India's paranoid economic history: A war room fights phantom imports!

‘Exim Policy Opens Floodgates – Industry Told to Pull up Socks,’ screamed the staid The Hindu Business Line, in a story datelined 31 March 2001 after commerce and industry minister Murasoli Maran abolished import quotas on the remaining 715 items that were on the list. With India’s exit, the number of countries with import quotas had shrunk to three.

Virtually everything of interest to everyday life could now be freely imported: mutton, butter, fresh grapes, black and green tea, coffee (not roasted), coffee or tea makers, sparkling wine, beer made from malt, sherry, wine, whisky, rum and gin, envelopes … even tooth brushes, toy guns, ball point pens, fountain pens, combs, hair slides….

India had been opening up gradually since economic liberalization began, and industry had coped. Yet the fear of Chinese goods ‘swamping’ the Indian market was so thick one could touch it. “If China can do it, why not India?” Maran exhorted. Its exports had grown ten-fold between 1980 and 2000 while India’s had merely doubled. “If we do not improve our competitiveness and cry hoarse for needless protectionism, we will have to content ourselves with a low level of subsistence economy,” Maran said.

Even though this was in line with India’s commitment to the World Trade Organization, such a wholesale abolition was a windfall to the naysayers and anti-globalisers. Maran knew he was easy meat for the Leftists. Optically, he had to do something to appear sympathetic, reassuring and in control. In a dramatic PR gesture he called the monitoring desk a WAR ROOM. Almost as if Maran was telling the country that if the imports became a flood, a threat too hot to handle, he would roll out the artillery and stanch them. So the “war room” terminology was attractive and graphic. “I am calling it a ‘war room’ because they would have to be watchful and we may have to declare war against surges in imports and dumping,” Maran told Frontline magazine in an interview.

But the war had already been declared in Parliament where the government was skewered. The opposition parties said the government had let down farmers and small industries. Congress MP Mani Shankar Aiyar compared the war room to Al Qaeda leader Osama bin Laden’s cave in the Tora Bora mountain range where he was supposed to have escaped to. “He has set it up after losing the war,” Aiyar scorned.

Communist Party members asked whether the government could even raise duties beyond bound rates. Aiyar reminded Maran that on edible oil (of which there was a shortage domestically) he could go up to 300 percent. The Leftist idea of helping the common woman was to sock her in the stomach!

But surprise surprise, the war did not even start. A year after the removal of quotas, imports of the 300 sensitive commodities had risen by only 3 percent from $1.6 billion to $1.76 billion.

To be sure, some traditional industries have gone under – but that is a part of the inevitable “creative destruction” that takes place when economic policies are changed on such a scale. The lock makers of Aligarh are struggling, unable to match Chinese prices or quality. The glassware industry of Firozabad has also suffered. At Delhi’s Bhagirath Palace wholesale market, one finds Chinese lamp shades instead. Xenophobes lament that even Ganesha idols are imported.

But there are huge gains elsewhere. Maran was quite prescient in another area. He had announced several measures to boost agricultural exports in his 2001 policy. In the last two years, India has exported 40 million tonnes of rice, wheat and maize. This has never happened since Independence—and perhaps not ever in India’s recorded history—says Ashok Gulati, former chairman of the Commission for Agricultural Costs and Prices. India has become the largest exporter of rice and of beef (buffalo meat). The growth of agri-exports has been much faster than that of manufactured exports, particularly during the past ten years with a sizeable trade surplus which shows that India’s agriculture can compete in world markets.

In all this, whatever happened to the grandiosely named WAR ROOM. Nobody quite remembers when it was quietly wound down and abandoned. India’s ordinary citizens had fought this economic war on their own. No government artillery was needed.

How I wish the war room had been preserved, as a memorial tomb to India’s paranoid economic history!