Stop this farce

Kamal Nath, the minister for commerce and industry, can justifiably take pride in the country's export performance since he took office in 2004. For two successive years, merchandise exports have growth at over 25 per cent, taking the total for 2005-06 past the $100-billion mark. Clearly, whatever the ministry has been doing by way of modulating policy and procedure has not hurt the activity. However, it is another thing altogether to claim that the annual export-import policy, the latest version of which was unveiled by Mr Nath on Friday, is critical to the sustainability of this momentum. The reality, one which successive governments have simply been unable to deal with over the last several years, is that the most significant constraints to export growth lie not in the domain of the commerce ministry, but in others that stubbornly and persistently resist reform.

The three areas which require the most attention from an export competitiveness perspective are infrastructure, labour regulations and small-scale reservation. On infrastructure, while there are visible signs of movement on power and transportation, it is a slow crawl towards any reasonable quality standard for the system as a whole. As far as labour market reforms are concerned, there appears to be consensus across the political board that they cannot be taken forward. On reservation, while some progress was made in reducing the list of activities, particularly with respect to the textile sector, other potentially competitive sectors continue to be burdened by it. Even textiles and garments cannot take full advantage because of the prevailing labour regulations. In short, unless the commerce ministry gets overarching control over all these domains, as far as export policy is concerned, it may as well put up its collective feet and take a refreshing nap.

It must, however, resist the temptation to offset the structural disadvantages to exporters with targeted, sector- and region-specific schemes, such as the ones it introduced on Friday. It is widely acknowledged that most such schemes are good for exporters but not for exports. All they do is to create new opportunities for arbitrage, which will not be wasted by Indian exporters, good businesspersons that they are. More so, when the objective in the pursuit of which the incentive is provided, is difficult to monitor. For example, duty-free imports of automobiles for R&D purposes in the components industry sounds reasonable but, as we saw recently, these will most probably allow a couple of naïve celebrities the joy of driving around in Hummers for a few months, until the enforcement agency catches up with them. Procedural streamlining and greater facilitation of exports are, of course, entirely legitimate objectives, but must surely happen on an ongoing basis.

If the commerce minister insists on continuing with this annual ritual, he should ensure that he has standing beside him the respective ministers for power, labour and small-scale industry, telling the exporting community what they plan to do within their domains to support exports. At the very least, it will force them to make public commitments and be held accountable for them. As on so many other fronts, export competitiveness is the responsibility of the government as a whole, not that of a single ministry, however progressive and enthusiastic it may be.