Mains Paper 3: Economy
Prelims level: Department for Promotion of Industry and Internal Trade
Mains level: Government policies and interventions for development in various sectors and issues arising out of their design and implementation
• The Department for Promotion of Industry and Internal Trade (DPIIT) reportedly directed e-commerce companies such as Amazon, Flipkart and Paytm to figure out a mechanism that will allow consumers to identify the country of origin for all the products sold on their platforms.
• The latest directive comes amid a growing clamour for the boycott of Chinese products, in the aftermath of the clash between Indian and Chinese soldiers on the LAC.
• This is a troubling development. It signals a willingness on the part of the government to allow the discrimination, possibly the shunning, of products on the basis of their place of origin.
• Coupled with the government’s push for “atma nirbharta” or self-reliance, there are reports of it contemplating the raising of tariffs on imports.
• Moves such as these appear to showcase an opportune political optics at a high economic cost.
• It could end up undoing the benefits and reversing the gains over the last few decades of free trade.
• It could presage a misguided shift towards protectionism, sliding into the failed policy of import substitution.
• The idea of specifying the country of origin in products in today’s integrated world serves no rational economic purpose.
• The difficulties in executing it only underline its absurdity. At the crux of the matter is defining the “country of origin”.
• While products may be assembled in one country, the raw materials or components are often sourced from several other countries.
• This makes it challenging to identify who “manufactures” the product.
• A distinction thus has to be made between “assembling” and “manufacturing”, and the extent of value added at each stage has to be estimated.
• Take, for instance, the iPhone.
• Its components, such as the touch screen display, memory chips and microprocessors come from a mix of US, Japanese, Korean and Taiwanese companies, not all of them manufactured in China.
• These individual components are shipped to China, where it is assembled, and then shipped across the world.
• So will an iPhone sold on an e-commerce website in India identify China as the country of origin?
• Even products that are assembled in India have components from several countries.
• How will the country of origin be worked out? Will it be based on value added?
• Who will be responsible for providing accurate information about the product — the platform or the seller?
• Seen alongside recent developments, this latest directive raises concerns over the increasing protectionist impulses and inward looking signals emanating from the government.
• Such policies open the door for further lobbying, and facilitate rent-seeking.
• From the excessively wide rhetoric of self-reliance to reports of the government considering raising tariffs to boost domestic manufacturing, India seems to have forgotten the lessons learnt from its past mistakes.
• Identifying country of origin of products is an idea whose time should never come — serves no economic purpose, will have costs.
Q.1) With reference to the Make in India (Shipping Industry), consider the following statements:
1. Under the revised policy, no global tender enquiry shall be issued, except with the approval of the Competent Authority, for procurement of all services with estimated value of purchases less than 200 crore rupees.
2. It is estimated that the Make in India policy will provide opportunity to at least double the number of Indian flag vessels in the immediate term – from the present approximately 450 to at least 900 and more over a period of 3 years.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Q.1) Describe the latest decision of Department for Promotion of Industry and Internal Trade (DPIIT) in which it directed e-commerce companies to figure out a mechanism that will allow consumers to identify the country of origin for all the products? What is the rationale behind the directives? Comment.