Kamal Nath following in Jaitley's wake

In his first year as commerce minister, Kamal Nath has generally followed the policies of his predecessor Arun Jaitley. To be fair, he has tried to be different but without much success.

Despite the rhetoric, Nath has ensured continuity, which is not altogether undesirable. Jaitley helped forge a coalition of developing countries at the World Trade Organisation negotiations.

Nath carried the process forward strengthening the G-20 coalition. He tried to be as strident as Jaitley but his lack of fluency has made him look much less uncompromising. Nath justified the July package at the WTO well enough and ensured no adverse reaction.

Jaitley moved aggressively to sign up bilateral and regional trading arrangements with other developing countries. Nath has gone ahead in the same path, although the benefits of such agreements are not all too clear.

By playing along, he has avoided any criticism of being less dynamic. Jaitley prepared the draft of the Special Economic Zone Bill.

Nath has fine-tuned the provisions and presented the SEZ Bill in Parliament, without altering the basic features of the draft prepared by Jaitley. Nath has looked receptive to new ideas without adopting any.

In the past 16 months, the aggregate Customs duties have come down from 50.8 per cent to 34.44 per cent and the rupee has appreciated from Rs 45.75 to Rs 43.25 per US dollar.

Many businesses have accordingly reviewed whether operations under the Export Oriented Units scheme or Special Economic zones are worthwhile alternatives.

Nath has not yet looked at whether EOU or SEZ schemes deserve to survive. Nath junked the Exim Policy 2002-07 and put in place a new Foreign Trade Policy 2004-09.

The new FTP, however, retains all the features of the earlier policy and reads not very differently. The changes are incremental and not fundamental. The special focus initiatives are helpful but of marginal impact.

Jaitley introduced outrageous direct export subsidies for export houses and service providers to please the business constituency. Nath has shown no courage to take on the exporters' lobby but has continued the unjustified subsidies.

His pusillanimity will cost the government dearly. Nath has successfully got the finance ministry to continue the export subsidies and the Duty Entitlement Passbook scheme, at least for the present.

Nath has also gone soft on defaulters. He has got the prime minister to intervene in the matter relating to income tax on DEPB. He has generally refrained from rocking the boat.

Nath has tried institution building by reviving the Board of Trade, by setting up Export Promotion Council for services, by mooting the idea of inter-state councils, etc. We have to wait and watch the effectiveness of these institutions.

Nath can claim justification of his policies by pointing out that export growth of about 25 per cent is significant. But, it must be remembered that the export growth has come in a year of buoyant world economic growth and record prices of petroleum products, metals and commodities.

The agenda of the Manmohan Singh government in the first year was to do nothing that will hurt business sentiment or impede the momentum that the economy had acquired.

Nath has followed the agenda scrupulously and has generally tried to cultivate an exporter-friendly image and done his best to match his predecessor's business- friendly overtures.