Editorial 1 : On licence raj in laptop imports, government does well to reconsider
Context: Govt. does well to review and revise its policy on imposing license requirements on laptop imports
Introduction
- In August, the central government had issued an order imposing licensing requirements on the imports of laptops, tablets and other devices with immediate effect.
- The rationale for the move was ostensibly two-fold: One, to provide a fillip to domestic manufacturing, and two, to curb imports from China.
Fears associated with the move
- There were fears that such a regime could lead to the imposition of import quotas, create space for arbitrary action in other sectors, and increase the room for bureaucratic discretion, hurling India back by decades to a time many bad economic policy ideas can be traced to.
- The government, subsequently, deferred the deadline for the implementation of the licencing requirement.
Infamous License Raj
- License Raj or Permit Raj was a system of regulations and licenses that were required to set up and run a business along with the accompanying red tapes, delays and corruption between 1947 and 1990 in India.
- Under this it was mandatory to obtain a license from the government to start a business.
Reactions from the world
- The contentious policy continued to draw criticism from all quarters. For instance, at a recent meeting of the World Trade Organisation, countries like the US, China, South Korea and Taiwan raised concerns over this move. The government has now modified its position on the issue. This is welcome.
New import management system
- On Thursday, it rolled out an import management system for IT hardware, which includes laptops and computers. Under the new system, companies will only have to register and reveal data that relates to their imports, and the country of origin.
- As reported in this paper, the system will help to monitor imports and ensure that items come from trusted sources. There are carve-outs for special economic zones, hardware that is essential for capital goods, among others.
- The system will be faceless and contactless, ensuring a hassle-free experience for importers. However, companies in the “denied entity list” will not receive authorisation for imports.
Way Forward
- The government has already put in place a production-linked incentive scheme for IT hardware. And as per reports, several firms, both contract manufacturers and original equipment manufacturers, have applied under the scheme.
- A more prudent approach would involve creating a more conducive environment for development of a strong and vibrant manufacturing ecosystem. The policy framework must be geared towards ensuring greater openness and more freedom to operate.
Editorial 2 : The Green Finance Challenge
Context: An agenda to unlock private funding for the people and planet
Introduction
- In June, more than 100 countries as well as representatives from global private sector entities gathered in Paris to affirm a single goal: No country should have to choose between fighting poverty and fighting for the planet.
- The Paris Pact for People and the Planet was the result of close work with India, who co-chaired the Summit’s steering committee and was represented in Paris by Minister of Finance Nirmala Sitharaman.
- This outcome has been enshrined in the G20 Leaders’ Declaration at the historic Delhi Summit in September.
- The achievement reflects the spirit of the Indo-French partnership for the planet — we act together to overcome the artificial North/South divide and seek to find tangible solutions to the greatest challenges of our times.
Green Finance
- Green financing is to increase the level of financial flows (from banking, micro-credit, insurance and investment) from the public, private and not-for-profit sectors to sustainable development priorities.
- A key part of this is to better manage environmental and social risks, take up opportunities that bring both a decent rate of return and environmental benefit and deliver greater accountability.
Transforming the International Financial System
- Transforming the international financial system to better support sustainable development is one such challenge.
- In order to address the overlapping challenges of poverty reduction, climate change and biodiversity protection, we need a shift from billions to trillions in global investments. Much discussion and controversy have focused on the public sector, especially the commitment by developed countries to provide USD 100 billion in climate finance per year between 2020 and 2025. This goal is now expected to be met in 2023 for the first time.
- But we know that public sector financing will not be sufficient for the cause. What we also need is a positive shock from private-sector funding. The role of the private sector has so far been somewhat of a blind spot.
- The Paris Pact for People and Planet seeks to address this. It proposes actions aimed at scaling up private capital flows to transform emerging and developing economies.
Unlocking Private sector Funding
- First, we should engage in a review of the global vertical climate funds in order to optimise the use of their resources and increase partnerships between peers and with the rest of the climate finance architecture.
- Second, it is time to review the post-2008 financial regulation with respect to its unintended impacts on the mobilisation of OECD savings towards non-OECD countries.
- Third, credit-rating agencies must be included in the reform agenda of multilateral development banks (MDBs). We don’t want MDBs to be penalised and lose their rating because of the reforms introduced to make them more effective. Rating agencies should take into account the innovative blended finance schemes we are designing and use the new data on actual defaults.
- Fourth, we should push further the thinking on the “green finance” framework to make the most of the global savings’ pool. The objective is to align the financial sector with the objectives of the Paris Agreement, something that has led to misunderstandings and distrust between developed and developing countries. In essence, it simply means harnessing the full trust of private finance to support low-carbon and resilient pathways around the globe.
- Finally, unlocking private sector finance for the green transition does not exonerate governments from addressing debt vulnerabilities in developing countries. Too many low-and middle-income countries face unsustainable debt trajectories. This was also a key topic of the Paris Summit in June — how to accelerate debt suspension and treatments when needed, and find new tools such as climate-resilient debt clauses. Every major creditor country must live up to its responsibility.
Conclusion
- In Paris on July 14, President Macron and Prime Minister Narendra Modi highlighted that our partnership is a force for “advancing cohesion in a fragmenting world”. This spirit, which is that of India’s vasudhaiva kutumbakam, must guide our efforts to make the global financial system more efficient and more just.