Import Tariffs Should Drop to Achieve Competitiveness in India, says Montek Singh Ahluwalia

Bringing down import tariffs by at least 50 per cent holds the key to achieve competitiveness in India, said Montek Singh Ahluwalia, Former Deputy Chairman, Planning Commission of India.

March 10, 2021. By Manu Tayal

Bringing down import tariffs by at least 50 per cent holds the key to achieve competitiveness in India, said Montek Singh Ahluwalia, Former Deputy Chairman, Planning Commission of India.

“The problem boils down to the fact that we simply have not grown fast enough, as an economy. The underlying challenge is the ineffectiveness to translate broad uncontroversial objectives of competitiveness and growth into concrete and actionable policy programmes yielding results in a time-bound manner,” Ahluwalia further added.

He was speaking during the webinar organised by CUTS International on ‘Improving India’s Competitiveness for Inclusive Economic Growth. The webinar touched a wide spectrum of issues ranging from global to sub-national and macro to micro.

The session was moderated by Pradeep Mehta, Secretary General, CUTS International, who articulated the vision of Atma-Samman, or self-confidence, of the domestic industries being the driver for true Atma-nirbharta and pursuing global value chains.

Mehta also pointed out that several committees etc have gone into the issue of improving India’s competitiveness but every new committee ends up reinventing the wheel rather than enquire into the earlier progress. It thus wastes taxpayers’ money and delays desired reforms.

On the issue of India not joining the Regional Comprehensive Economic Partnership, there was a divided house with panellists putting forth their opinions. The pro-RCEP arguments were premised on the need to participate in the globalised economy in order to reap benefits of higher levels of global competition.

On the other hand, examples of economies like Japan and Korea were cited which adopted the route of becoming global champions of manufacturing first, before opening up their economies for trade and investment. State capacity to negotiate trade deals better was highlighted in order to foster better and effective trade agreements with the likes of European Union, the USA and RCEP members excluding China.

On achieving competitiveness, Ajit Pai, Distinguished Expert, Economics and Finance, NITI Aayog, advocated for designing a sequential strategy of policy interventions in order to achieve the objectives of competitiveness. Developing scale of manufacturing, both as a strategy and as an outcome of policy instruments, should be the imperative to achieve this, he highlighted.

According to Ajay Shankar, former Member-Secretary, National Manufacturing Competitiveness Council, one of the less-discussed strategies for infusing cost-competitiveness in domestic value-addition and exports is of artificially appreciating the real exchange rate.

Shamika Ravi, Non-resident Senior Fellow, Governance Studies, Brookings Institution, Washington D.C., highlighted the need for accounting peculiar structural features of the Indian economy in the debate around competitiveness and growth.

Rajat Kathuria, Director and Chief Executive, Indian Council for Research on International Economic Relations and Manoj Panda, RBI Chair Professor, Institute of Economic Growth, while reiterating the need for looking at global as well as domestic competition landscape, stressed on the need for capitalising the comparative advantages of different states while moving forward in a competitive yet collaborative manner.

There was a general consensus on the fact that the bank-for-the-buck lies in enhancing competition regimes and logistics ecosystem, rather than jacking up protectionist measures in the economy.

Bipul Chaterjee, Executive Director, CUTS International, concluded the webinar by focusing on the need to get the granular corrections right, in order to achieve the macro objectives of competitiveness and inclusive growth.

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