‘For the first time, India’s trade deficit with China has shrunk’: Suresh Prabhu
The power derived and given by Parliament to the government is being used through the Reserve Bank of India (RBI) but it essentially follows from the insolvency code.Updated: Apr 04, 2019 10:43 IST
Union commerce & industry and civil aviation minister Suresh Prabhu spoke to Shishir Gupta and Rajeev Jayaswal about trade, privitisation of Air India, ease of doing business, among other issues. Edited excerpts:
The RBI insolvency circular of February 12 has been made invalid. What is your take on it?
The power derived and given by Parliament to the government is being used through the Reserve Bank of India (RBI) but it essentially follows from the insolvency code. If you take all G20 economies, India did not have a code like this. As a result, the biggest sufferers were the promoters, bankers, and the recycling of capital never happened because it was stuck in one particular place. Employees were suffering because they could never come out of it and therefore the insolvency code was necessary and it actually solved the problems. In the absence of the insolvency code, the economy will slow down because the capital which could be used for something else will be put into the non-performing assets (NPAs). I have not read the Supreme Court judgment - I don’t know exactly why the court termed it invalid.
The judgment said that without the concurrence of the Centre, RBI cannot direct banks to take action against companies after 180 days of notice.
It must be a technical point, the law ministry and finance ministry will look into it. I am talking about the broad philosophy. There’s a classic example so we understand it better: The backbone of India’s manufacturing sector was the textile industry. The biggest textile centre of India was Mumbai, besides Ahmedabad and Kanpur to some extent. All textile mills have closed down. Why? Because they were stuck, they were not mordernised, they could not recycle the capital. We respect the SC judgment and we will respond to it in a proper manner.
India has jumped in the ease of doing business rankings to 77. What is the biggest contributor?
We did a lot of baseline studies. The World Bank has a well laid down procedure to what leads to ease of doing business. There were measures necessary which were legislative in nature. In fact, the insolvency code is one of the measures for ease of doing business. Frankly, and I’m not making a political statement, it was the prime Minister who personally took interest, he got all the ministries together, he chaired a few meeting to make it happen. He provided the leadership.
We decided to do something completely different and that work has already started. We are working on ease of doing business for every district . So, if ease of doing business increases in all the districts of India, it will really bring change. While we do it on a pan-India level, we are trying to work on grassroots level.
Do you think you can break into the top-50 next year?
Allow me to deviate a little. We talk about the GDP crossing the barrier into double digits. We have started working on it. We took six districts in five states – Muzaffarpur in Bihar, Sindhudurg-Ratnagiri in Maharashtra, Varanasi in Uttar Pradesh, we have taken Vishakhapattinam, and in one hilly district of Solan in Himachal Pradesh. We did a complete analysis - what is the contribution of that district to GDP, and can we make the district from the baseline to 4-5% more. Why are we doing this? If each district of India grows at 3-4% more than the normal growth, as an aggregate of all districts India’s growth will automatically be 3-4 % more.
President Donald Trump has withdrawn general trade preferences. What is the current state of India-US trade?
India and US have good trade relations. We have a trade surplus with the US. While working on the trade deficit issue, they came across the issue of medical equipment and devices. The Indian government launched a major programme of giving concessional medical treatment to people. Before Ayushman Bharat, there was Jan Aushadhi and there was a pricing cap on things like stents. As a result, medical device firms in the US went to its commerce department saying this is an unfair trade practice.
There is another issue - the dairy industry wants to export to India but we have some issues, because it has got to do with the religious sensibilities. And we made an informed choice that milk may have residue in it which may affect religious sentiments. The third issue is the export of certain agricultural products to India such as strawberries, almonds etc. We prepared a package for the US for their consideration. We have given a package which they say they’re examining. Our government is working towards addressing US concerns. The US must appreciate India’s concerns.
The other side is the trade deficit with China, which is at $63bn. Are you looking to address this?
For the first time, the trade deficit with China has gone down. In March 2018, soon after I became the commerce minister, I invited China’s senior-most political leader, one of the top five, he’s the commerce minister also. I told him we would like to balance the trade with China, not only reduce the trade deficit. So we are working on the strategy. This year, we exported rice for the first time in 20 years. We exported rapeseed, we are negotiating on soyabean, sugar and pharmaceuticals. We are going to make a concrete proposal as to how to balance trade, increasing export to China, bringing more of manufacturing of China’s products in India, so automatically that would mean India’s share of manufacturing will increase, job creation will happen, and imports from China will go down. We are changing our engagement with China on the economic level.
What are your plans to disinvestment of Air India. Is reasonable to presume it can be privatised in the coming months?
First time AI was attempted to be privatised, it was our government. We did everything possible. We ran the process transparently. Unfortunately, when the bids were to be submitted, oil prices shot up. But the intention was clear. We are also trying to professionalise the management of AI and it should be a board-run company and not the government of India.
Are you coming up with a new industrial policy?
That policy is ready. It could not be cleared by Cabinet because of last-minute rush. This will be helpful for the new industry. We are reviewing all the regulations which could come up in the way.
What’s the status of the e-commerce policy?
The e-commerce draft policy is already in the public domain. Let all comments come in, somebody will benefit, somebody will not. We don’t want to take sides. We will not make the policy final unless we are satisfied all issues are addressed.