Impact of Import Restrictions

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Impact of Import Restrictions

--BY KRISHNA RAJ BAJGAIN

The government has put a restriction on the import of various products  categorised under Alcoholic Products (other than raw materials), Cigarette and  Tobacco (other than raw materials), Diamond (Except for industrial use), Jeep, Car, Van (Other than Ambulance ), Kurkure, Kurmure,  etc, Mobile Phone (priced over USD 300), Motorcycles (having capacity over 250 CC), all kind of playing cards, toys and dolls, and TV (above 32") to curb the skyrocketing imports.

Recently, the government issued another notice introducing new  provisions on the import of mobile phones and motorcycles.  As per the new notice, traders  cannot  import mobile phones priced  over USD 300 and motorcycles with more than 150 CC capacity. Given the month-wise import figures  of these items, the import restriction has shown  positive impacts, data shows. However, the import of most of these items increased in fiscal year 2021/22 in comparison to the imports in FY 2020/21 as huge imports occurred during the first ten months of  2021/22.  The import restriction put in place by the government has resulted in the reduction of imports by Rs 4.19 billion which accounts for 0.22% of the total imports in 2021/22.

Import restriction is a  short-term tool applied to ease the pressure on foreign currency reserves.  It is true that the perpetual use of this tool has a  serious implication on economic activities  inside the country. It increases illegal trade, flourishes the black economy and encourages under-invoicing of such products. In keeping view of these implications,  parallel activities should be carried out inside the country with practical alternatives.  As these ten products account for a mere 3.39% share in Nepal's total imports, this restriction should not be assumed as the panacea for the problem associated with Nepali economy’s external sector. A lack of industrial activities (goods and services) inside the country, remittance-induced prosperity and behaviour of conspicuous consumption are the major reasons behind the skyrocketing imports.   These three factors have created  a quagmire in Nepal's external sector.  To get out of this quagmire, a paradigm shift in every  aspect of state affairs is imperative and economic and structural transformation is the first step toward this paradigm shift.  

(Bajgain is a Senior Officer with the Trade & Export Promotion Center. The views expressed here are his personal.)

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