BUOYANT INTERNAL TRADE CAN PUSH GDP BY 20% BY 2010 – PHD CHAMBER

The Share of internal trade to GDP, which hovers around 15 per cent at present, can increase to 20 per cent by 2010, generating employment opportunities both in upstream and downstream segments for millions, says Mr. Sanjay Bhatia, President, PHD Chamber.

According to the National Accounts Statistics 2007, trade has grown at a compound rate of over 14 per cent over the last five years. This rate of growth is much higher than that registered in segments like hospitality and financial services. At this rate by 2010, trade should exceed $1100 billion .

The key to nurturing and even augmenting internal trade is by re-visiting the legacy of restrictions that prevent free movement of goods from one State to another and from one market in a State to another. It is needless to mention that the upshot of any distributive trade reform should be rationalization of the plethora of taxes such as entry and toll tax, cess and mandi tax on commodities, that not only vary from State to State but also create avoidable cascading effect, pushing up prices,” says Mr Bhatia.

Central to the development of the distributive trade is the creation of a strong infrastructure for free movement of agricultural goods. This will have two spin-offs. One, it will help the farmers to realize better return for their produce by minimizing wastages, which account for over 40 per cent at present. Secondly, higher returns will translate into better purchasing power and quality of life. Investment to the tune of several billion dollars is necessary to set up cold chains, refrigerated transportation and the like. This can come through only by private-public partnerships, which should also enlist active participation of the farmers and their co-operatives.

Cataloguing the reasons that hamper inter-State trade, PHD Chamber says that the markets in India are developed in the most unscientific manner, keeping in view revenue considerations and are therefore supply driven. Demand matrix is given scant attention. For instance, the State Governments alone are empowered to initiate the process for setting up of markets for agricultural commodities in notified areas. Also, there is lack of established warehouse facilities, which force the farmers to sell their produce immediately after the harvest.

At the policy level, a number of initiatives are critical .to usher in a common market. These include scrapping of the Essential Commodities Act and encouraging, among other things, the private sector, co-operatives and Panchayats, to set up modern storage and bulk handling facilities for different commodities. In order to de-regulate markets, Agricultural Produce Marketing Act has to be abolished and the private and corporate sector should be motivated to set up alternate marketing systems. That will help evolve an integrated product market

Efforts and consultations, which PHD Chamber has initiated to achieve the “Northern India Common Economy' (NICE), is a reflection of our commitment to usher in hassle free, vibrant and expanding integrated markets. This can help derive economies of scale and a market responsive to demand profiles of the citizens. Such a barrier free economic entity will have synergies on a pan-India basis, helping stakeholders down the line. It is a difficult process since it involves co-ordination at all levels to ensure free movement of goods, be it regulating mandis, movement of vehicles, regulating trade, quality assurance, processing of goods and storage etc,” says Mr Bhatia.