In the emerging trade scenario, India needs to liberalise further and co-operate with neighbouring countries by entering into free trade agreements like the one being negotiated with the Association of South East Asian Nations.

"Gains from trade could be exploited if all the south Asian countries unite into a single trading block, like the European Union and the Asean. Apart from the usual exchange of goods and services, there would also be an exchange of expertise, strengthening the region's position vis-a-vis the world," S Narayan, Economic Advisor to the Prime Minister said at an ICRIER-World Bank workshop on trade policies of the south Asian countries.

He said India's progress in the standardisation of tariffs was successful and it was moving towards the Asean levels.

Ideally, there should be a free movement of goods and services depending upon the efficiency of different regions, Narayan said.

This, however, was distorted due to subsidies, differences in purchasing power, and differences in the countries' levels of development.

This kind of trade distortion could be partly remedied by forming such blocks where unfettered trade could occur.

India continued to be highly protected among the developing countries, World Bank consultant Gary Pursell said in his presentation.

Among the 105 developing countries that the World Bank surveyed, India ranked second in terms of high average tariffs. Pakistan and Sri Lanka fared better.

However, a common thread that ran through the five south Asian nations -- India, Nepal, Bangladesh, Pakistan and Sri Lanka -- was high degree of agricultural protection.

Tariff duties levied in south Asia not only comprised custom duties but other import taxes also, boosting the effective tariff levels.

For instance, India used special additional duties and Bangladesh used supplementary duties and domestic value added tax exemptions, he said.

Apart from the tariff barriers, even non-tariff barriers like State Trading Enterprises, tariff rate quotas, technical standards and health and safety regulations were pervasive in the south Asian nations.

While India was the principal user of STEs to control imports of rice, wheat and all coarse grains, it also used the tariff rate quotas to protect its powdered milk and maize producers.

Moreover, the new Bureau Indian Standard rules, introduced in 2000, were responsible for restricting steel imports in India, Prusell said.

Rajiv Sikri, additional secretary, Ministry of External Affairs, who was chairing the session pointed out that most of the non-tariff barriers were compatible with World Trade Organisation.

He said it was very difficult to gauge whether these barriers hindered trade or they were erected due to legitimate reasons.

Sikri said trade restrictions could not be attributed to economic reasons only and political factors also needed to be considered.

The fact that trade happened through third parties proved that there were factors other than non-economic considerations at work, he added.