Livemint, June 1, 2022
By Pradeep S. Mehta,
An umbrella law like America’s could assure us policy cohesion and aid the cause of global integration
India has been on a steady path of reforms for its economy to achieve better competitiveness. Economic reforms include digital growth, trade policy reforms and a mix of inward and outward looking measures. The agenda is to alleviate poverty and create better jobs. A six-point agenda for India to raise its competitiveness was laid out in my last article. One of the six essential pillars was the need for a ‘whole of government’ approach, within the Centre, and with and among states. For this, it is time for India to consider a law and an institution which can persuade all organizations to pursue competitiveness.
We can achieve policy convergence of both inward and outward looking policies through an overarching legislation with a supervisory body. For such a statute, India can take a cue from the US, specifically, the US Competes Act. An umbrella legislation that covers all US policies, it is aimed at bolstering its global economic leadership.
A white paper on ‘Improving India’s Competitiveness for Inclusive Economic Growth’, authored jointly by Cuts International, Institute for Competitiveness and Institute for Studies in Industrial Development (bit.ly/3iTn6Hj), discusses some of the pillars for improving and sustaining India’s competitiveness. A robust institutional structure is essential for achieving business competitiveness, capacity building and supply chain resilience. It is also a prerequisite for negotiating free trade agreements (FTAs), which are crucial for our economy’s growth.
There are parallel strategic interests in India’s policies and the US Act. Semiconductors have taken centre stage as key inputs for a range of new technologies. Experts have hypothesized that oil has been replaced by semiconductors (and digitization) in shaping geoeconomics and geopolitics. With supply chain disruptions triggered by covid, export controls by China and the Russia-Ukraine conflict, both countries realize that a semiconductor manufacturing base is imperative. In India, the Centre announced a ₹76,000 crore package for semiconductors by way of its production linked incentive (PLI) scheme. The US provides American manufacturers massive federal subsidies (of $50.2 billion) to incentivize domestic investment.
Other key areas include information and communication technology (ICT). India’s department of telecom (DoT) has constituted six task forces on 6G technology. The ministry of external affairs, through Nest, its new, emerging and strategic technologies division, promotes national interests and ensures India’s active participation in international forums on technology governance. Evidently, multiple ministries and departments are involved in various functional aspects, but are they talking to each other in a meaningful way? The experience of turf overlaps that defeat good ideas underlines the need for an enactment on competitiveness.
India has also made efforts to ensure resilience in manufacturing capacity. Atmanirbhar Bharat and Make in India are aimed at domestic supply chains and heavy investment in manufacturing hubs. To strengthen its global forward and backward linkages, the country could leverage a supply chain resilience initiative with Australia and Japan, and also multiply its collaborative efforts with others in the Indo-Pacific region, covering Asean countries in particular.
The strengthening of trade linkages and our industrial base would have simultaneous effects. These include convergence that will limit inverted duty structures. Action is also needed on non-tariff factors: incentivize innovation, strengthen the intellectual property regime, reduce logistical costs and ease the running of a business. India must also leverage advanced technologies such as 6G, Internet of Things and blockchain. This will help anchor our position in FTA negotiations. Exports of goods and services depend on domestic linkages and capacity. So, the proposed legislation can act as a unifying factor for overall economic gains at all levels.
The issue to be tackled is an inherent lack of cohesion in our single-perspective approach towards competitiveness. For example, the ministry of commerce and industry has two departments. One for commerce is entrusted with foreign trade policy, multilateral and bilateral trade relations, etc, while another for the promotion of industry and internal trade functions in the realm of domestic activity and overall industrial policy. A National Manufacturing Competitiveness Council was once set up, but could not make any impact. However, a National Competitiveness Commission under a new law would provide a robust forum for policy dialogue to energize and sustain the growth of Indian manufacturing industries; empowered adequately, it would acquire the strategic and legal heft needed to ensure proper policy implementation.
We must acknowledge that India is not a pioneer in any of these sectors. Our priorities are competitiveness enhancement, self-reliance and exports-led growth, apart from ensuring administrative reforms that act as enablers. Hence, our challenges and policies differ from those of the US in many areas, be it small-unit export promotion, regulatory hurdle removal, making businesses easier to run, or attracting investments. Yet, the pillars of competitiveness must envelop all policies. Emulating the US on legislative action, therefore, could be a good place to start.
The idea of competitiveness-focused legislation needs to be floated and acted upon. It would enable India to carve out a position for itself on the global stage.
Shiksha Srivastava of CUTS contributed to this article.
Pradeep S. Mehta is secretary general, CUTS International
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