Backing The Wrong Horse

So, what does this 10-year time-frame mean as far as the countrys future foreign trade and investment policies are concerned? Indian companies face competition at two levels through easy imports at lower tariffs and through foreign companies setting up manufacturing and marketing bases in India. Is it then talking of a 10-year protection period for Indian industry against easy imports and entry of foreign companies? And does that mean raising import duties on items where Indian industry has already established domestic capacities, reintroducing physical restrictions on imports and placing curbs on foreign investments?

If the BJP is serious about providing a seven-to-10 year transition time to Indian industry, this will obviously result in a reversal of the present economic policies. The danger is that today the possibilities of such a reversal look more real than ever. The partys desire to provide 10 years transition time to Indian industry is the outcome of its deep conviction that import competition has caused a lot of harm to Indian industry. That is why, as a logical extension of its promise to provide protection to Indian industry for 10 years, the manifesto talks of a policy that would prefer Indian companies to foreign ones.

 

Who is the BJP trying to please? Is it trying to respond to the distress call sent out by certain Indian companies which have been looting consumers for deca-des by selling shabby products and services at a relatively high price? Nobody denies that the government should remove all handicaps that Indian companies suffer from because of infrastructural and systemic weaknesses. But surely Indian companies that remained oblivious to the need for offering better value for money to consumers do not deserve preferential treatment. Those that did take care of consumers by offering better goods at a cheaper price are not pleading for any protection. Consumers have taken care of such companies by reposing their faith in their products and services.

In this respect, the partys stand is diametrically opposite to that of the Congress. In its manifesto, the Congress says that the problem facing Indian industry is a reflection of its internal weaknesses and cannot be traced to any competition that it faces from imports or foreign companies. Therefore, the party remains committed to reforms and in its present direction.

It would appear that while the Congress wants to keep the pressure on Indian industry for it to remain cost-efficient and quality-conscious in the face of continued competition from imports, the BJP is trying to help out certain inefficient companies that moved in a closed market when Indian consumers had no choice. The BJP might argue about the impact of dumping in the name of exports on the vast Indian market. But the solution to this problem lies with the government. It can set up the necessary mechanism to impose special duties on such imports. That is what the Congress government under Narasimha Rao did. The BJP, therefore, is trying to please a section of industry, which has got a raw deal from competition. Whereas, the Congress is pleading for more choices and options for consumers.

There is an apparent contradiction in the BJPs proposal for a 10-year transition period for Indian industry. Its leadership has also indicated that the party would honour all international obligations of the previous governments. This means that it will stand by the commitments made by the previous governments to the WTO. How can the BJP raise import duties and impose curbs on foreign investment without violating the Indian governments commitment on liberalisation on trade and investment fronts? Clearly, it cannot be serious about both the promises. Either, the promise of offering a 10-year transition period is bogus, or its commitment of honouring all previous international obligations is public posturing, nothing more.

One is also curious to know why the BJP decided that 10 years are sufficient for Indian industry to adjust to import competition. Right from the mid-80s, the direction of Indias economic policies has been towards lower duties, phasing out of physical import controls and easier norms for foreign investment. There has never been any reversal of the direction. All governments have pushed ahead reforms on this very path. Is the BJP arguing that 13 years after the direction of tariff and investment policies had been set, Indian industry wants a reprieve for another 10 years to adjust itself to competition?

Unfortunately, as far as economic policies go, the party seems to be backing the wrong horse once again. It continues to be very fond of NRIs the same bunch of people who were the first to take away their money from their motherland when the economy was in the doldrums in the 90s. It now wants to offer these NRIs more concessions. And, once again, it wants to support the same inefficient companies, wh-ich for decades failed to produce better goods at cheaper prices. Now that competition is knocking at their doors, they want protection and are looking up to the BJP. It is time the party recognised the true colour and character of Indian industry and spared a thought for Indian consumers as well.