Protection for industry must come with performance obligations: CEA

India cannot be passive when other countries apply industrial policy, but protection for industry cannot be permanent and has to be in return for productivity and export performance, Chief Economic Advisor (CEA) V Anantha Nageswaran said on Wednesday.

 

Speaking at a seminar by CareEdge, Nageswaran stressed the need for an industrial policy focused on productivity and performance.

 

“Industry still looks for protection from competition because some other country has large capacity facilities, and they use both tariff and non-tariff measures… but it's important to know that protection has to come with quid pro quo obligations on the part of the industry,” he added.

 

The CEA’s comments come at a time when India is faced by 50 per cent tariffs on its goods trade with the US, which has threatened labour intensive sectors such as textile, footwear and marine products. The US administration’s move to impose a one-time fee of $100,000 on new visa applications for skilled workers could hurt India’s $280-billion tech services industry and put thousands of jobs at risk.

 

Nageswaran said that in order to achieve the goal of “Viksit Bharat”, India needs to break the vicious cycle of regulation with virtuous cycle of trust, and push for measures such as deregulation and delicensing.

 

The CEA said that societies in Asia, Africa etc. had multiple compliances, certifications and attestations because of low trust. He said that achieving scale requires trust between strangers and arm’s length relationships.

 

“We are a work in progress, and we need certain evolution to be able to achieve socio economic transformation on scale. Some of these countries get stuck in the middle income trap because they are unable to transcend the scale deficiencies and drawbacks,” the CEA said. 

 

Nageswaran added that when the government trusts the industry, there is a need for reciprocation on both sides since evasion by the latter would lead to even more regulation.

 

The CEA highlighted the varied challenges faced by India and developing countries today in becoming developed compared to the 20th century, including energy transition, lack of support of the US, different demography with higher younger population.

 

Nageswaran said that India needs to make vocational schools the pride of its education system. “It is what the country needs to become a manufacturing power, and it is what the country needs to be able to handle the consequences of artificial intelligence and its spread across the society and the economy,” he said.