India is on a continuous path of reforms to achieve better competitiveness in its economy. Economic reforms include digital development, trade policy reform and a mix of inward and outward measures. Its agenda is to eradicate poverty and create better jobs. The six-point agenda for India to increase its competitiveness was laid out in my previous article. One of the six essential pillars was the need for a ‘whole government’ approach within the Center and with and between the states. For this, it is time for India to consider a law and institution that can persuade all organizations to pursue competitiveness.
We can achieve policy convergence of both incoming and outgoing policies through a comprehensive legislation with a supervisory body. For such legislation, India may take cues from the US, in particular, the US Competition Act. A comprehensive law that covers all US policies aims to strengthen its global economic leadership.
A White Paper on Improving India’s Competitiveness for Inclusive Economic Growth, jointly authored by Cutts International, Institute for Competitiveness and Institute for Studies in Industrial Development (bit.ly/3iTn6Hj), Improving and Sustaining India’s Competitiveness Discusses some pillars for A strong institutional structure is essential to achieve business competitiveness, capacity building and supply chain resilience. It is also a prerequisite for negotiating free trade agreements (FTAs), which are vital for the growth of our economy.
There are parallel strategic interests in India’s policies and the US Act. Semiconductors have taken center stage as major inputs for a range of new technologies. Experts have speculated that oil has been replaced by semiconductors (and digitization) in shaping geoeconomics and geopolitics. Due to supply chain disruptions, export controls by China and the Russia-Ukraine conflict, both countries felt that a semiconductor manufacturing base was imperative. In India, the Center announced 76,000 crore package through Production Linked Incentive (PLI) scheme for semiconductors. The US provides huge federal subsidies ($50.2 billion) to American manufacturers to encourage domestic investment.
Other key areas include Information and Communication Technology (ICT). India’s Department of Telecommunications (DoT) has constituted six task forces on 6G technology. The Ministry of External Affairs, NEST, through its New, Emerging and Strategic Technology Division, promotes national interests and ensures India’s active participation in international fora on technology governance. Obviously, many ministries and departments are involved in different functional aspects, but are they talking to each other in a meaningful way? The experience of turf overlap that defeats good ideas underscores the need for an act on competitiveness.
India has also made efforts to ensure flexibility in manufacturing capacity. Atmanirbhar Bharat and Make in India aim to invest heavily in domestic supply chain and manufacturing hubs. To strengthen its global forward and backward linkages, the country can leverage a supply chain resilience initiative with Australia and Japan, and its allies with others in the Indo-Pacific region, specifically covering ASEAN countries. efforts can also be increased.
The strengthening of trade ties and our industrial base will have simultaneous effects. These include convergence which would limit inverted charge structures. Non-tariff factors also need to be addressed: encouraging innovation, strengthening the intellectual property regime, reducing logistics costs and making it easier to run a business. India should also take advantage of advanced technologies like 6G, Internet of Things and Blockchain. This will help strengthen our position in the FTA negotiations. The export of goods and services depends on domestic relations and capacity. Therefore, the proposed legislation can act as a unifying factor for overall economic benefit at all levels.
The issue to be tackled is an inherent lack of coherence in our single-point approach to competitiveness. For example, the Ministry of Commerce and Industry has two departments. One is assigned to foreign trade policy for commerce, multilateral and bilateral trade relations etc., while the other is for promotion of industry and internal trade functions within the scope of domestic activity and overall industrial policy. Once a National Manufacturing Competitiveness Council was set up, but it could not make any impact. However, a National Competition Commission under a new law would provide a strong platform for policy dialogue to activate and sustain the growth of Indian manufacturing industries; Sufficiently empowered, it will achieve the necessary strategic and legal heights to ensure proper policy implementation.
We must admit that India is not a leader in any of these areas. Our priorities are increased competitiveness, self-reliance and export-led growth, besides ensuring administrative reforms that act as enablers. Therefore, our challenges and policies differ from those of the US in many areas, whether it is to promote small unit exports, remove regulatory barriers, make it easier to run businesses or attract investment. Nevertheless, the pillars of competitiveness must include all policies. So, emulating the US on legislative action can be a good place to start.
The idea of competition-centric legislation needs to be floated and acted upon. This will enable India to carve a place for itself on the global stage.
Shiksha Srivastava of CUTS contributed to this article.
Pradeep S. Mehta, Secretary General, Cuts International