Licence Raj Redux?

The import policy changes might take us back to the days of License Raj

- Puja Mehra

All of a sudden, India has a new import policy regime. Importing laptops, computers and other such electronic items will now require licences. However, it would probably be wrong to call it new. Imports required licences before the 1991 reforms tore down that regime and gave us some semblance of a modern economy. We thought that the reforms had killed import licenses. However, the bureaucratic mindset has turned out to be resilient, and licences have been resurrected. Is this a well-thought-out policy that will do what the government says it wants it to do?

The first thing to note is that the government was forced into rethinking the idea within hours of announcing the new import policy regime. It announced the new licencing requirement on August 3 and a day later, on August 4, said that it was putting the implementation of the policy on hold till November 1. It stated that it wanted to give importers transition time to obtain the permits after they had warned of imminent shortages due to the demand-supply mismatches. Importers had said that the government’s decision to suddenly change the import conditions was bound to cause a consequence. This tells us that the government had proceeded to announce the new licence requirement without thinking about the fallout that it would have on consumers in the interim and also perhaps in the long run; the consequences of the policy changes are not rocket science, and anyone with a graduate-level degree in basic economics would have been able to predict them.