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

Context: India recently signed trade deals with Australia and UAE. Many more are in pipeline. Such deals are important as 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 article outlines six action points for raising India’s trade competitiveness.

What are the action points that can help raise India’s trade competitiveness?

1]. India needs better and higher investment in intangible assets such as health and education, accompanied by ‘future friendly’ skills building.

– States must be let to devise their own strategies. They must promote peoples-first public-private partnerships to raise funding to cover health, jobs and skills, and ensure efficient implementation in consultation with all stakeholders. 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.

– India must also focus on our third tier of governance, by empowering district administrations to realize the potential of its districts.

2]. Free trade agreements (FTAs) will help India’s industry to 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.

– India also need to rethink our decision to join the Regional Comprehensive Economic Partnership (RCEP).

3]. Promotion of a 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 DPIIT 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. To counter this, India needs a strong anti-corruption law with provisions of disgorgement so that perpetrators can’t get away with ill-gotten wealth.

4]. Modernize and enhance the capacity of public institutions in India. Reports of past administrative reform commissions need to be looked into. The present 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.

5]. A ‘whole of government’ approach, that is monitored by policy-coherence units in the offices of the Prime Minister and state chief ministers, is needed.

– Also, policies need to work together instead of against each other. 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.

6]. India needs to move ahead with a shared vision, mutual learning and a single market. It must implement cooperative federalism in letter and spirit.

We need to work diligently so that our demographic dividend is not wasted.

Source: This post is based on the article “A six-point agenda for India to raise its trade competitiveness” published in The Indian Express on 18th Apr 22.