South Asia Monitor, June 25, 2019
By Amol Kulkarni
The new Minister of Commerce and Industry, Piyush Goyal, has taken charge, holding a slew of marathon meetings with internal and external stakeholders. He will be subjected to diverse and often contradictory perspectives and pressures on key commercial policy issues, and is expected to take tough calls on issues wherein political interests apparently conflict with economic ones. Crucially, he would have to clearly communicate the rationale for his decisions and policy positions to the broader stakeholder community in a way that reinforces the broader reform agenda pursued by the Prime Minister and not succumb to vested interests.
It is here that the experience of his predecessor Suresh Prabhu will come handy. Prabhu was extremely approachable and open to hearing diverse points of view. He did not shy away from taking hard decisions. However, he was perhaps unable to articulate and communicate the rationale for his decisions, making him susceptible to pressure, resulting in frequent changes in policy positions. For instance, comprehensive consultations with stakeholders happened during initial phases of designing the national e-commerce policy framework. However, later versions of the policy clearly favoured specific sets of stakeholders at the cost of fostering an inclusive e-commerce sector in the country.
To avoid such situations, Goyal would need to institutionalise certain reforms to improve the policy formulation process. First, he needs to adopt a whole of government approach; identifying all relevant government departments, including Prime Minister’s Office, which might be directly or indirectly concerned with the issue, formulate inter-departmental committees, and involve them in policy discussions from inception. Second, adopt a structured stakeholder consultation process and reach out to all stakeholders prior to taking any policy position, and understand diverse perspectives. He must not limit the conversations to Delhi, but organise consultations in smaller cities and specifically focus on vulnerable groups like consumers and MSMEs.
A low hanging fruit in this regard is the long pending industrial policy. There was talk during NDA 1.0 about release of a New Industrial Policy. Any such policy which does not look into complementary issues in trade, competition, labour and other policies is practically incomplete, doomed to remain ineffective and unimplementable. A whole of government systems approach which views industrial policy as one of the many important components of the broader economic reform agenda of the government and makes efforts to align different related policies has a better chance to succeed.
Goyal should quickly set up an inter-departmental group to draft a trade and industrial policy for India, taking advice from external experts. The Prime Minister’s Office (PMO) has already shown intent in adopting a whole of government approach by constituting Cabinet Committees on Investment and Growth and Employment and Skill Development, both of which has Goyal as member, with other ministers. This thinking should percolate across ministers and departments, with the objective of developing a shared and consistent approach to tackle challenges faced by the economy.
The minister also has to deal with more complex issues which have geo-economic implications. These include framing rules on digital economy in general and data in particular, designing a policy framework for development of the e-commerce sector, developing bilateral and regional trade and investment relationships, and leading discussions at the WTO on sensitive and critical issues like agriculture subsidies, dispute resolution, e-commerce and investment, among others.
Any decision on these issues must be comprehensively thought through, backed by evidence and taken after consideration of possible alternatives and their impact. Given the likelihood of stable government for at least five years, a long term approach needs to be adopted, with the objective of inclusive and sustainable development and ensuring availability of decent income generating opportunities for individuals. A well-structured regulatory impact assessment framework, which puts these objectives at the forefront, can arm Goyal with reliable data on costs and benefits of possible policy approaches, and help him to take informed decisions, which can clearly be communicated to diverse stakeholder groups.
On bilateral relationships, the minister will need to quickly realise that we live in an increasingly transactional world and a strategic approach to align with different nations on different issues of mutual interest needs to be adopted. For instance, on e-commerce issues, we may need to learn from China the art of promoting domestic industries, by enabling them access to necessary factors of production and minimal government interference, but not necessarily limiting the scope of e-commerce sector. On data regulation, we can learn from experiences of Europe and other early movers.
To promote greater trade and investment in the South Asian region and with other emerging economies, we need to shun the ‘big brother’ role and transition into a more reliable ‘elder brother’ role, by pursuing more citizen-centric connectivity initiatives. On the multilateral front, we need to learn from past mistakes and take a place at the negotiation table to shape multilateral rules, rather than walking away with no position to influence the discussion.
Above all, Goyal will need to focus his energies on driving institutional and administrative reforms to ensure that policies are enforced in letter and spirit so that the country can prosper.
The author is Director (Research) at CUTS International, an economic policy research and advocacy group. He can be contacted at email@example.com
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