India Transformed

by Rakesh Mohan

45.  See, for example, the tariff changes introduced by the 2016 Budget in the Table from page 53 onwards in http://indiabudget.nic.in/ub2016-17/bs/bs.pdf and the tariff schedules given in http://www.cbec.gov.in/htdocs-cbec/customs/cs-tariff2015-16/cst2015-16-idx.

  46.  See, for example, http://www.indianindustry.com/trade-information/export-incentives.html, or https://fieo.org/view_section.php?lang=0&id=0,30.

  47.  See ‘Trade in Value Added India’, OECD-WTO, 2015, https://www.oecd.org/sti/ind/tiva/CN_2015_India.pdf.

  48.  It signed the ‘India–Bhutan Agreement on Trade, Commerce and Transit’ in January 1972; Asia Pacific Trade Agreement in 1975; the Global System of Trade Preferences in 1988.

  49.  See http://pib.nic.in/newsite/PrintRelease.aspx?relid=111882.

  50.  See ‘Free Trade Agreements. Frequently Asked Questions’, Department of Commerce, Government of India, 9 April 2014, 4.

  51.  In this context, it is worthwhile to recall the analysis earlier in the paper to show that reduction of tariffs for high tariff items will not likely increase the average trade-weighted tariff in a major way.

  52.  WTO Dispute, DS90. See https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds90_e.htm.

  53.  For a list of the consumer goods allowed without restrictions, see India: Trade Policy Review 1993 Report, Secretariat, WTO, 75–76.

  54.  The other products included precious, semi-precious and other stones; safety, security and related items; seeds, plants and animals; pesticides and insecticides; electronic items; drugs and pharmaceuticals; chemicals; articles related to the small-scale sector; miscellaneous items; and special items required by hotels, restaurants, and sports and recreational bodies. See Trade Policy Report, Secretariat, WTO, 1993, 72.

  55.  These are milk and milk products, chocolates and chocolate products, and candies/confectionary/food preparations with milk or milk solids as an ingredient.

  56.  The list of prohibited and restricted imports can be seen at http://dgft.gov.in/exim/2000/download-ftp1213.htm.

  57.  Details on these latter set of restrictions are provided in ITC (HS); Schedule 1, Import Policy; Appendices I and II; Appendix III specifies the products subject to mandatory BIS certification. While the appendices provide a summary information on these aspects, tariff-line-level treatment for different products can be seen from the links at this website to each chapter of the Indian Trade Classification (ITC).

  58.  The duties were on PVC imports from Argentina, Brazil, Mexico, Korea and the United States.

  59.  From 2008–09, the average number of anti-dumping initiations has been thirty-eight; the mode and median averages for anti-dumping initiations during this period are thirty-four initiations.

  60.  It is noteworthy that India has filed nine disputes-settlement cases as complainant, against the anti-dumping actions of others. Following the principles of good governance will generate a stronger basis for India to demand similar treatment of its exports by others.

  61.  The WTO Committees on SPS and TBT discuss both new and old STCs (i.e., those still to be adequately addressed and remain a matter of concern). For TBT, see WTO Document G/TBT/Rev./1, Chart 19. For SPS, see G/SPS/GEN/204/Rev.16, Table 1.1.

  62.  One example is the ZED scheme of Quality Council of India, which takes an SME from its present capability level to global standards in five sequential steps.

  63.  For the list subject to export taxes and exemptions to these taxes, see http://www.cbec.gov.in/resources//htdocs-cbec/customs/cs-tariff2015-16/sch2-exptariff.pdf.

  64.  WTO Secretariat Report for India’s Trade Policy Review, 2015, paras 3.117 and 3.118.

  65.  For a range of different steps to facilitate exports, see http://dgft.gov.in/exim/2000/ftp2015-20E.pdf.

  66.  See paragraph 2 in the Executive Summary contained in http://dgft.gov.in/exim/2000/FTPstatement2015.pdf.

  67.  For a list of export promotion schemes, see pages 155–58 of the WTO’s 2015 Trade Policy Review of India, Secretariat Report, WTO Document WT/TPR/S/313/Rev.1.

  68.  There is some evidence that services-trade flows are adversely affected both by trade restrictiveness on services as well as regulatory heterogeneity. See H.K. Nordås, ‘Services Trade Restrictiveness Index (STRI): The Trade Effect of Regulatory Differences’, OECD Trade Policy Papers, no. 189 (2016), Paris: OECD Publishing, http://dx.doi.org/10.1787/5jlz9z022plp-en.

  69.  For a discussion, see Joint United Nations Regional Commissions, Trade Facilitation and Paperless Trade Implementation Survey 2015; and Global Report, the United Nations. The OECD includes the following components: advance rulings, appeal procedures, fees and charges, formalities, documents, automation, procedures, internal border agency cooperation, governance and impartiality, information availability, and involvement of the trade community.

  70.  See ‘OECD Trade Facilitation Indicators—India’, April 2014, https://www.oecd.org/tad/facilitation/india-oecd-trade-facilitation-indicators-april-2014.pdf.

  71.  For the consultation paper of the task force released in 2002, see http://www.finmin.nic.in/kelkar/report.pdf.

  72.  See, for example, E. Moïsé and S. Sorescu, ‘Contribution of Trade Facilitation Measures to the Operation of Supply Chains’, OECD Trade Policy Papers, no. 181 (2016), Paris: OECD Publishing, http://dx.doi.org/10.1787/5js0bslh9m25-en.

  73.  Examples include continuing with the implementation of the Indian Customs Single-Window Project, allowing deferred payment of customs duties for importers and exporters with proven track record, and shift from physical control to record-based control for customs-bonded warehouses, supported by sophisticated IT systems.

  74.  For certain trade facilitation components, India’s performance is better than the country with the best global overall performance (e.g. for advance rulings) or equal to the best overall performance country (e.g. for internal border agency cooperation or information availability). For some other components, however, India is substantially below the average for Asia (e.g. fees and charges and procedural formalities). See ‘OECD Trade Facilitation Indicators—India’.

  75.  See, for example, TPP, chap. on investment, Article 9.17.

  76.  TPP, chap. 26.

  77.  At present, TPP has this issue under cooperation under its Article 19.10.6(g).

  Chapter 7: Foreign Policy in the Wake of Economic Reforms: New Options and Friends

  1.    George Perkovich, India’s Nuclear Bomb: The Impact on Global Proliferation (Berkeley: University of California Press, 1999). See also, ‘The National Security Archive’ (George Washington University), http://nsarchive.gwu.edu/nukevault/ebb412/.

  Chapter 9: Security and Sovereignty in an Open Economy: New Thinking after 1991

  1.    Jasjit Singh, India’s Defence Spending: Assessing Future Needs (New Delhi: Knowledge World, 2000), chap. 1.

  2.    Ministry of Finance, Government of India, Economic Survey 1990–91, chap. 7, 102.

  3.    See, for example, Vijay Joshi and I.M.D. Little, India: Macroeconomics and Political Economy, 1964–1991 (New Delhi: Oxford University Press, 1994), chap. 8, 202; and Arvind Panagariya, India: The Emerging Giant (New Delhi: Oxford University Press, 2008), chap. 9.

  4.    Amit Bhaduri and Deepak Nayyar, The Intelligent Person’s Guide to Liberalisation (New Delhi: Penguin Books India, 1996), 23.

  5.    Manmohan Singh, Budget Speech, Ministry of Finance, Government of India, July 1991, http://indiabudget.nic.in/bspeech/bs199192.pdf. Accessed on 2 May 2017.

  6.    Kautilya, Arthashastra (Pune: Ameya Prakashan, 2005).

  7.    Niall Ferguson, The Cash Nexus: Money and Power in the Modern World, 1700–2000 (London: Allen Lane, Penguin Press, 2001).

  8.    Jasjit Singh (2000).

  9.    Laxman K. Behera, ‘India’s Defence Spending: A Trend Analysis’, Journal of Defence Studies, April 2009, In
stitute of Defence Studies and Analysis, New Delhi, http://www.idsa.in/system/files/jds_3_2_lkbehera.pdf. Accessed on 2 May 2017.

  10.  See, for example, Ritika Behera, ‘Indian Defence Budget 2015-16: An Analysis’, DefenceProAc, March 2016, http://www.defproac.com/?p=2079. Accessed on 2 May 2017.

  11.  Sanjaya Baru, ‘State and Industrialisation in a Post-Colonial Capitalist Economy—The Experience of India’, Economic and Political Weekly 23, no. 4 (1988).

  12.  P.V. Narasimha Rao, Broadcast to Nation: Selected Speeches, Volume I, June 1991–92, Publications Division, Ministry of Information and Broadcasting, Government of India, New Delhi, 1993, 8–9.

  13.  For an elaboration of these ideas, see Sanjaya Baru, Strategic Consequences of India’s Economic Performance (New Delhi: Academic Foundation, 2006), chap. 4.

  14.  The National Security Advisory’s Board’s Strategic Defence Review was never published by the government. The chapter on economic security was written by Rakesh Mohan and myself. I have drawn on some portions of that chapter in writing the essay ‘National Security in an Open Economy’, published in my Strategic Consequences of India’s Economic Performance (Gurgaon: Academic Foundation, 2006), chap. 4.

  15.  Michael Pilsbury, China Debates the Future Security Environment (Washington, D.C.: National Defence University Press, 2000).

  16.  P.K. Singh, Y.K. Gera and S. Dewan, Comprehensive National Power: A Model for India (New Delhi: Viji Books India, 2013).

  17.  Baru, Strategic Consequences of India’s Economic Performance, 77–78

  18.  Ibid., 89.

  19.  Satish Kumar et al., ‘National Power Index’ (New Delhi: Foundation for National Security Research, 2012), https://docs.google.com/viewerng/viewer?url=http://fnsr.org/images/NationalPindex2012.pdf. Accessed on 2 May 2017.

  20.  Kaushik Basu et al., ‘The Evolving Dynamics of Global Economic Power in the Post-crisis World: Revelations from a New Index of Government Economic Power’, July 2011, http://www.kaushikbasu.org/Index%20of%20Government%20Economic%20Power.pdf. Accessed on 2 May 2017.

  21.  Ibid, 5.

  22.  Ibid.

  23.  For an elaboration of this idea, see Sanjaya Baru, ‘Shifts and Shocks: Understanding Geo-economics and Strategy’, in India and the World: Essays in Geo-economics and Foreign Policy (New Delhi: Academic Foundation, 2016).

  24.  India–US Joint Statement during Prime Minister Modi’s visit to USA, 7 June 2016, ‘The United States and India: Enduring Global Partners in the 21st Century’, http://mea.gov.in/bilateral-documents.htm?dtl/26879/IndiaUS_Joint_Statement_during_the_visit_of_Prime_Minister_to_USA_The_United_States_and_India_Enduring_Global_Partners_in_the_21st_Century. Accessed on 2 May 2017.

  Chapter 10: India’s Governance Challenges: Why Institutions Matter

  1.    The author is grateful to Rakesh Mohan, Vineeta Rai and Aparna Sundar for their insightful comments on an earlier draft of this chapter. He is also most grateful to Arunima Nair for her tireless research in support of this chapter.

  2.    John Williamson, ‘The Washington Consensus As Policy Prescription for Development’ (lecture in the series Practitioners of Development, World Bank, 13 January 2004).

  3.    Arvind Subramanian, ‘The Evolution of Institutions in India and Its Relationship with Economic Growth’, in Oxford Review of Economic Policy 23, no. 2 (2007): 196–220.

  4.    A third and more important exception was the seventy-third and seventy-fourth amendments to the Constitution that introduced local self-government (Panchayati Raj) in rural and urban areas with the objective of devolving greater resources and responsibilities to elected local bodies. This chapter does not discuss these reforms because its primary focus is on governance reforms at the national level that underpin economic liberalization.

  5.    ‘Tenth Five-Year Plan 2002–07’, Planning Commission, Government of India, New Delhi, 2002.

  6.    Manmohan Singh, prime minister’s address to the nation on the 58th Independence Day, MPISG, New Delhi, Architexturez Imprints, 2004.

  7.    Census 2011.

  8.    Population living on below $1.90 a day (PPP$ 2011).

  9.    Indermit S. Gill and Homi Kharas, ‘The Middle-Income Trap Turns Ten’, Working Paper no. 7403, World Bank, Washington, D.C., 2015.

  10.  This adopts a framework developed in the 2004 World Development Report (World Bank, 2004).

  11.  Consultation Paper to the National Commission to Review the Working of the Constitution, quoted by Ministry of Law and Justice, 2010.

  12.  N.N. Vohra, ‘Vohra Committee Report’, Ministry of Home Affairs, Government of India, 5 October 1993.

  13.  As argued below, FIRs are easily purchased from a corrupt police force.

  14.  Palanigounder Duraisamy, ‘Who Wins in the Indian Parliament Election? Criminals, Wealthy or Incumbents?’, FMSH-WP-2014-75.2014, .

  15.  Jai Prakash Narayan, ‘Political Parties and Indian Democracy’, Narla Memorial Endowment Lecture, 1998, http://www.liberalpartyofindia.sabhlokcity.com/writers/jp1.html.

  16.  They also receive a range of allowances and are paid Rs 2000 a day for attending Parliament.

  17.  K.P. Krishnan and T.V. Somanathan, ‘Civil Service: An Institutional Perspective’, in Public Institutions in India, edited by Devesh Kapur and Pratap Bhanu Mehta (New Delhi: Oxford University Press, 2005), 285.

  18.  ‘Refurbishing of Personal Administration: Scaling New Heights’, Second Administrative Reforms Commission, Tenth Report, Government of India, New Delhi, November 2008, 278–89.

  19.  Rakesh Mohan, Growth with Financial Stability: Central Banking in an Emerging Market (New Delhi: Oxford University Press, 2011), 482.

  20.  Ved Marwah, ‘Police Reforms’, Seminar, February 2009, http://www.india-seminar.com/2009/594/594_ved_marwah.htm.

  21.  Arvind Verma, ‘The Police in India, Design, Performance and Adaptability’, in Public Institutions in India, 210.

  22.  Ibid., 214–15.

  23.  Deeptiman Tiwary, ‘Why India Has a Low Crime Rate’, Indian Express, 12 January 2016.

  24.  ‘Data on Police Organizations in India as on January 1, 2015’, Bureau of Police Research and Development, New Delhi, 2015.

  25.  Pratap Bhanu Mehta, ‘India’s Judiciary: The Promise of Uncertainty’, in Public Institutions in India.

  26.  ‘Study Shows Pendency of Cases Longest in Allahabad HC, Shortest in Sikkim’, Indian Express, 12 August 2016.

  27.  Ruma Pal, ‘An Independent Judiciary’, Tarkunde Memorial Lecture, New Delhi, 10 November 2011.

  28.  M.J. Anthony, ‘Litigating for a Lark’, Business Standard, 5 November 2013.

  29.  L.K. Advani, ‘Collegium Should Appoint CAG, ECs’, Friends of BJP, 4 June 2012, https://friendsofbjp.org/content/collegium-should-appoint-cag-ecs.

  30.  Shailaja Bajpai, ‘The World Came Home’, Indian Express, 24 July 2016.

  31.  ‘State of Information Commissions and the Use of RTI Laws in India: Rapid Study 3.0’, Commonwealth Human Rights Initiative, New Delhi, June 2015.

  32.  Arvind Subramanian, ‘The Evolution of Institutions in India’.

  33.  Devesh Kapur, ‘Explaining Democratic Durability and Economic Performance: The Role of India’s Institutions’, in Public Institutions in India, 30.

  34.  Ibid., 43.

  35.  Arvind Subramanian, ‘The Evolution of Institutions in India’.

  36.  The Sri Lankan reforms establish a ten-member Constitutional Council, which comprises the Speaker of Parliament; the prime Minister; the leader of the Opposition; and four members of Parliament, one each nominated by the President, the prime minister, the leader of the Opposition, and collectively by the smaller parties in Parliament. In addition, a High Posts Committee of Parliament selects three outsiders chosen for their eminence and i
ntegrity. The Council recommends a short list of candidates to the President for all constitutional, statutory and regulatory bodies (Lateef, 2015).

  Chapter 12: Union–State Relations and Reforms

  1.    The author is grateful to G.R. Reddy, adviser, Government of Telangana; Pinaki Chakraborty, professor at National Institute of Public Finance and Policy; and V. Bhaskar, former special chief secretary, finance, Government of Andhra Pradesh, for their valuable assistance and advice on the subject.

  2.    For a detailed understanding of the path of fiscal imbalance, induced by the global financial crisis, see Chakraborty and Chakraborty (2013).

  3.    For details, see ‘Annual Report, 2015–16’, Reserve Bank of India, 2016, Appendix Table 6: Key Fiscal Indicators, 175.

  4.    The Eighty-eighth Amendment (2004) introduced Article 268A, amended Article 270 and introduced Article 92C of the Union List—tax on services. These explicitly provided for the levy of service tax by the Centre and its sharing with the states. All these three provisions were deleted by the recent Constitution 101 Amendment (GST) Act.

  5.    Through the back door in the Finance Bill. It has continued to do so till today. Regrettably, there is no substantive service-tax law in place today. All components of service-tax law are found only in various finance bills.

  6.    Only input tax paid in that state through upstream purchases. CST is still not set off as well as other taxes such as purchase tax, agricultural mandi tax and entertainment tax.

  7.    The Forty-second Amendment brought in forests, population control and family planning, and) education into the Concurrent List. The Seventh Amendment brought in ‘Acquisition and Requisition of Property’ into the Concurrent List. Welfare of labor, trade unions, social security were always in the Concurrent List (even in the Government of India Act 1935). Perhaps, these areas are good places to start such examinations.

  Chapter 13: Energizing the States

  1.    The author would like to thank Rakesh Mohan and Sumita Kale for their incisive comments and Chander Shekhar for help with both data and research. The author would also like to thank Soumali Banerjee and Vidya Krishnamurthi for their assistance.