Nath has done well for UPA, needs to do more

EXIM MATTERS

This week, the UPA (United Progressive Alliance)government will complete half its tenure of five years. During this period, if any minister has grown in stature beyond expectations, it is Kamal Nath.

When he took over the Ministry of Commerce and Industries, Nath was better known for his loyalty to the party and proximity with the Congress president. Now, he has emerged as the principal spokesman for the developing countries at the World Trade Organisation (WTO) and the chief architect of the policy on special economic zones (SEZ).

During his tenure, foreign direct investment flows have grown substantially and so have foreign investments by Indian companies.

The manufacturing sector has grown in double digits and exports have consistently posted a growth of about 25 per cent.

At the WTO negotiations, Nath's job has been relatively easy, that is, stalling negotiations on farm subsidies that the rich countries give to their farmers.

Where he seems to have made a difference is that now it is the richer countries that are under pressure to give in and take the negotiations forward.

Earlier, the richer countries always seemed to have the upper hand and used to put pressure on the developing countries to give some concession or the other.

With repeated failure of the trade talks at the WTO, Nath has turned attention to regional and bilateral trading arrangements. His initiatives in this regard have been viewed with enough scepticism and the beneficial results of several framework agreements for free trade with similar developing countries are far from visible.

Although his predecessors were committed to the idea of SEZs, it is Nath who so re-drafted the legal provisions and put in place the new SEZ Act and Rules that big businesses have got interested in developing the zones.

No doubt the SEZ policy has drawn criticism from many quarters, including from within his party. However, he has been able to counter the criticism with suitable amendments to the SEZ Rules and get the firm backing of the prime minister.

Nath replaced the earlier Exim Policy with Foreign Trade Policy (FTP) but he ensured continuity in policy and procedures and generally, wherever he has introduced changes, these have helped exporters. His initiatives to promote exports from sectors like marine products, handloom and handicrafts, leather products etc are yet to show great results but they may over a period of time.

Nath has ensured survival of the Duty Entitlement Passbook (DEPB) scheme and has succeeded somewhat in making the duty drawback scheme more broad-based. He has attempted to use technology to link the licensing offices with the Customs electronically and make life easier for exporters.

Looking forward, Kamal Nath needs to come up with creative ideas to get the WTO talks moving again.

A multilateral trade deal is far superior to any number of regional/bilateral trade deals. India has many regional/bilateral agreements with countries having competing strengths. It is time to look for deals with countries with complementary strengths. He must heed the warnings about the unintended consequences of too many SEZs. He needs to interact more with exporters and fine-tune the FTP so that the transaction costs for exporters are reduced further.