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Goyal: What's the Way Forward...
Suresh Prabhu to Piyush Goyal: What's the Way
Forward for Trade and Industry?
The Wire, June 02, 2019
By Pradeep S. Mehta
Piyush Goyal is aware that the trade portfolio is at the
heart of the economy and a key part of creating jobs both in
urban and rural areas.
The decision to drop former commerce and industry minister
Suresh Prabhu from the new Union cabinet is inexplicable. He
was thought of as one of the more hard-working ministers of
the first Modi government.
A few others have also been dropped, and some non-performers
have been retained. One does not know why. As usual, many
rumours are making the rounds.
While some sectors of industry, trade and civil aviation
under Prabhu’s charge have not done as well as they could
have, it is difficult to place the blame solely on his
shoulders. External factors, internal incoherence and vested
interests did not allow the desired results.
All Central ministries and state governments are aware of
the resolution to make India a $10 trillion economy by 2030.
This means adding nearly $7 trillion to our economy over the
next decade, a challenging but not impossible task.
The NITI Aayog has prepared action plans for the first three
years, then seven years. It will have another long-term plan
to show what has to be done to achieve this goal.
The Modi 2.0 administration will have to be stronger on
reforms given the huge mandate – it has no choice but to
provide economic security to India’s teeming poor.
The key issue
India needs a sustained growth rate of 8-9% over the next
two decades. To ensure that, many things have to be done
with vigour and rigour. Modi will have to channel China’s
Deng Xiaoping, who pulled the country out of the pits in
1970s and 80s.
In this quest, trade and industry has a vital role, and
Piyush Goyal has proven credentials as a minister to take it
Exports play an important role in economic development,
which is not to say that ‘exports are good and imports are
bad’. Imports are necessary for both exports and for
consumer welfare. Today, two-thirds of international trade
is through value chains, where India is weak. Being a part
of a value chain means we need to import to add value and
then export. Some of these value-chain operations would mean
technological work and some would mean manual work.
In fact, exports of labour intensive goods and services
(including tourism) help create jobs, our great priority to
eradicate poverty. Our exports, including tourist arrivals,
have been coming down which is a cause for concern. We need
not rely upon our traditional markets but explore new
markets. For this purpose we need a mission approach through
an inter-ministerial agency with representation from states.
As we stand today, the US-China trade war opens up new
opportunities for our trade and investment goals. We need to
target both American and Chinese enterprises to invest in
India which can help them to access global markets.
For this purpose we need to identify and target such
enterprises on a mission mode. For ease of trade relations,
we should also push the Regional Comprehensive Economic
Partnership Agreement which includes China, and also launch
a mission to attract Chinese tourists (both Buddhists and
others) to India as they reduce their travel to the US.
Today, Chinese tourists are expanding rapidly.
Free trade agreement
India also need to look at a free trade agreement with the
US as a desirable possibility. The American economy is doing
well on a consistent basis and is a big market for us. We
also have a common resolve to raise the bilateral trade from
the current $147 billion to $500 billion by 2025. In this
effort, we need a stronger economic diplomacy which can
fortunately be provided by our competent new foreign
minister, K. Jaishankar who has dealt with both US and China
In recent times, India’s foreign direct investment (FDI)
inflows have been going down, but the steps suggested above
can help improve the scenario. If this progresses, then
domestic private investment flows will also improve.
Of course, most banks remain wary due to NPAs, but it is
here that the Finance Ministry and the RBI have to be more
imaginative so we can move forward.
Another dynamic minister, now in charge of Finance and
Corporate Affairs, Nirmala Sitharaman, will also be very
useful. Her experience in defence, where India is inviting
investment in local manufacturing, will also help push the
agenda. For example, Lockheed Martin’s offer to manufacture
F-21s exclusively in India and export them from here is a
Goyal’s big agenda
The big agenda for Piyush Goyal will need sustained effort
from many government departments.
In this context, there are pressing macro issues as well.
The Modi government needs to bring in convergence between
our industrial policy, trade policy and competition policy
so that India becomes more competitive.
Ease of doing business is crucial and India should not be
taking the World Bank’s rankings as our sign of progress.
Our experience on the ground is quite different. One of the
worst indicators is on enforcement of contracts, i.e.
judicial delays or incompetence. Specialised commercial
courts have been established but the judges need training on
microeconomics so that they adjudicate sensibly, and
Many of the Supreme Court’s orders have caused havoc in the
economy. They could have been handled differently,
penalising the wrongdoers but not upsetting the larger
Much is possible if attention is given to state capacity to
implement. Administrative reforms to allow bureaucrats to
work as executives, coupled with lateral entry and exit, is
vital to improve our states’ capacity. Accountability has to
be tightened, and promotions happen on merit. More than half
of our problems happen due to bureaucratic ineptitude or
Finally, the need to build state capacity to be able to
implement various initiatives in a ‘whole of government
approach’ by demolishing the siloes.
For this purpose, the Cabinet Committee on Economic Affairs,
chaired by the Prime Minister, should be turned into an
actual empowered body, with the Niti Aayog providing it the
knowledge and oversight support.
Pradeep Mehta is the Secretary General of CUTS
International, a global public policy research and advocacy
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