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Govt. should not impede development

During the year of American declaration of Independence, China was the biggest economy of the world, followed by India. Now with both China and India opening up their economies, Economist Clyde Prestowitz thinks that 21st century could well turn out to be the Indian century.

But then it takes political will to sustain the current growth. For the current Indian Govt. this is all the more difficult because the Congress is supported by the Communists, who are anti everything. But the Trade Minister seems to realize what needs to be done.

India’s main problem is the absence of world-class ports, cold-storage facilities and all-weather roads. “The biggest exporter complaint is the amount of time it takes to get your product from A to B,” he said. One solution would be to open India’s retail sector to foreign direct investment. Many multinational retail chains have beaten a path to Mr Nath’s door since Congress took office in May. Economists argue that foreign investment would stimulate much greater investment in cold storage facilities and transport links.

But many lobby groups would fight tooth and nail to prevent a global chain store setting up in their city. “I would not rule out permitting foreign investment, especially if it were shown it was a net generator of employment,” said Mr Nath. “My main concern would be to protect ‘mom and pop’ stores from closing.”

“We know the direction we are heading – a freer and more dynamic trading environment,” said Mr Nath. “It is just a question of filling in the details.”[Infrastructure reform high on the list for India’s new trade minister]

For a country the size of India, there is a limit to the employment that mom and pop stores can generate. Also the Govt. should not introduce artificial restrictions which will impede development. One such situation is coming up in 2005 when the Multi Fiber Agreement will end. When Indian planners began the five year plans in 1951, they were worried that the large scale expansion of cotton mills in Ahmedabad would put the small scale sector out of business. So they prevented the mills from expanding and modernizing and Indian exports could not even fill the quotas under the Multi-Fibre agreement. But in 2005, the Agreement will expire and there is fear in India that Chinese Mills will kill them in the global market. [from In Defense of Globalization]

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