Ahead of last week’s meeting of trade ministers in Delhi, Indian officials went to great lengths to water down expectations and emphasized that it was just a forum to discuss processes to revive the stalled multilateral trade talks rather than specific issues. A smart strategy in any circumstances; it makes the actual gains seem much bigger than would have been otherwise.
The meeting produced a breakthrough, with the ministers agreeing to restart talks in Geneva on 14 September.
This aside, there are two key intangible gains from the meeting, from the Indian point of view. One, it has cleared its name as it were; along with the US, India was held responsible for the breakdown of global trade negotiations under the framework of the World Trade Organization in July last year. Second, it has given India a leg-up in terms of a defining leadership role at a multilateral forum.
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India’s negotiators may be patting themselves on the back that in the process they may have reinvented their image as a proactive negotiator as opposed to someone who has always railed from the sidelines.
If this is indeed so, then the Congress-led United Progressive Alliance (UPA) should come clean with the rest of the country. Because implicit in this image makeover is a potential change in the country’s negotiating position. Nothing wrong, really.
India is an emerging trading power and, has therefore, higher stakes in reviving global trade talks and hence more willing to part with concessions. But since it has implications for the entire country and its effects will pan out over decades, it is only fair that this is preceded by a debate among key stakeholders.
Transparency—not in revealing India’s negotiating strategy or position—would go a long way in ensuring that there is greater acceptability. Alternatively, there is every chance of it triggering negative rhetoric, underlying which is the danger of some politician hijacking the agenda for his or her own gains. Populism is very seductive and hence difficult to counter, once a negative narrative has taken hold.
So we may well be on the cusp of a very interesting transformation of India’s global image: about how India views itself and how the world looks at the largest democracy.
Underlying this image transformation is yet another assertion of India’s emerging status as an economic power.
Money talks. Look at China, a country with which we love to index ourselves. Its emergence as a global economic power has forced the US to scale down its rhetoric and now, after the Obama administration took charge, there has been talk of a grand alliance between the two countries. With a nuclear test, India gained the world’s attention. Its emergence as an economic power will earn it respect, which no amount of lobbying can manage.
Now that India seems to have signalled a new intent, it may well go the rest of the distance. It has, given its late start, always been a kind of outlier at global forums; looking inside from outside. Whether it is a place on the United Nations Security Council or membership of any key trading block, it has always eluded India. In fact, its desire to be part of the inside has at times been exploited by some developed countries to their advantage.
At the end of nearly three decades of reforms—which kicked off when the then Congress party government headed by Indira Gandhi signed the country’s first ever loan programme with the International Monetary Fund—the country’s industrial infrastructure has been radically transformed. With the UPA giving the finishing touches to the most radical tax reforms—that will put in place a direct tax code and a nationwide goods and services tax—the stage is set for another surge in the economic spirits of the country.
Peak industrial tariffs, which even two decades back was over 200%, is down to 10%. Even this is meaningless, given the raft of free trade agreements that India is signing with other countries and trade blocs. At the same time, the country’s trade basket as well as direction of trade is very diversified, especially when compared with what it was even a decade ago.
In this backdrop, here is a daring proposal: zero import duties for any country/trade bloc that offers the same facility to India. Underlying this proposal is the assumption that India desperately needs market access and is looking to leverage its relatively low cost of labour. Fears of inundation of imports and minimal value add in exports should not be viewed as a constraint. What is relevant is the totality of the value of exports. A high value add and a small export turnover is not desirable, say, when compared with low value add and an extremely enhanced turnover—the employment generation as well as multiplier effects of the latter should be spectacular. Since this will be offered to any country that can match the offer, India can potentially target the entire world.
So if the UPA is indeed undertaking an image makeover of the country as a strategy then it should be transparent about it and also go the full distance. Any half-measures would only damage than help the country’s cause.
Anil Padmanabhan is a deputy managing editor of Mint and writes every week on the intersection of politics and economics. Comments are welcome at email@example.com