It is said, ‘The More things Change, The More they Remain the Same’.
There was a time when India had a severe foreign exchange problem. Our reserves were low and we dare not import stuff that was manufactured abroad. The government at that point in time had put all imports under a license. A quota system existed, allowing only a certain value of import and those who got the licenses made the most of this system. Using their proximity to the government officials (using bribes too), businessmen acquired licenses and imported things. This gave them a monopoly on the items they imported and they could then sell these to anyone at any price they wanted.
All this changed in 1992 when PV Narsimha Rao was pushed into a corner and had to perforce liberalize the Indian economy. The situation was so bad that Government of India had to send plane loads of its gold to UK to raise money for imports. This forced Narsimha Rao to give Dr. Manmohan Singh (his Finance Minister) a free hand and allowed the dismantling of the license raj, thus opening up our markets to foreign companies, slowly and gradually.
The end of license raj saw a glut of international products and companies entering India and establishing their operations here. Indians had a choice.
Of late, the Modi Sarkar, has decided that it wants to go back to the License Raj. The reason it gives for this return to License Raj is that it will boost local production. The first bombshell came in the Information Technology sector. The Government now wants everyone who wants to import computers, tablets, servers to take a license.
The main components in a computer system are, CPU (Central Processing Unit) of which there are just two or three manufacturers across the world, including Intel, AMD and Arm. The next major component is the chip-set required to support CPU, the third is memory modules, the fourth is the multi-layer motherboards, the fifth is hard drives or solid state devices. External components are a monitor, a mouse, a keyboard. A cabinet and a power supply is required to hold these devices together. Out of all these, India does not even manufacture a mouse! Even the things that India ‘manufactures’ are mostly assembly jobs from components imported from abroad. We might be manufacturing cabinets, power supplies but even these are at least 30-40% expensive than better quality stuff imported from abroad. A return to license raj will not create manufacturing infrastructure overnight. In the end, it will only serve to make things expensive for the consumers and will impact the import of high technology products. This will affect the growth of IT and may even lead to Indian Software companies leaving India for good.
To top that, there is news that TRAI is planning to bring broadband devices used for Fiber to Home connections under the License Raj! This will slow down the rollout of Internet services in the wired segment, which remains by far the most reliable and speed oriented mode of use of Internet.
All this is happening because we are facing a US Dollar problem. The real story is that the High Net Worth Individuals are quitting the country and taking away billions of dollars with them. Even with a 100 Billion Inward Remittance every year, our US Dollar Reserves are depleting. Our Rupee is falling leading to more pain for everyone.
A return to License Raj bodes ill for the country. The flight of capital has to be stemmed and that can only happen if those who are leaving India get convinced that they can have a comfortable and safe life here in India. They don’t seem to believe that India is in Amrit Kaal. Unfortunately, Modi Sarkar is not doing anything to stem this tide.
