A six-point agenda for India to raise its trade competitiveness

Livemint, April 17, 2022

By Pradeep S. Mehta,

Exports can boost overall economic growth and domestic reforms could help us gain a global edge

In a recent joint article, Piyush Goyal, India’s trade minister, and Dan Tehan, the Australian trade minister, wrote that the new trade deal between our two countries will result in new jobs. This deal follows a similar one with the UAE, and there are more in the pipeline. One hopes that such deals will push the envelope of India’s competitiveness and make good use of our demographic dividend. It is a no-brainer that exports lead to higher growth.

In a white paper on ‘Building Competitiveness for Inclusive Growth’, CUTS International, Institute for Competitiveness and Institute for Studies in Industrial Development have outlined an action agenda for improving Indian competitiveness. The exercise was done over seven stakeholder consultations, as there were many points to be worked upon. Let me recall the six main ones which can make a big difference.

We need better and higher investment in intangible assets such as health and education, accompanied by ‘future friendly’ skills building. These issues are to be worked upon by states in partnership with the Union government, insofar as policies and funding is concerned. However, one size doesn’t fit all. Hence, states must be let to devise their own strategies. They must leverage the potential of promoting peoples-first public-private partnerships to raise funding to cover health, jobs and skills, and ensure efficient implementation in consultation with all stakeholders. Samaj, sarkar and bazaar need to come together to this end.

The Niti Aayog is doing comparative studies on several topics across states, such as health, sustainable development goals, innovation and export preparedness. These would, hopefully, lead to better outcomes through competition among states. It would also be good if states come together and establish their own association to exchange information on good practices and lessons learnt. This would give them a better sense of ownership. Similar bodies exist in other federal countries like the US, Nigeria and Australia. We must focus on our third tier of governance, by empowering district administrations so as to realize the potential of our districts .

Secondly, free trade agreements (FTAs) will help our industry participate in supply chains. Hence, there is also a need for intra- and inter-sectoral firm-level cooperation and participation without violating the Competition Act. Our FTAs should complement production-linked incentive schemes so that the products whose manufacturing is incentivized domestically can compete at a global level. We also need to rethink our decision to join the Regional Comprehensive Economic Partnership; else, supply chains in that part of the world would not be attracted to India, except in specific cases. We are losing out on an opportunity. After all, most of our demands for long-term commitments in that deal had been agreed upon.

Thirdly, we must promote more fair competition by implementing the draft National Competition Policy. Among other things, the policy advocates a level-playing field for all actors, thus promoting economic democracy. It also encompasses Ease of Doing Business (EODB); i.e. removing entry barriers, for which the department for promotion of industry and internal trade has prepared a comparative index across states. Those that have done well on EODB are found to be creating more jobs. The only problem is that it doesn’t talk about running a business smoothly. The inspector raj continues in most areas, extracting its pound of flesh from businesses and thus hiking their costs. To counter this, we need a strong anti-corruption law with provisions of disgorgement so that perpetrators can’t get away with ill-gotten wealth.

Fourth, there is a need to modernize and enhance the capacity of our public institutions. We know the problems on which much work has been done in the past through administrative reform commissions. Someone has to dust off these reports. Fortunately, this government is already carrying out some administrative reforms, such as the lateral entry of experts. This needs to be expanded to cover lateral exits through rigorous periodic evaluations aimed at ridding the system of flab.

Fifth, there needs to be a ‘whole of government’ approach that is monitored by policy-coherence units in the offices of the Prime Minister and state chief ministers. Also, many policies work at cross purposes. For example, a lack of cohesion between our trade and industrial policies has often resulted in inverted duty structures. This is despite both being under one ministry.

Simultaneously, the civil services’ tendency to draft new laws and rules and retain old ones needs to be checked through institutionalized regulatory impact assessments involving three tests: a) legality b) necessity, and c) proportionality. Only if they pass all these tests should they should be retained or introduced, else scrapped.

Finally, we need to plod ahead with a shared vision, mutual learning and a single market. The country must implement cooperative federalism in letter and spirit. All of us will need to work diligently so that our demographic dividend is not wasted. The Niti Aayog is planning a new index to rank states on competitiveness. These six indicators could be a good starting point.

Pradeep S. Mehta is secretary general of CUTS International


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