A Step In The Right Direction

Coming at a time when the trade sector is badly in need of direction, the Exim policy has given some broad indications of the possible policy orientation that the BJP government is likely to adopt. While the major thrust of the Exim policy is on refurbishing the export sector, the policy has also sent signals that the process of trade liberalisation would continue.

Thus, on the one hand, a series of export facilitating measures have been announced, and on the other, several hundreds of commodities, imports of which were hitherto restricted, have been put either on the open general licence list or on the special import licence list.

With export growth falling to well below 3 per cent in the first 11 months of 1997-98, the imperatives of pushing exports have never been so compelling What makes the dismal performance of the export sector even more striking is the fact that the immediately preceding year had seen export growth slump to 4 per cent, which was considerably below the double digit export growth that the initial years of economic liberalisation had witnessed. The commerce minister has responded to this challenge by mainly improving the procedural requirements that exporters have to meet. It is, however, less clear as to how such procedural changes on their own would necessarily meet the over-riding objective of strengthening the domestic industry and making it globally competitive that the commerce minister has set out in his policy statement. Greater emphasis needs to be placed on providing the requisite infrastructure that can contribute to the increase in productivity of the domestic industry and in this direction that the

commerce minister would have to move so as to ensure a rapid turn around of the export sector.

The key role that infrastructural facilities could play in the expansion of the export sector can be seen further from the sectoral priorities that the commerce minister has underlined in his policy statement. Among the sectors identified as thrust areas are agriculture and allied sectors like horticulture and floriculture, and it is these sectors which, in recent years, have suffered as a result of grossly inadequate investments in infrastructure. The projected decline in agricultural output in the previous financial year has been a direct outcome of such a neglect. Apart from the considerable amount of investment that the commerce minister must garner for the improved performance of the agricultural sector, the other thrust areas, viz. electronics and software, would also need to be given similar attention to help develop a truly competitive domestic industry.

The policy of import liberalisation that the Exim policy spells is in line with the broad parameters that the World Trade Organisation (WTO) has set for India. The removal of 340 commodities from the restricted import list, several of which are in the consumer goods sector, has been the surest expression in this regard. The new policy is thus quite consistent with the past tendencies where India has displayed its willingness to go along with the progressive liberalisation of import controls, thereby fulfilling its commitments towards the multilateral trading system. Towards this end, India has been steadily removing commodities from the restricted list of imports, the Exim policy of the United Front government having removed almost 2,000 commodities a year ago.

Going along this route of progressive import liberalisation should stand the country in good stead particularly at a time when it is trying to defend its rights for a gradual removal of restrictions in the WTO.

(The author is an economist with a Delhi-based think-tank, Research and Information Systems)