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Expenditure on food security: When Nirmala Sitharaman fought for a peace clause

Countries like Canada, Mauritius, Israel and the European Union have been expecting India to take the lead and conclude the negotiations for their respective Free Trade Agreement (FTA) as soon as possible.

Written by Deepak Patel , Sunny Verma | New Delhi | Updated: September 4, 2017 7:30 am
Cabinet reshuffle, Nirmala Sitaraman, Suresh Prabhu, Trade and Commerce Industry, Modi Cabinet, India news, Indian Express Commerce and Industry Minister Suresh Prabhu at the Rashtrapati Bhavan, in New Delhi on Sunday. (Express Photo/Neeraj Priyadarshi)

In December 2013, the developed and developing countries had met at Bali in Indonesia and cobbled together a “peace clause”, which stated that no country would be penalised for any excessive expenditures on food security programmes even if it breached the limits of World Trade Organization’s (WTO) Agreement on Agriculture. This peace clause was expected to be in force till 2017, and the countries expected to find a “permanent solution” within this four year period.

Nirmala Sitharaman — who took her oath for Minister of State (Independent Charge) for Commerce and Industry along with the Prime Minister on May 26, 2014 — decided to challenge this time limit of 2017. India got worried as it was  possible that there would be no permanent solution by 2017, and with the expiry of peace clause, its food security measures would then be open to  world’s scrutiny and subsequent penalisation.

Therefore, in July 2014, Modi government made it clear to the WTO that the Trade Facilitation Agreement would be signed only when it is made clear that the peace clause will remain in force till a permanent solution is worked out. India received a lot of criticism from developed countries for taking this stand. However, with India making its stand absolutely clear that it  will not budge from its position, the developed countries buckled under the pressure and agreed to India’s demand in November 2014.

While Sitharman succeeded on this front, she leaves a lot of work that would have to be completed by the new commerce minister Suresh Prabhu — including the need to boost India’s exports, further liberalisation of the foreign direct investment (FDI) regime, containing gold imports and improving ease of doing business in India. Apart from trade negotiations, steps to strengthen the manufacturing sector in the country, in line with the ‘Make in India’ programme, remains another key area requiring further work.

Countries like Canada, Mauritius, Israel and the European Union have been expecting India to take the lead and conclude the negotiations for their respective Free Trade Agreement (FTA) as soon as possible. Moreover, Indian exports decreased from $468 billion in 2014-15 to $437 billion in
2016-17. While the exports have gradually picked up in last eleven months, India is far from becoming a China-like export powerhouse.

“There are many reasons for India not faring up to the mark on the export front. One is global headwinds as countries across the world are turning more protectionist. But then, there are reasons such as the absence of new national manufacturing policy, slow discussions on free trade agreements (FTAs) and the difficulty in running a business in India, which has been plaguing the Indian industry for long. The new commerce minister would now need to take more proactive steps to deal with this,” said a Delhi-based trade expert.

The World Bank — which issues the annual “ease of doing business (EODB)” rankings to each country — has been in continuous discussion with the Department of Industrial Policy and Promotion (DIPP), which comes under the commerce minister only, as the latter has been targeting to improve its ranking dramatically for last three years. According to an output-outcome framework document prepared by the Modi government, India wants to reach the 90th rank in 2017-18 and 30th by 2020. However, in last two years, India has been able to improve its rank from 142nd rank to 130th rank only.

“To improve EODB rankings, the states would need to be taken along much more proactively. The state-level reforms need to be implemented and enforced by the centre more vigorously. This can be done as most of the states in the country are controlled by the BJP currently… A strong cabinet minister at a commerce ministry can make a difference in this regard,” said a former senior government official, who is aware of the developments and discussions regarding World Bank ranking. In 2014, Prabhu was named as India’s sherpa for the Group of 20 countries meetings. Sherpa is a senior official responsible for preparing the agenda for leaders to consider during the G20 summit. In September 2015, Former Vice Chairman of Niti Aayog Arvind Panagariya replaced Prabhu as the country’s sherpa.

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