Return of protectionism: Panagariya sounds alarm over Modi's new trade template for India
A new generation of babus seems to have now replaced its more enlightened predecessor. It is about to erect the wall of protection all over again, Panagariya said.
When GoI raised custom duties on a number of products in December 2017, as an eternal optimist, I took the view that this had been done for revenue reasons. But increases in duties on a long list of products ranging from kites and footwear to cellular mobiles phones and motor vehicles in Budget 2018 have ended that optimism.
Indeed, revenue secretary Hasmukh Adhia has explicitly stated that the duties have been levied, not to raise revenue, but to provide protection to micro, small and medium enterprises (MSMEs). Adhia adds, “We have a phased manufacturing programme in electronic manufacture industry for which increasingly we will be putting more duty on the final product, then on second level of spare part and third level of spare part.”
The Great Wall of India
The clear message from the revenue secretary: stay tuned, more tariff hikes are on the way.
For those of us old enough to remember the India of the 1960s to the 1980s, this is déjà vu. Thanks to ultra-high protection and tight internal regulation, India was condemned to per-capita growth rate of less than 2% during 1950-51 to 1990-91. Imports as a proportion of the GDP, which did not even once touch the 10% mark during the four decades, fell to as low as 4.1% in 1969-70. Exports were consistently lower yet.
The clear message from the revenue secretary: stay tuned, more tariff hikes are on the way.
For those of us old enough to remember the India of the 1960s to the 1980s, this is déjà vu. Thanks to ultra-high protection and tight internal regulation, India was condemned to per-capita growth rate of less than 2% during 1950-51 to 1990-91. Imports as a proportion of the GDP, which did not even once touch the 10% mark during the four decades, fell to as low as 4.1% in 1969-70. Exports were consistently lower yet.