If The Centre Cannot, Why Can’t States

21-Jan-2021 Intellasia | Hwnews | 6:02 AM Print This Post

On a scale of 1 to 10, Vietnam is rated 6 for its FDI policy, with India and China at 5/5 each and at 7/3 for foreign trade and exchange controls

A recent report of the Economist Intelligence Unit (EIU) states that Vietnam has emerged as a low-cost manufacturing base in Asia’s supply chain, beating India and China, doing much better on parameters like FDI policy, forex and trade controls and labour markets. It is preferred for the manufacture of hi-tech products too, due to its pool of low-cost workers, and astute proliferation of FTA. For eg. under its FTA with the EU, wef August 2020, its footwear exports to the EU now attract NIL import duty, as against 30 percent for other exporting nations, thus giving it a huge edge.

On a scale of 1 to 10, Vietnam is rated 6 for its FDI policy, with India and China at 5/5 each and at 7/3 for foreign trade and exchange controls, as against 6/4 for China and 5/5 for India. Its score for labour market too was better at 5/6, as against 5/4 for India and even in terms of infra deficit, while both Vietnam and India were lowly placed, it yet did better than India. Vietnam gives attractive incentives to foreign investors and also makes it easy for them to invest and do business in India.

It cannot be denied that through a single-minded pursuit of economic and political reforms over a 30 year period, Vietnam has risen from being one of the poorest war-ravaged nations in the world to be a middle-income nation, whose per capita income has gone up over 10 times from $ 230 in 1985 to over $ 2500 now. Despite pursuing its object of being a socialist-oriented nation, it has set up a free-market economy, based on trade liberalisation, deregulation, lowering of the cost of doing business and massive investments in human capital and infrastructure. Of course, this growth comes under a one-party rule, which suppresses freedom, human rights and freedom of the press, but has yet ensured that the growth has been inclusive and is thus sustainable.

While India has the challenges of a fractious/cantankerous democracy and large geography which hinder growth and make it uneven too, yet the question is that while it is not easy for India to become an economic miracle like Vietnam why cannot certain states or regions or cities try to be one, so as to record rapid growth, within our democratic structure. With voters urging and aspiring and being swayed by promises of ‘bijli, Sadak, Pani’ to symbolise growth and development, any such effort for a state to be India’s rapid growth story, will also make political sense to the party that pursues it. The issues are as under:-

Despite India’s confusing federal structure of overlapping governance rights between the Centre and the State, why can’t one state in a self-contained, standalone manner, set up an ecosystem, where it is easy to do business, cost of production is low and competitiveness of the producer is high, labour is low cost/competition, where infrastructure is of world-class and the investor feels that his investment is safe and profitable. States in India today do publish their own individual EODB and competitiveness ranking, but such self-certification and accolades serve little, as long as the investor does not approve it. Individual states must aspire for their own economic miracle.

If it is too difficult for an entire state to be so, why cannot we have such trade zones attached to ports, dedicated to manufacturing/service exports and with their own set of regulations for those trade zones, to make it easy to invest and do business.

Why cannot a state be the facilitator of approvals/clearances by the Central government, instead of letting the investor be harassed, such that he ultimately loses interest in investing in India?

And to provide low cost, high skilled manpower to these states/zone, why can’t we invest in providing such education and skills to our graduates to make them valuable and employable, which benefits the employee and the employee too.

It is unfortunate that growth has become a challenge to India, a nation with a huge domestic market, with a demographic dividend by way of a large young population. We may blame covid for our present economic crisis, but in the same period, while our economy shrank and millions of jobs were lost, it was the reverse in the case of China. While we are expected to end the year with a 10%, growth, China will end with a plus 2.3%, with a V-shaped recovery where its GDP growth rate is already exceeding the prepandemic levels. It is time for the Centre to be concerned and if that’s not so, then the individual states at least should be so, with the determination that they can be an economic miracle, despite India’s overall slumbering growth.



Category: Economy, Vietnam

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