Union Budget 2023-24 Should Introduce A Competitiveness Act To Ensure All Agencies Work In A Coherent Manner To Promote Growth: CUTS

India Education Diary, November 29, 2022

Earlier today, the Finance Minister held Pre-Budget consultations with key stakeholders to solicit suggestions for the Union Budget 2023-24.

CUTS International, a global public policy research and advocacy group, highlighted that different Government initiatives to curb imports, promote manufacturing, incentivise enterprises, support services, and enhance exports, are not entirely consistent with each other, resulting in sub-optimal outcomes.

“A Whole of Government approach needs to be adopted through a Competitiveness Act which can bind all agencies to work in coherence, towards promoting nation’s growth”, said Pradeep S Mehta, Secretary General, CUTS International. Enhanced competition, better regulation, reduced cost of doing business, and greater convergence in policy measures, will be key to promote competitiveness.

In the past few years, the Government has taken several steps to support specific local industries and foster domestic champions across sectors. It has incentivised select entities. There is a need to ensure that such preferential treatment does not protect inefficiency and does not continue indefinitely.

There is also a need to adopt pro-competition policies to support green growth, climate change mitigation efforts, and facilitate renewable energy trade. A National Competition Policy can help remove distortions, and promote pro-competition approach in policy making. A draft is pending with the Government for more than 10 years now.

Simplification, digitisation, and decriminalisation of regulatory frameworks is necessary but not sufficient to unshackle the Indian economy. All existing and proposed regulatory requirements need to be subject to a three step test of legality, necessity, and proportionality. Only when all three requirements are met, should they be retained, else scrapped.

Bipul Chatterjee, Executive Director, CUTS International, noted that proportionate regulation is the need of the hour, particularly to support micro, small, and medium enterprises. This can be facilitated through institutionalisation of the Regulatory Impact Assessment framework, which helps in estimating and comparing costs and benefits of different regulatory proposals. It is also essential to take forward Ease of Doing Business and Ease of Living initiatives of the Government.

Services are over50 percent of our GDP and growing, hence there is a need to adopt targeted approach to expand and diversify services exports. It is essential to identify new markets wherein services exports could be promoted, build capacity and closely coordinate with Indian missions in such markets, to leverage the potential in a time-bound manner.

“With the proposed Development of Enterprise and Services Hub Initiative, adequate consideration needs to be given to promoting the ‘servicification’ of manufacturing and creating an effective framework to support it”, Chatterjee added. Export competitiveness needs to be consciously boosted by reducing cost of operations and compliance, building capacity, facilitating market linkage and branding, supporting intellectual property acquisition, and ensuring access to capital and skills.

“There is a need to ensure convergence between trade, industrial and other policies of India, so that they complement each other’s objectives. This can be achieved by adopting an Integrated Industrial Strategy, designed and implemented through empowered Policy Coherence Units in the Prime Minister’s Office and likewise in the Chief Minister’s Office in our States and UTs”, concluded Mehta.

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