The Hindu Business Line : Co-opting States as exporters

A WEEK AFTER setting an "international engagement" target of $500-billion two-way trade by 2010, the Prime Minister, Dr Manmohan Singh, is to address Chief Ministers at the first meeting of the Inter State Trade Council (ISTC). Announced in the annual supplement to the Foreign Trade Policy 2004-09 by the Commerce Minister, Mr Kamal Nath, the Council is to help the country shape into a major player in world trade. The objective is to help the States, especially those which host export industries, to emerge as major stakeholders in the export business.

Good intentions. But the tricky part is to achieve that elusive "coherence and consistency among trade and other economic policies of both the Union and the State governments," given the current political equations between the Centre and some of the big exporting States such as Uttar Pradesh, Gujarat and Tamil Nadu. While State governments are now more willing than in the past to partner with the Centre in trade development, the big question that begs an answer is how far the former will go in formulating policies to promote exports without knowing exactly what is in it for them. The sluggish pace of the Centre's ASIDE (Assistance for States in Development of Exports) Scheme, launched to make the laggard States become export savvy and qualify for enhanced Central assistance in infrastructure development, is enough proof of this. If the ISTC is to serve any useful purpose, it must take the bull by its horns; hopefully, the Prime Minister will do so at the very first meeting.

The major issues before the ISTC are quick development of export infrastructure, labour rigidities hobbling Special Economic Zones, Value Added Tax, and electricity costs. If the States are to be meaningfully engaged in providing an enabling environment for international trade, the Centre should involve them in all discussions/negotiations and trade agreement formulations. Even if the Centre finds it tough to take up the issue of labour rigidity straightaway, one hopes it will include export performance as a criterion for devolution of funds. The least that is expected of the ISTC is that it will provide an institutionalised dialogue mechanism between the Centre and the States, as envisaged in the Exim Policy to address the various trade bottlenecks.

The earlier Medium-Term Export Strategy (2002-07) had perceived in the labour market rigidities major constraints for foreign investors. The ISTC can identify sectors where export production dominates, and which are in need of more flexible labour policies. Needless to add, the Centre should focus on ensuring that fair legislation is applied uniformly and that workers who need to look for jobs are supported adequately. True, upgradation of infrastructure is a gradual process given the resource scarcity and the project gestation time. Ideally, the Centre should identify and prioritise specific infrastructure projects crucial for export enhancement within SEZs and outside, and the ISTC can enlist the States' help to establish a monitoring system.

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