IS INDIA HEADING TOWARDS TRADE PROTECTIONISM: AN ANALYSIS OF CAROTAR RULES?

Abstract

With the announcement of Self-Reliant India Mission, the Government of India has announced several policy measures to promote domestic manufacturing to make India, as a hub of global manufacturing. One of its major policy measures is the introduction of Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (CAROTAR Rules). The objective of these rules is to regulate frivolous imports of the third country, which is routing to the Indian market via its FTA partners. These rules have created ‘lots of hues and cry’ among importing and exporting firms due to their regulatory, operational and business implications. This article examines key provisions of CAROTAR rules and their implications to India’s foreign trade sector in general and exporting and importing firms in particular. Findings show that CAROTAR rules are highly protective and regressive in nature and designed to safeguard the domestic manufacturing industry. The intent and content of these rules clearly demonstrate that importing firms are subject to strict regulatory compliance to claim preferential benefit under India’s existing trade agreements. New rules will increase the cost of importing inputs and components thereby affecting India’s trade competitiveness. Keywords: CAROTAR rules, free trade agreements trade protectionism, customs, imports, global value chains.