Upgrading The CEPA With South Korea
Why in news?
- India has decided to upgrade its existing trade pact with South Korea.
- The domestic industry has flagged concerns over the agreement.
What is CEPA?
- Comprehensive Economic Partnership Agreement - CEPA, was a trade deal signed between India & South Korea in 2009.
- The CEPA has increased bilateral trade volumes by over 50%.
- Many Korean companies have penetrated deep into the Indian consumer goods market and have directly benefitted from CEPA.
- Recently in a review meeting, both countries have decided to upgrade the CEPA at the earliest – possibly by 2018.
- This has angering domestic exporters, who claim the pact has disproportionately helped Korean exporters.
What are the concerns about CEPA?
- Trade Deficit – India’s trade defict with South Korea is continuously worsening with time.
- While India imported $12.58 billion worth of goods from South Korea in 2016-17, its exports totalled only $4.24 billion.
- Misuse - The Duty free import facility for gold from South Korea was found to be misused by round tripping.
- Recently, the Directorate General of Foreign Trade – DGFT, had to withdraw the zero-duty import facility to plug the same.
What is the way ahead?
- A focus on enhancing market access and strengthening the rules of origin will be the key for India to improve its exports.
- Underlined the importance of pushing trade in services as a prime mover of global growth will also benefit India’s cause.
- Caution needs to be exercised for broadening the terms of the deal as most of our existing bilateral trade engagements have faultered.
Job Creation And Economic Reforms
What is the issue?
- Job creation rates have been dismal for years now.
- The government has been espousing the need for a new industrial policy to address the flaws of current liberal economic structure.
How are economies engineered?
- The Concept - The process of industrialisation is one of acquiring capabilities to produce more complex products that before.
- Workers learn newer advanced skills and policymakers work to create conditions conducive for the advancement of industries.
- While, a competitive world enhances growth, policymakers should ‘nurture’ necent domestic sectors by following protectionism until they are strong enough for more open competition.
- Indian Context - Until the 1980s, the Government closely managed the flow of investments into selected industrial sectors to nurture their development.
- From the early 1990s onwards, the Washington Consensus model of liberal markets has been dominating both Indian & global economic policies.
- After the 2008 slowdown, it is now felt that the present pattern of economic growth is not producing sufficient jobs – calling for structural reforms in the economy.
How has the Indian industrial sector fared?
- Free market approach was embraced with the expectation that market forces would accelerate growth.
- But, India’s manufacturing sector, which should’ve been a principal driver for job creation & growth didn’t meet expectations.
- While the services sector grew, overall job growth hadn’t keep pace with population growth.
- India’s capacity to produce capital goods was as strong as China’s in 1991 because of compulsions due to foreign exchange shortages.
- But by 2009, Chinese capital goods production capacity was about 50 times as large as India’s.
What are the other issues hindering job creation?
- Skilling policy - The skills people need are the ones that industry demands and hence large scale coordination is required.
- So, dedicated ministries for promoting programs for skilling like in India are bound to fail.
- Effects - This approach has resulted in the mismatch between the output of the skilling programmes and requirements of industry.
- While, less than 20% of the millions trained by the government’s skilling missions have been able to find suitable jobs, enterprises complain that they don’t have people with the requisite skills.
- Therefore, policies for developing skills must mesh with policies to stimulate growth of enterprises.
Role Of CAG
What is the issue?
- The Corruption Perception Index released by Transparency International ranks India at a lowly 79 out of 176 countries.
- As much of this corruption is linked to public funds, it calls for a relook at the role of the CAG (Comptroller and Auditor General).
What is the reality?
- India spends about 30% of its GDP on public procurement and hence the quantum of corruption associated with this is proportionately high.
- Estimates reveal that 20-30% of the investments in public construction projects are lost to corruption.
- In addition, the huge sum of leakages in government revenues worsens the financial picture.
- The office of CAG was created as an independent status and authority to work against these financial misconducts in public office.
- However, CAG is seen to be functioning short of its objective.
What are the drawbacks in this regard?
- CAG, over the years, has functioned as a routine auditor and has failed to proactively expand its role to meet the emerging challenges.
- Control - Though CAG reports are discussed by the public accounts committees of the respective legislatures, no one evaluates or questions what the CAG does.
- As a result, its functions are largely confined to itself and is not known to meet with experts, professionals or institutions.
- There is no Constitutional authority, including the judiciary, which is so secluded and unapproachable as the CAG is.
- Precedence - It does not disseminate its policies or practices for the benefit of public servants and the general public.
- The audit reports of CAG are short of issuing any guidelines, best practices or advisories that would restrict malpractices and set a precedent.
- Post-Mortem - CAG could well be called the “Post-Mortem Authority of India as it looks primarily at what is demised.
- Carrying on concurrent audit which is legally permissible could be a preventive and curative measure to at least restrict financial ineffectiveness.
- Scams have been occurring with increasing frequency, but the CAG is able to expose only a few and that too with minimal consequences.
- Ex: There are enormous cost overruns in public projects due to poor contract design coupled with corrupt practices.
- Limitation - The growing interventions of the CAG, CBI, CVC and the unpredictability with their actions, at times result in bureaucrats preferring to avoid decision-making.
- CAG reports is recent years seem to be going into sensationalism. Ex: the excessive numbers, of anticipated loss, put out by the CAG in the telecom spectrum and coal mine scams.
- This seems to be distracting the CAG from an objective and judicious examination of matters with the requisite expertise and diligence.
What is desired?
- When the government is taking initiatives to curb corruption, black money, etc it is essential that public institutions like the CAG function for its purpose.
- A reassessment of the role and responsibilities of the CAG towards this end is the need of the hour for India to fare better in global transparency indicators.
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