Read Online To the Brink and Back: India’s 1991 Story by Jairam Ramesh - Free Book Online
Authors: Jairam Ramesh
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dexterity. But as soon as the package was announced—and the fact that the office of theChief Controller of Imports and Exports (CCI&E) would be abolished—there were howls of protest within Udyog Bhavan which housed the Ministry of Commerce. The protests continued even as the minister, in his defence, took recourse to the Congress’ 1991 manifesto and its commitment to abolish five regulatory agencies in the first 730 days in office. A compromise was struck a little later and the CCI&E took on a new avatar, Indian-style, as theDGFT (Directorate General of Foreign Trade).
It took less than ten hours, asAhluwalia writes, to get the4 July trade policy reforms approved by the prime minister and the finance minister. The reforms themselves—anchored in removal of discretionary controls in the form of licensing, and in the linkage of all non-essential imports to exports (other than in the case of petroleum, fertilisers, steel and other essential purchases)—were widely welcomed by industry. They vastly simplified the procedures for imports while giving a huge boost to exports. Besides, they granted a large degree of automaticity in the issue of replenishment licenses which were being renamedexim (for export-import) scrips.
The commerce minister, for the first time ever, unambiguously declared that the rupee would be made fully convertible on the trade account in three to five years. This meant that Indian currency could be freely exchanged for dollars to import goods. This was actually accomplished in less than two years.
But the former prime minister,Chandra Shekhar, was most unhappy and very biting in his criticism in Parliament. He accused the government of becoming a slave of the World Bank and said that the4 July package had been prepared by that organization. The commerce minister issued a pointed rejoinder on 19 July giving the long lineage of the 4 July package. In his defence, the commerce minister pointed out that the basic blueprint for trade policy reforms was prepared by theAbid Hussain Committee, 49 which had submitted its report way back in December 1984, and this blueprint was further expanded in June 1990 whenV.P. Singh (a former commerce minister himself) was prime minister. But the most telling riposte was the revelation of the commerce minister thatChandra Shekhar’sCabinet Committee on Trade and Investment (CCTI) itself had on 11 March 1991 approved a new export strategy which contained the main elements of the 4 July package; the commerce minister at that time wasDr Subramanian Swamy.
The 4 July package was only the first step. Much remained to be done. This was but natural since a highly complex system built over a period of more than four decades was being dismantled. The system was so convoluted and opaque that I used to joke that the most eagerly awaited import-export document every year was not the one on trade policy, but rather,Takht Ram’s commentary on it. 50 Besides, the name of the organization itself—the Office of theChief Controller of Imports & Exports—betrayed a particular mindset, where a case could be made for controlling imports, but controls on exports were to be pioneered at one’s peril.
Finally, on 13 August 1991, the commerce minister made a detailed statement on trade policy in theLok Sabha, going beyond the 4 July initiatives. A new package for 100 per cent export-oriented units and for units in the export-processing zone was announced. Public sector monopoly on the import and export of items was considerably curtailed. Details of how the new exim scrip instrument would operate were made explicit, as were those for the system of advance licenses to provide exporters with duty-free access to imports. The statement demonstrated that the Rao government was determined to push through both policy and institutional reform in support of accelerating exports. The commerce minister conveyed this in so many words.
48 The events of 3 July 1991 have been discussed in greater
It took less than ten hours, asAhluwalia writes, to get the4 July trade policy reforms approved by the prime minister and the finance minister. The reforms themselves—anchored in removal of discretionary controls in the form of licensing, and in the linkage of all non-essential imports to exports (other than in the case of petroleum, fertilisers, steel and other essential purchases)—were widely welcomed by industry. They vastly simplified the procedures for imports while giving a huge boost to exports. Besides, they granted a large degree of automaticity in the issue of replenishment licenses which were being renamedexim (for export-import) scrips.
The commerce minister, for the first time ever, unambiguously declared that the rupee would be made fully convertible on the trade account in three to five years. This meant that Indian currency could be freely exchanged for dollars to import goods. This was actually accomplished in less than two years.
But the former prime minister,Chandra Shekhar, was most unhappy and very biting in his criticism in Parliament. He accused the government of becoming a slave of the World Bank and said that the4 July package had been prepared by that organization. The commerce minister issued a pointed rejoinder on 19 July giving the long lineage of the 4 July package. In his defence, the commerce minister pointed out that the basic blueprint for trade policy reforms was prepared by theAbid Hussain Committee, 49 which had submitted its report way back in December 1984, and this blueprint was further expanded in June 1990 whenV.P. Singh (a former commerce minister himself) was prime minister. But the most telling riposte was the revelation of the commerce minister thatChandra Shekhar’sCabinet Committee on Trade and Investment (CCTI) itself had on 11 March 1991 approved a new export strategy which contained the main elements of the 4 July package; the commerce minister at that time wasDr Subramanian Swamy.
The 4 July package was only the first step. Much remained to be done. This was but natural since a highly complex system built over a period of more than four decades was being dismantled. The system was so convoluted and opaque that I used to joke that the most eagerly awaited import-export document every year was not the one on trade policy, but rather,Takht Ram’s commentary on it. 50 Besides, the name of the organization itself—the Office of theChief Controller of Imports & Exports—betrayed a particular mindset, where a case could be made for controlling imports, but controls on exports were to be pioneered at one’s peril.
Finally, on 13 August 1991, the commerce minister made a detailed statement on trade policy in theLok Sabha, going beyond the 4 July initiatives. A new package for 100 per cent export-oriented units and for units in the export-processing zone was announced. Public sector monopoly on the import and export of items was considerably curtailed. Details of how the new exim scrip instrument would operate were made explicit, as were those for the system of advance licenses to provide exporters with duty-free access to imports. The statement demonstrated that the Rao government was determined to push through both policy and institutional reform in support of accelerating exports. The commerce minister conveyed this in so many words.
48 The events of 3 July 1991 have been discussed in greater
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