Relevant ideas on ministry merging

Narendra Modi has raised expectations that various ministries will be restructured, with the aim of having a smaller council of ministers. Can exporters and importers expect the commerce ministry to be split and merged with other ministries, for more effective policy formulation and administration?

Most exporters interact with the Director General of Foreign Trade (DGFT), who formulates and implements the Foreign Trade Policy (FTP) through his various regional offices. The FTP, beside regulating imports and exports, promotes exports through various schemes that involve exemptions from customs/excise duties and service tax. All these schemes require the finance ministry to issue exemption notifications and administer these through the excise and customs field formations. The export oriented units scheme and special economic zones schemes are administered through the Development Commissioners (DCs) but here again, the finance ministry’s role is critical because the schemes involve excise/customs duty and service tax exemptions. Then, why not make the DGFT and DCs part of the finance ministry and make that ministry accountable for export growth as well?

The other function of the commerce ministry is negotiations at international bodies like the World Trade Organisation and negotiation of trade agreements. Here again, the impact is mostly on customs duties, domain of the finance ministry.  So, why not let the finance ministry take a holistic view and handle this, too?  Another thought is to send the officers of the Indian Trade Service to the external affairs ministry and let trade diplomacy play a more central role in our embassies.

Such a splitting of the commerce ministry and entrusting trade promotion largely to the finance ministry can lead to better re-orientation, coordination and accountability. The flipside is that the sharp focus on exports and imports that the commerce ministry brings in might get diluted. For exporters and importers, the advantage would be that inconsistencies between FTP provisions and Customs notifications/instructions will be reduced. Indeed, many schemes can be handled only through the provisions in the customs and excise laws, eliminating the very need for regional offices of the DGFT.

Calibrating exchange rates to help exporters and domestic industry maintain their competitiveness and interest rates to help keep the borrowing rates low are in the realm of the Reserve Bank of India (RBI). The finance ministry interacts with RBI more regularly than the commerce ministry. So, if the subject of foreign trade also falls within the domain of the former ministry, the chances of more coordinated efforts to make exports competitive can be better achieved.

Export competitiveness is a function of a number of factors, most of which are outside the ambit of the commerce ministry. Some sectors like infrastructure, power, shipping, etc, are also outside the remit of the finance ministry. However, that ministry has a greater say in how other ministries use their funds and, to that extent, is better placed to take a more holistic view of what needs to be done to boost exports.  

Whether all this will happen is anyone’s guess. However, there is no doubt that Modi’s promise of job creation can be best achieved by making it easier to do business and helping them become more competitive. Restructuring of ministries to ensure coordinated and effective action can be the first step.
 
email: tncr@sify.com