India’s liberalisation process began with the two-stage devaluation of the rupee on July 1 and 3, 1991. Export subsidies, principally cash compensatory support, were abolished on July 4. With a stroke of the pen, imports of all goods that were not specifically restricted were allowed without a licence — a dramatic turnaround from the earlier policy that restricted imports of all goods that were not specifically permitted.
In March 1992, the government introduced the Liberalised Exchange Rate Management System (LERMS). Exporters were required to surrender 40 per cent of foreign-exchange receipts at the official rate and sell the remaining 60 per cent at market-determined rates. This dual exchange rate system gave way to a unified exchange rate on March 1, 1993. By then, the rupee had depreciated from ₹21.14 at June-end, 1991 to ₹33.14 at February-end, 1993. The government described this as full convertibility of the rupee on the trade account.
The government began the process of significantly reducing customs duties on July 24, 1991. The facility to import capital goods and inputs at significantly lower duties against export obligations encouraged domestic industry to explore overseas markets actively. Competition from imported goods made the domestic industry more efficient. The progressive relaxation of foreign investment limits in several sectors brought additional investment and new technology. The government responded to a grave foreign exchange crisis by progressively liberalising access to foreign exchange and imports, rather than perpetuating restrictions on them.
A lot has happened in the 35 years since then, and now the cry is for deregulation. That should start by respecting the time and mind space of the operating executives. The Reserve Bank of India (RBI) should lead by reviewing the requirement for routine transaction-level monitoring through the Export Data Processing and Monitoring System (EDPMS) and the Import Data Processing and Monitoring System (IDPMS). This consumes enormous time and effort in businesses and banks. These controls reflect an earlier assumption that traders might use exports and imports to retain funds abroad. But economic conditions have changed. Tax rates are more competitive, exchange controls are liberal, and residents can remit sizeable amounts for permitted purposes. Enforcement, therefore, can be intelligence-led and directed towards exceptional or suspicious cases. The RBI and the government must recognise that exporters cannot indefinitely supply goods without payment, and importers cannot repeatedly make advances without receiving goods. Nor can businesses survive by accepting advances without shipping the goods or withholding payment after receiving imports.
Commercial discipline supplies powerful incentives for settlement of transactions.
Today, thousands of executives in companies and banks spend valuable hours reconciling shipping bills, bills of entry and remittances, correcting mismatches, and seeking closure of ageing entries. Much of that can be avoided by abolishing the routine EDPMS and IDPMS matching. Banks should report aggregate flows and unusual transactions, while regulators use data analytics and risk-based scrutiny. The reforms of 1991 trusted markets rather than licences. The next wave of reforms should begin with similar trust on importers and exporters.
 "export policy, economic reform, economic policy")