As for the drive to involve the states in the export effort, it is based on the presumption that their lack of interest derives from the fact that export projects which contribute to employment generation do not yield any revenues for the state government. This presumption is belied by the fact that even less industrialised states like Kerala are making a major effort at enhancing software exports and attracting international tourists. What is no doubt true is that under the current system of revenue devolution and given recent trends in taxation and subsidy reduction at the centre, the states are facing a major fiscal crunch, leaving little resources for sustaining their current plans. In that context, the Rs.250 crore set aside as support for an export effort at the State level is laughable. What the Commerce Minister should have learnt from the Chinese experience is the need to substantially reduce the centralisation characterising the Indian economic system, which would increase the manoeuvrability of state governments and provide them the space to experiment with measures aimed at exploiting the opportunities offered by the world market.
 
Thus, the export thrust of the new policy is of no consequence. But the import liberalisation it incorporates is. What encourages the present government to keep on this track is the "comfortable" foreign exchange position of the Reserve Bank of India. During the first nine months of the last financial year, reserves rose by $2.8 billion. This was because while the current account deficit in that period totalled $3.5 billion, net inflows on the capital account amounted to $6.4 billion. This included $1.7 billion in the form of portfolio flows and 1.5 billion in the form of non resident deposits. That is, all of the reserve increase was the result of "hot money flows", in as much as they can be withdrawn at any time. This experience corresponds with a tendency that has been going on for some time, and has accelerated in recent times. Given that, the reserves position does not reflect balance of payments strength, but a kind of weakness.
 
These signs of weakness are of significance because they occur in a context when many of the advantages of the mid-1990s are waning. Oil prices have touched new highs and are unlikely to fall too much in the wake of the recent OPEC decision to increase production by a small amount. Remittances from Indian's abroad which rose dramatically from $2.1 billion in 1990-91 to $12.4 billion in 1996-97, have fallen by over $2 billion by 1998-99. And the desperate bid of East Asian countries to use exports as the basis for a recovery is increasing competition in world export markets. This is a time which is least propitious from the point of view of launching policies that enhance vulnerability.
 
What remains is the argument that the Commerce Minister had no choice but liberalise given India's commitments as a member of WTO. There are a number of points to be made here. First, if the liberalisation of imports is unavoidable, then it is best to declare that, rather than celebrate the process as an indication of strength and present it as a means to export-led growth, as the exim policy statement does. Second, inasmuch as the policy can adversely affect growth and the balance of payments, the government should realise that in the course of the WTO negotiations, India had made too many concessions on trade liberalisation and tariff binding, receiving little in return in areas like textiles. A demand to correct for this situation needs to be repeatedly made and consistently fought for. Finally, efforts should be made to use other means, such as anti-dumping measures to protect domestic producers and the balance of payments, which requires emphasising the dangers and not the presumed benefits of liberalisation. The fact that the Commerce Minister has chosen not to emphasise these options is indeed disconcerting.