Arun Maira | India needs a much more muscular trade policy
Planning Commission member Arun Maira spells out policies govt needs to focus on to meet rising aspirations of the people
The government has recently introduced a number of new laws and made some key policy changes. But a lot more needs to be done, such as improving labour laws, infrastructure creation capacity, trade and urban planning, says Arun Maira, Planning Commission member and former chairman of Boston Consulting Group (BCG) in India. In an interview, he spells out policies the government needs to focus on to meet the rising aspirations of the people. Edited excerpts:
Now that new laws for companies, food security and land acquisition have been passed in Parliament, what should be next on the legislative agenda from an industrial growth point of view?
The biggest thing that industry wants is a change in the labour laws. The labour unions have also been demanding changes, but to provide more security. Consensus among these stakeholders will have to be arrived at before changes are made to the law.
CII’s (Confederation of Indian Industries’) process recognized that there wasn’t sufficient understanding and consensus even among the employers. They are now working to agree to work in a dialogue with the unions. If they can’t agree, there is no hope of changing labour laws. We are hoping that in a few months’ time, the employers and labour unions would be in agreement that we shall be in a national process to produce an agreement to change the labour laws.
You have said infrastructure is a bigger problem than labour laws and that an implementation gap is holding up infrastructure creation. How is this implementation gap affecting aspirations?
I find young people that I work with and encounter so unhappy that things don’t get done in the country. They know that the country cannot grow and create jobs for them in the future if things are not done now. They want a society in which people are not so much in contention, people work together. The present situation is very disappointing for young people, which is why they want to have some strong person who can make some order out of what appears to be growing disorder. One hears from the chief ministers and state officials that the number one requirement is to create jobs.
What is your assessment of the public-private partnership, or PPP, model’s contribution to bridging the implementation gap?
PPP has been applied in infrastructure, mainly. We have realized that deficient infrastructure in roads, ports and power is the biggest drag on manufacturing. Many have been successful, but this is something new that we are doing on a large scale. So, there have been examples of many projects not going well. Working as partners is a skill we need to introduce.
Trade policy is a significant influencer of how industry feels about working in India. Where do you think we need to change things?
Trade policy cannot be about protection, which we had earlier, nor can it be about not having an industrial policy, which has been the case for the last 20 years. An open market policy is a good thing, but it can sometimes have a severe impact on local industries.
Recently, when we had the preferential market access policy in the electronics area, people from other countries asked how we could go against free trade principles. Our electronic industry has been almost dead since we opened up, while countries like China have been growing strongly against a little barrier. It was not a protection in this case and no higher duty to imports.
If government is a buyer then it will prefer those who have a manufacturing base in the country. People worry about how you will define local manufacturing. We have to settle this, but you are allowed to do this under the WTO (World Trade Organization) rules. India definitely needs to have a much more muscular trade policy.
You have had an inside view of how policy is made. Do you think the stock markets have an impact on it?
Too much so. I wonder why we react so much to the stock market. It goes up, as when Raghuram Rajan came in (as Reserve Bank of India’s new governor) and said something. But that doesn’t affect more fundamental things. Then another announcement or news a month later makes the stock market go the other way. To make good policy and get good institutions in place, we have to focus on the fundamentals and not the stock markets.
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