Common market dreams

UPA-II finally works on integrating inter-state trade

The government’s initiative to begin the spadework for reforming inter-state trade and commerce by removing unwarranted barriers in the flow of goods and services across the country is a welcome move. The country’s internal market for agricultural, industrial and other goods and services has been fragmented by varying systems of taxation and a host of other trade-unfriendly rules and formalities. A recent Assocham study maintained that the Indian market was divided into 28 different state markets due to a multi-layered indirect tax structure. The worst off in this respect is the market for politically sensitive farm goods, which are subjected to formidable and distortionary controls and curbs. As a result, the inter-state disparity in prices is pronounced.

It is, therefore, good that the government has set up a high-powered inter-ministerial committee to look into internal trade reforms and suggest changes in the taxation and regulatory systems. Also, the agriculture ministry has begun work on drafting an Inter-State Agricultural Produce Trade and Commerce (Regulation) Bill. The transport industry, meanwhile, complains of divergent central and state taxation; a lack of uniformity in the standards laid down by different agencies; curbs on the movement of goods from state governments; frequent stoppages for checking and inspection at state, district and even municipality level; and several other procedural hassles. The biggest step forward would be the proposed goods and services tax (GST), but that would not solve all the problems. The scope for harassment in the road transport of goods can be curtailed to a large extent by introducing a single-point permit system for goods carriers, notably trucks, under which the consignments can be checked and sealed right in the beginning to obviate the need for frequent stoppages for inspection. The paperwork can also be minimised through computerisation.

The idea of a seamless common market in India is not new. Prime Minister Manmohan Singh had vowed to integrate the domestic market for all goods and services way back in 2005, during the first term of the United Progressive Alliance (UPA) government. In whatever time remains for the UPA, it should work harder to bring it to fruition.