No need for SEZs in reforms era: Bhagwati

SHIVOM CHAKRAVARTI

TIMES NEWS NETWORK[ THURSDAY, OCTOBER 19, 2006 03:10:06 AM]

The government and policy agents have tipped special economic zones
(SEZs) to be an important driver of growth and exports for the economy.
But Jagdish Bhagwati, professor of economics and law at Columbia
University, and a poster boy for globalisation and free trade, feels
otherwise.

“Give the current progress in reforms undertaken in earnest since 1991,
there is no need to establish SEZs,” said Mr Bhagwati. “It made sense to
have SEZs in the pre-reform era when policies of the country as a whole
could not be tweaked. That period warranted the setting aside of certain
exclusive economic zones with low trade barriers and other favourable
policies to enhance growth.”

The number of SEZs approved by the board of approval, commerce ministry,
shot up to 181 in the second-half of the current fiscal from 150 in
FY06. Units in an SEZ have to be net foreign exchange earners but are
not to be subjected to any pre-determined value-addition or minimum
export performance requirements. Big players like Reliance, Mahindras
and DLF are betting heavily on SEZs.

Liberalistation in agriculture is another area on which Mr Bhagwati has
strong views. “The presence of those with socialist leanings in the
incumbent coalition government precludes the possibility of
liberalisation of agriculture, which is a pity indeed.

In China, one of the things that pushed agriculture was the
decollectivisation, which makes agriculture more productive. We need to
examine that.” He drew a parallel with the industrial sector,
performance of which improved dramatically post-liberalisation.In
respect of global trade talks under the auspices of WTO, the professor
said there were four sets of countries that have to make concessions -
India, Brazil, EU and the US. While India and Brazil are expected to
make concessions in manufacturing and services, EU and US are being
urged to make concessions in the area of agriculture for WTO talks to
make headway. “However, the Congress Party will never make concessions
on the agriculture front as they believe that would impact 60% of
India’s population.

The US has to accept the fact that India was not going to move on
agriculture in any significant way,” he said, adding that “they would
have to trim down their ambitions and make concessions.”Mr Bhagwati is
optimistic in his outlook of the Indian economy, especially given the
acceleration witnessed over the past three years. “What you have to
worry about is whether this is a flash in the pan, reflecting excellent
world economic conditions or has something really taken root. The growth
being seen is also helping in reducing poverty.”

He has warned that the danger point at this juncture is that revenues
should not be wasted away and be used to build schools and provide
healthcare to the poor.

Mr Bhagwati has been the economic policy advisor to Arthur Dunkel,
director general of GATT (1991-93), special advisor to the UN on
globalisation, and external advisor to the WTO.
ET INTELLIGENCE GROUP

http://economictimes.indiatimes.com/articleshow/2201541.cms