Govt must be pro-competition rather than pro-business

At the annual business summit of the Confederation of Indian industry (CII) earlier this month, BVR Subrahmanyam, chief executive officer (CEO), Niti Aayog, called for lower tariffs on imported goods and meeting global labour, environmental and technical standards besides making some more telling points.

Subrahmanyam’s call for lower import duties is significant because it is contrary to the present government’s policy of giving more and more protection to domestic producers. Arvind Panagariya, former chief, Niti Aayog has also been advocating lower tariffs because the protectionist policies lead to inefficiencies, which make us globally uncompetitive. Subrahmanyam emphasised that to be a part of global value chains, we need low tariffs and low procedures. He also cautioned that we look back and get very happy about our performance but if we look left and right, we see that our performance can be much better. That was a much needed warning against getting carried away with our own feel-good propaganda.

In another refreshing change from the official line of thinking,  CEO of Niti Aayog said that non-tariff barriers such as Carbon Border Adjustment Mechanism (CBAM) in Europe should not be seen as a hindrance for developing economies. “If you want to sell a product in a particular location, you have to meet the standards of that place. I don’t think these barriers are put up to cut off trade because they apply equally to local as well as foreign, which means it’s a local standard,” he said. It is time to realise that non-tariff barriers are not barriers; labour, environment, and other issues are a part of society and if a society imposes conditions there, industry has to adjust and that’s the only way to be competitive, he said. He also called for Indian technical and other standards to be on par with global ones.

Stressing the need for diversification of export products mix, Subrahmanyam said that the bulk of India’s exports are in those products which constitute about 30 per cent of world trade, which means that we don’t export the stuff which is widely traded in the world, and that means very limited upside because in 70 per cent of the goods that are traded, we have no presence. This was quite an eye opener for the business leaders present at the conference.

While the other ideas like building a financial sector that has the muscle to service Indian firms not just in India but across the world, getting more private investment for building the infrastructure, greater synergy between academia, industry, and the research institutions etc are best dealt with by business entities exercising their commercial judgment, the government is best placed to lower the tariffs and bringing Indian standards on labour, environment and other issues at par with international standards, as suggested by Subrahmanyam.

The CEO of Niti Aayog deserves appreciation for asking the government and industry to focus on getting globally competitive. As Ruchir Sharma, a globally renowned investment analyst said, our government must be pro-competition rather than pro-business. That is possible when we expose our producers to competition through lower import duties and ask our businesses to adopt global standards. Hopefully, the new government that will come in after the elections will revisit the protectionist policies. 

Email: tncrajagopalan@gmail.com