Indian Budget

As in the last year, the Indian national budget has sent a sense of fear across a section of Nepali business community that is still surviving on export to India. The special administrative duty (SAD) levied last year on all imports to India was waived for Nepali products just a few months ago after much cajoling and pleading from Nepal. This year, the Indian Finance Minister changed the base for the counter-veiling duty (CVD) that is levied to protect the Indian industries from outside competition. CVD is now made applicable on the maximum retail price (MRP) of the imported product instead of the value of import invoice as was the case previously. The result of changed base for CVD is feared to be the same as with SAD, i.e. making Nepali products costlier in Indian markets.

Now the attention of the Nepali business community and the government will again be focused on similar cajoling and pleading with India, and perhaps some concessions may be received after some months. Since the most affected by the changed rule will be Nepali subsidiaries of Indian companies, they can be expected to use their good offices to get the CVD lowered. But the basic problem will remain unresolved as this will still leave one fundamental question unanswered: How long can Nepal continue surviving on the mercy of India's dole out?

Nepal has been able to sell some items in India cheaper than the Indian products mainly because of lower duty in Nepal on import of raw material from overseas. This advantage is an artificial one and is to disappear very soon. In fact, the Indian Finance Minister has already given the hint. Presenting this year's budget, he removed 10% surcharge from highest tariff slabs on imports there and outlined a plan to bring down the highest import tariff to 20% by 2003. Such tariff slashing can be expected to continue beyond 2003 as India is moving towards WTO regime. In this situation, the only way Nepali industries will be able to survive the competition in India with India's domestic industries and overseas imports are through improved efficiency. Therefore, if the business associations devote more of their time in achieving improved efficiency in Nepali industries than on lobbying for marginal concessions from the governments of Nepal or India, the better it will be for industries themselves and the Nepali economy as a whole.

It seems that this realization has already dawned on Nepali business community as indicated by the recently announced FNCCI National Excellence Award – 2057. Let's wait and see if more of such efforts to encourage quality and efficiency are launched and implemented in their earnest.