.e.c. |
5.6 |
0.4 |
5 |
0.5 |
0.7 |
0.8 |
0.5 |
0.4 |
17 |
Metal prods. |
12.6 |
1 |
8 |
1.7 |
2.6 |
1.5 |
0.7 |
0.4 |
16.4 |
Motor vehicles, parts |
15.6 |
1.3 |
8.8 |
0.8 |
1.4 |
1.3 |
1.1 |
0.5 |
17 |
Transport equipment n.e.c. |
3.5 |
2.4 |
2.7 |
0.7 |
1.6 |
0.7 |
0.6 |
0.8 |
10.1 |
Electronic equipment |
4.9 |
0.9 |
8 |
0.4 |
1.1 |
2.6 |
1 |
1.2 |
17 |
Machinery, equipment n.e.c. |
9.4 |
0.2 |
8 |
1.1 |
2.3 |
1.5 |
0.7 |
0.4 |
17 |
Manufactures n.e.c. |
11.7 |
1.3 |
7.7 |
1.3 |
2.4 |
3 |
1.6 |
0.6 |
16.6 |
Electricity |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
Source : GTAP Database |
|||||||||
AVG. |
4.5 |
36.5 |
16.1 |
3.2 |
4.4 |
9.7 |
8.3 |
38.9 |
16.2 |
STD.DEV. |
5.5 |
75.9 |
21.6 |
7.5 |
8.5 |
18.9 |
17 |
64.9 |
8.7 |
CV |
121.5 |
207.9 |
133.7 |
233.5 |
193.7 |
195.4 |
204.8 |
166.7 |
53.8 |
Max |
21.5 |
270 |
100 |
45 |
35 |
65 |
64.6 |
250 |
59 |
Ratio Max. /Avg. |
4.7 |
7.4 |
6.2 |
13.9 |
8 |
6.7 |
7.8 |
6.4 |
3.6 |
|
Source : Derived from GTAP Database, Version 4 |
|||||||||
A U S |
Australia (1993) |
||||||||
J P N |
Japan (1996) |
||||||||
K O R |
Republic of Korea ( 1995) |
||||||||
C A N |
Canada (1996) |
||||||||
U S A |
United States of America (1996) |
||||||||
G B R |
Great Britain |
||||||||
S W E |
Sweden |
||||||||
E F T |
EFTA (Composite Region) (includes Iceland, Norway and Switzerland) |
||||||||
IND * |
India (1999-2000) |
||||||||
|
Table 8 Adjusted Average import tariff - Case II |
|||||||||
A U S |
J P N |
K O R |
C A N |
U S A |
G B R |
S W E |
E F T |
IND |
|
Paddy rice |
1.2 |
85 |
25.6 |
0 |
0.3 |
35 |
30 |
0 |
0 |
Wheat |
0 |
85 |
59.2 |
0.3 |
1.8 |
3.1 |
0.4 |
50 |
0 |
Cereal grains n.e.c. |
0 |
85 |
80 |
0.2 |
0 |
5.8 |
12.9 |
40 |
13.1 |
Vegetables, fruit, nuts |
2.2 |
5.9 |
33.5 |
0.2 |
1.3 |
2.5 |
1.7 |
35 |
15.8 |
Oil seeds |
0 |
0 |
7.4 |
0 |
0 |
0 |
0 |
100 |
17 |
Sugarcane, Sugar beet |
2 |
35 |
51.7 |
7.3 |
20 |
40 |
30 |
70 |
NA |
Plant-based fibres |
3.3 |
42 |
2 |
3.2 |
0.1 |
37.9 |
30 |
35 |
NA |
Crops n.e.c. |
6 |
1.1 |
5.9 |
0.1 |
3.6 |
1.4 |
1.2 |
49.8 |
15.9 |
Cattle, sheep, etc. |
0 |
48.1 |
4.9 |
0 |
0 |
40 |
30 |
50 |
15 |
Animal prods. n.e.c. |
0 |
1 |
4 |
0 |
0.3 |
0.3 |
0.2 |
24.9 |
10.7 |
Raw milk |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
NA |
Wool, Silk-worm cocoons |
0 |
0 |
10.7 |
0 |
8.4 |
0 |
0 |
50.9 |
17 |
Forestry |
0 |
0 |
1.5 |
0 |
0 |
0 |
0 |
0.2 |
17 |
Fishing |
0 |
4.4 |
12.9 |
0 |
0.3 |
4 |
1.4 |
0.3 |
17 |
Coal |
0 |
0 |
1 |
0 |
0 |
0.4 |
0.3 |
0.2 |
17 |
Oil |
0 |
0.7 |
5 |
8.6 |
0.2 |
0 |
0 |
0.7 |
17 |
Gas |
4.8 |
0 |
2.8 |
0 |
0 |
0 |
0 |
0.3 |
NA |
Minerals n.e.c. |
0.6 |
0 |
1.8 |
0 |
0.1 |
0 |
0 |
0 |
13.8 |
Cattle, sheep, etc., meat prods. |
0 |
48.1 |
40.3 |
0 |
0 |
35 |
30 |
50 |
17 |
Meat prods. n.e.c. |
0.3 |
30 |
40.3 |
5.8 |
1.8 |
1.1 |
3.1 |
50 |
17 |
Vegetable oils and fats |
0 |
0 |
4.8 |
0 |
0 |
0 |
0 |
100 |
17 |
Dairy prods. |
12.8 |
85 |
80 |
20 |
20 |
20.5 |
4.7 |
70 |
17 |
Precessed rice |
1.2 |
85 |
35 |
0 |
0.3 |
19.5 |
30 |
0 |
NA |
Sugar |
3.1 |
35 |
4.9 |
7.3 |
20 |
35 |
23 |
60 |
17 |
Food prods.n.e.c. |
3.6 |
6.8 |
17.9 |
4.2 |
1.9 |
2.8 |
2.2 |
2.8 |
26.4 |
Beverages, tobacco prods. |
5.3 |
3.7 |
35.3 |
6.9 |
19 |
3.6 |
2.7 |
4.1 |
59 |
Textiles |
21.5 |
3.5 |
7.1 |
5.6 |
7.3 |
2.3 |
1.1 |
1.5 |
17 |
Wearing apparel |
6.6 |
6.8 |
8 |
18 |
11.6 |
7.2 |
4.7 |
4.5 |
17 |
Leather prods. |
19.3 |
9.6 |
5.8 |
12 |
8 |
2.8 |
2 |
2.9 |
17 |
Wood prods. |
7.2 |
0.9 |
6.9 |
1 |
0.7 |
0.9 |
0.5 |
0.4 |
15 |
Paper prods.,publishing |
6.5 |
0.5 |
4.1 |
0.2 |
0.4 |
0.7 |
0.3 |
0.1 |
14.9 |
Petroleum, coal prods. |
0.1 |
2.7 |
4.3 |
1.3 |
3.5 |
0.5 |
0.1 |
0.2 |
17 |
Chemical, rubber,plastic prods. |
7.7 |
2.2 |
7.5 |
1.5 |
2.9 |
1 |
0.4 |
0.4 |
17 |
Mineral prods. N.e.c. |
9.8 |
1.6 |
7.4 |
1.4 |
5 |
1.3 |
0.7 |
0.4 |
17 |
Ferrous metals |
7 |
1.6 |
6 |
2.2 |
2.8 |
0.7 |
0.3 |
0.3 |
16.9 |
Metals n.e.c. |
5.6 |
0.4 |
5 |
0.5 |
0.7 |
0.8 |
0.5 |
0.4 |
17 |
Metal prods. |
12.6 |
1 |
8 |
1.7 |
2.6 |
1.5 |
0.7 |
0.4 |
16.4 |
Motor vehicles, parts |
15.6 |
1.3 |
8.8 |
0.8 |
1.4 |
1.3 |
1.1 |
0.5 |
17 |
Transport equipment n.e.c. |
3.5 |
2.4 |
2.7 |
0.7 |
1.6 |
0.7 |
0.6 |
0.8 |
10.1 |
Electronic equipment |
4.9 |
0.9 |
8 |
0.4 |
1.1 |
2.6 |
1 |
1.2 |
17 |
Machinery, equipment n.e.c. |
9.4 |
0.2 |
8 |
1.1 |
2.3 |
1.5 |
0.7 |
0.4 |
17 |
Manufactures n.e.c. |
11.7 |
1.3 |
7.7 |
1.3 |
2.4 |
3 |
1.6 |
0.6 |
16.6 |
Electricity |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
Source : GTAP Database |
|||||||||
AVG. |
4.5 |
16.8 |
15.7 |
2.6 |
3.6 |
7.4 |
5.8 |
20 |
16.2 |
STD.DEV. |
5.5 |
28.4 |
20.4 |
4.6 |
5.9 |
12.9 |
10.6 |
29.3 |
8.7 |
CV |
121.5 |
169 |
130.2 |
175.6 |
163.7 |
174.8 |
182.4 |
146.6 |
53.8 |
Max |
21.5 |
85 |
80 |
20 |
20 |
40 |
30 |
100 |
59 |
Ratio Max. /Avg. |
4.7 |
5.1 |
5.1 |
7.6 |
5.6 |
5.4 |
5.2 |
5 |
3.6 |
|
Source : Derived from GTAP Database, Version 4 |
|||||||||
A U S |
Australia (1993) |
||||||||
J P N |
Japan (1996) |
||||||||
K O R |
Republic of Korea ( 1995) |
||||||||
C A N |
Canada (1996) |
||||||||
U S A |
United States of America (1996) |
||||||||
G B R |
Great Britain |
||||||||
S W E |
Sweden |
||||||||
E F T |
EFTA (Composite Region) (includes Iceland, Norway and Switzerland) |
||||||||
IND |
India (1999-2000) |
||||||||
3. Concluding Remarks
From the above preliminary analysis of tariff structure in India and other selected developed countries, it may be suggested that the negotiations for reduction of tariff rates by LDCs should also include a categorical discussion on reduction in dispersion and peak rates by the developed countries. The peak rates in these latter set of countries are very high for several agricultural commodities, most of which are important export items of many LDCs. The overall tariff rates are required to be more uniform globally, along with due regard to permissible level of dispersion. It is of course, important to mention that the study is based on aggregated data at the 43 commodity level (as brought out by the GTAP). There is need to see greater levels of dis-aggregation for more detailed and meaningful negotiations.
As far as India is concerned, it is well recognized that we need to further streamline the tariff structure so that it is considerably simplified with greater transparency in the operations of the external sector. This would facilitate gains in industrial efficiency and enhance competitiveness. It was observed that in such a changed scenario where the average rates were brought down by half, the imports may not increase substantially although the revenue would suffer. For this the exemptions need to be done away with.
References:
