Please, not licence raj in camouflage

Last week, when the decision to license imports of laptops, PCs, tablets, etc were announced, we gave GoI the benefit of the doubt. While upholding the letter of multilateral and bilateral agreements, the plan was, we argued, to push vendors to switch to China Plus One options quickly. Now, with the follow-up announcement that FTA partners like Japan and South Korea will not be spared, the whole import licensing issue shows up India in poor light, especially to its trading partners. The national security argument is overdone, and there are better ways to increase domestic manufacturing. Most damaging is the possible perception of reversal to a mindset gradually cast aside since the liberalisation of the economy in the 1990s: licence raj. Even if not true, the perception of protectionism is bad enough. Any move to curb market freedoms, however well-intentioned and opportunistic in a changing global order, could undermine hard-won gains.

India has taken strides in improving its stature as a destination for manufacturing. The government is on an accelerated course of building physical and digital infrastructure that should attract foreign investors. It offers competitive tax rates and is lowering logistics costs. Generous incentives are on offer for production and exports in select manufacturing areas, including IT hardware. The size of its domestic market is an obvious factor for global manufacturers trying to make their supply chains more resilient. It has allayed Western concerns over the transfer of dual-use technology. All these are significant achievements.

Yet, India has turned to import substitution rather than opening its economy further to promote manufacturing exports. Any resurrection of licensing reinforces concerns of an inward-looking economy. That is the wrong kind of signal global investors would receive about the time they are sizing up the India opportunity. India cannot afford misgivings among sources of capital and technology as it tries to speed up its ascent to the world's third-largest economy.