The PM’s good intentions are being scuttled by some forces. This scuttling will add to the country’s import bill and widen the current account deficit.
The PM’s good intentions are being scuttled by some forces. This scuttling will add to the country’s import bill and widen the current account deficit.
The Prime Minister’s four-pronged prescription to boost manufacturing in civil aviation, textile exports, steel and automobiles has been loudly hailed in some circles. Understandably so.
Actions speak louder than words and just two days ago the same PMO bowed before foreign multinationals and put a landmark policy, that would have boosted domestic manufacturers in the electronic systems design and manufacturing industry, on hold. Called preferential marketing access, it had got Cabinet approval in February last year and required the government to buy a percentage of its requirements from domestic manufacturers. The government’s huge IT business will now be monopolised by global companies that reportedly got the policy shelved through various lobbies.
The PM’s good intentions are being scuttled by some forces. This scuttling will add to the country’s import bill and widen the current account deficit, over which the Prime Minister has expressed anguish. Import of electronic items total $31.4 billion, the fourth largest bill after crude ($169.3 billion), gold (55.8 billion) and machinery ($48.5 billion). One of the more pro-active and statesman-like strategies to pare the CAD would be through import substitution, which would also boost employment. We do not produce gold and produce just 30 per cent of our requirement of crude, but there is no reason why we cannot produce electronic items and capital goods given the talent and skills in the country. The government needs to incentivise this industry by listening to what they have been asking for. It is regrettable that the Prime Minister ignores the medium and small industries that are the backbone of the manufacturing industry.
The Prime Minister has also proposed to increase textile exports by 30 per cent. Perhaps he should ask commerce minister Anand Sharma to explain why India’s garment exports have fallen behind Bangladesh’s since 2008. Bangladesh exports garments worth $21.4 billion (2011) while India’s garment export earning is just $10.6 billion. Similarly, a country like Switzerland, which is smaller than many of our states, exports chemicals worth $28,837 million while India exports just $18,836 million worth, according to figures available with Exim Bank. Why?
Indian ministers are circling the globe looking for foreign direct investment to cover the CAD, but this is hardly likely to succeed until it gets its governance book in order. Most analysts and writers say foreign investors are more concerned about decision-making, transparency, consistency and corruption, and unless the government can tackle these, foreign jaunts will remain just foreign jaunts and the CAD will increase.
