Import licensing

Indian Economy glossary

Topic: International Trade Policy, WTO and Intellectual Property · NCERT: Class 11, Ch 3 "Liberalisation, Privatisation and Globalisation: An Appraisal"

Meaning

Import licensing means a firm needs government permission (a licence) before it can bring a good into the country. It is a non-tariff barrier: the state decides directly who may import, and what. Before 1991, India used licences widely, along with tariffs and quotas, to protect domestic industry and save foreign exchange. The 1991 reforms abolished import licensing except for hazardous and environmentally sensitive items and a few other restricted imports.

Example

Before 1991, an Indian firm that wanted to import a machine had to apply for a licence first. Firms often spent effort lobbying for these permits instead of improving their products. This was part of the "permit licence raj". After 1991, most goods could be imported without any licence.

Don't confuse with

  • Import quota: a quota caps the quantity or value of a good that can come in over a period. A licence is the permission to import at all, and it can be used to enforce a quota.
  • Quantitative restrictions (QRs): QRs are direct limits on quantity. India removed its remaining QRs on consumer goods and farm products from 1 April 2001. That was a separate step from the 1991 abolition of most licensing.

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