The economic policies of the United Progressive Alliance government were, till very recently, moribund. Then suddenly, a mercurial element from eastern India left the coalition in a huff; the government got a fresh influx of energy, and some desirable and overdue measures were taken last month. Since then there has been a hiatus. It is always difficult to do domestic reforms; the said reformers must make calculations all the time of the impact on volatile political formations. It should not be that difficult to make changes in external economic policy.
The prime minister has been keen on closer relations with the neighbours; this is the time to galvanize the relationships. Both Pakistan and Bangladesh have a very narrow export base. Manmohan Singh should look at their actual and potential exports, and go about dismantling import restrictions on them. Quite a few fall in India’s negative list; under the commerce ministry’s rules of the game, import restrictions on them can be brought down only in trade agreements. The argument would be that if India brings down its trade restrictions, there should be reciprocal concessions from its trade partners. But there is nothing in the Constitution that says import barriers can be brought down only in trade agreements. India is much larger than its neighbours; however much they may give, the impact of their concessions on India’s exports would be small. So even from the profit-maximizing viewpoint of the commerce ministry, reciprocity does not mean much in the context of neighbourly relations. The prime minister should scrap the negative list with respect to India and Pakistan. He should then propose a customs union to them, wherein external barriers would be harmonized and internal barriers abolished. The expensive transit point the government is creating at Petrapole is not going to increase trade much; the customs and commerce officials will be there to obstruct and milk the trade. The way to increase the trade is to have an open border, as between Canada and the United States of America. India can afford it, and the benefits it will bring to the neighbours will increase the value to them of friendly relations with India.