Sharma faces uncertain times

Anand Sharma, better known as the Congress spokesperson, has taken over as commerce minister from Kamal Nath. Sharma will be assisted by the young Jyotiraditya Scindia, who has taken over as minister of state for commerce from Jairam Ramesh. The new incumbents face more challenging and uncertain times than their predecessors did.

When Kamal Nath took over five years back, the world economy was booming. Many countries are in recession now. Nath had to mainly stall the negotiations at the World Trade Organization (WTO) but Sharma will have to take the Doha Development Round forward. Nath inked many trade agreements, protocols, framework agreements and so on. Sharma will have to assess their efficacy and decide the pace and course of action.

Nath managed to continue the DEPB scheme, give direct export subsidies through the Target Plus Scheme and introduced schemes to promote exports of goods produced in the rural sector in times when the revenues were buoyant. Sharma may find such giveaways less easy in times when the government revenues are struggling to cope with increased demands for expenditure.

Nath pushed through the SEZ legislation. Sharma will be pushed into reviewing the SEZ policy.

The profiles of Sharma and Scindia inspire confidence that they will be equal to the tasks on hand. Sharma was a minister of state in the external affairs ministry. So, he must be equipped with considerable knowledge of international affairs and niceties of diplomacy. He is also a lawyer by profession. He can be expected to quickly grasp the state of play at the WTO negotiations and the nitty-gritty of various agreements, and cope with the pressures of bilateral, regional and multilateral trade talks.

Scindia has a great deal to prove he is being looked upon as the flag bearer for the next generation of India’s political leadership that includes Rahul Gandhi and Sachin Pilot, among others. He can be expected to strain every nerve to live up to the hopes from young a.

The first task of Sharma and Scindia will be to revive exports. That won’t be easy because there are few buyers abroad. The refrain of exporters is that there are enough enquiries but to convert them into orders is getting difficult because of low prices that buyers ask for. The costs in India and the burden of un-rebated taxes makes their products uncompetitive, say the exporters.

There are two ways to tackle the problem. One is to give more subsidies as demanded by exporters. The other is to reduce transaction costs. Giving more subsidies may be very difficult at a time when the resources are constrained. Moreover, subsidies do not really solve the basic problems. They only minimise the impact of the problems. It is better to identify the transaction costs and try to reduce them. For that, the commerce ministry needs to recognise that its own licensing offices do impose unnecessary costs on exporters and start from that stage.

E-mail: tncr@sify.com