Domestic investment vs trade deficit – by ankit bhatia

Good evening !

On the verge of embarking upon day’s journey, sans any aberration, well .. aberration synonymous of being – to rather embark upon blogging journey – however, usual biased financial newspaper editorials, source biased financial editors, consequent culprit has induced intellectual aggression (civilized term being ‘intellectual stimulation’) – on aggrandizement or accolades by editorials – being attributed to domestic value addition fiscal initiatives policy.

Perusal of financial editorials of prominence could culminate unto extremely flawed inferences regarding domestic value addition policies role vs impeding or being conducive to accomplishing desired objective of domestic value addition program. (ought be personal aggrandizement accolades, rather)!

Predominant aspirations veiled behind prominent editorials apparently seem to be conducive to marketing, be in vogue, pro power centers, rather than being informative, critical or factual.

Predominantly, editorials seem aggrandizement pamphlets, flattery and erroneous – in for all accolades for flawed fiscal policies being implemented via statutory framework – for aggrandizement programme of likes of ‘domestic value enhancement programme’.

A mere glance at the trade deficit figures with corresponding economy – aptly suffice to substantially rebut the flattery redundant critique of the flawed policies in such editorials.

India’s exports only reached $10.02 billion after nine months of the year, out of two-way trade of $ 53.34 billion. India and China are certain to fail to meet an earlier target of $100 billion set for 2015.
Chinese exports to India, however, grew by 8.6 per cent in September.

via India set for record trade deficit with China in 2015 : India, News – India Today.

Such figures expose the veiled bias of editorials. Facts represent a jolt to the aggrandizement programme – veiled as pertinent policy framework adopted for promoting domestic investments / value addition in India.

Consider, for instance, India’s 2nd largest import – electronics! India imports 65% of its electronics consumption ! After crude oil, this is the largest consumer of India’s disposable income – coercing its way out of the economy!

In my fiscal advisory assignments in a global consulting firm, rendering advisory to global corporations, discovered flaws in fiscal policies – attributable to the aforesaid aggrandizement programme. For instance, majority global corporations in electronics industry, opt for exporting semi assembled commodities (technically referred as SKD in Excise Customs terminology) to India – rather than manufacturing or pursuing value addition in India. Such a practice – deteriorates the value addition in India programme, in addition to, jolt to revenue targets! Such a practice tantamount to legally avoiding massive import fiscal levies, and, simultaneously, prompts negligible investments / job work in India (since SKD tantamount to a virtually complete product). Consequently, India stands to loose on both strata – fiscal collections as well as diversion of value addition away from India.

Further, Customs Tariff Statutes empower power centers to impose obnoxious levies on imports – so as to impede the damage to local value addition. For instance, a specific statutory imposition vide Section 8C, empowers for a specific levy – to balance out cheap imports. Even exists for anti dumping !

Why such statutory powers are not being employed to accelerate progress to accomplish domestic value addition programme ? Power centers ought pursue anything, but sporadic assessment, of factors determining foreign investments, specifically, in manufacturing sector.

Though, in such issues, I concede the implications of India’s WTO agreement’s clauses – which governs determination of fiscal levies on imports. However, factors alike of, such already incorporated statutory powers etc, ought be employed in their entirety – to accomplish or accelerate the embarking upon the domestic value addition journey – along with enhanced domestic investments!

Else, will culminate unto a mere aggrandizement programme, merely of a political accolades and fiction.

Ponder overrrr ..