ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

A+| A| A-

HEALTH CARE-Old Prescription

that a reduction in the effective rates of protection along these lines may well destroy the nascent industry.
But in arguing for rationalisation of the customs tariff structure, industry spokespersons are taking an altogether narrow view of the problem. True, they have expressed their fears in very strong terms. For instance, a former president of the CII has declaimed that "there is a deliberate attempt to demolish the capital goods industry in India". Attributing government policies to pressure from the International Monetary Fund, he has pointed out that "those who give you the money will always extract their pound of flesh". But industry spokespersons are ignoring the more fundamental issues arising out of the stabilisation and structural adjustment programmes. Rationalisation of the customs duty structure will not by itself solve the capital goods industry's problems. In fact, the government may concede the point and to an extent realign the customs duties as demanded by industry, but will that lift industry out of the recessionary conditions? Not likely, for the problems that have been created for the capital goods sector by the government's policies on reduction of public investment, almost total liberalisation of imports and general opening up of the economy are deep-rooted. Apart from the sizeable investments made by the public sector directly, there was a certain pattern of investment in the past which had favoured capacity build-up in basic and capital goods industries as also in infra- structural industries. In the era of liberalisation, the private sector can hardly be counted upon to build on this industrial base. Also, the diversion of resources to support conspicuous consumption is bound to create a different production structure, much more import-based than in the past. While, in the next phase of development, there was need to restructure the industry, the socially optimal course would have been to upgrade the edifice of basic and capital goods industries already created through infusion of fresh investment, technology and management. But, clearly, such an approach has little place in the scheme of all-out liberalisation and globalisation.

Dear Reader,

To continue reading, become a subscriber.

Explore our attractive subscription offers.

Click here

Back to Top