Addressing the 120-year-old Merchant Chamber of Commerce and Industry in Kolkata, Commerce Minister Piyush Goyal rediscovered a 204-year-old insight that its proponent David Ricardo dubbed the theory of comparative advantage. Free trade agreements (FTAs) are not one-way avenues, the minister said: Indians will export those goods in whose production they have relative competitiveness, even those who import Indian produce will sell those items to India. exports in which they have a relative competitive advantage. Be more competitive and export more, don’t come to the government crying out that our FTA partners are ‘dumping’ their produce into the Indian market, urged the minister.
Goyal also highlighted the benefits to Indians who use efficiently produced, competitively priced imports. They get goods at world-beating prices. These then become inputs for Indians to produce value-added goods that are world-winners in quality and price.
The FTA is an invitation to the Indian industry to raise its ambitions. The Indian industry should aim at the sky instead of just looking at the fruit hanging at the bottom. In modern manufacturing, the rejection rate is 10 parts per million or less. For India to churn out such quality produce, the workers who make them must be happy on the shop floor, realizing their human creativity in the work they do, not the unfairness they get from management. on the deal; Companies must invest a fair portion of their revenue in actual research and development, as opposed to making market research a tax-deductible R&D expense; capital costs that leave padding to convert bank loans into promoter pockets for cost-increased projects are shared with the leader-babu nexus, whenever necessary; Access to world-class infrastructure at world-beating prices, along with a constraining, rent-seeking bureaucracy, is an adjunct.
The workforce should be healthy and skill-upgradable, meaning, well-educated. Tax rates should be competitive and easy to comply with. Contract enforcement must be predictable both by time limits and by the logic of the law. Financial intermediation should be efficient. Macroeconomic management should keep prices under control and provide financial stability.
Are we asking for the moon when we lay down this laundry list of conditions that must be met to enable Indian industry to become competitive in FTAs with efficient rival producers of goods and services? No way. These are things that developed economies take for granted, which means they have realized these conditions. A country like China, while still a middle-income country and prone to old age before getting rich, has also achieved a fair proportion of these conditions.
If others can do it, why not Indians?
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