Let us abandon protectionism and embrace free trade
Context: Our official goals would be better met if the government did not go down an old policy path that failed us.
Arguments against rising protectionism in India
- Contradictory Policy measures:
- While the Digital India mission seeks to transform India into a knowledge economy counter-productively, the Centre has increased import tariffs on smartphones and laptops.
- While on one hand government is charging high import tariffs on foreign made cars, it is also heavily subsidising automobile exports.
- Increased digital divide: 800 million people could not afford electronic devices even before the price hikes, therefore further increasing digital divide.
- Impact on skilling and re-skilling: Current 4th Industrial revolution era reskilling and upskilling requires access to Information technology.
- Re-introduction of License-Raj: During COVID, the government gave itself the authority to ban the import of any commodity;
- For E. Only post-1991 reforms, did some Indian companies such as Tata Steel and others become globally competitive, by investing in technology and skill.
- Decreasing Purchasing Power: Protectionism also punishes Indians by making goods more expensive, thus reducing people’s purchasing power
- Forced Currency devaluation: While the export subsidies have been reduced under the World Trade Organisation (WTO) regime, countries have often resorted to currency devaluation to boost exports (making imports costlier).
- Ad-hoc Measures towards China: India accounts for only 3% of China’s exports and less than 1% of its imports, defeating the purpose of Chinese import ban.
- Restrictions on consumers: Indian businesses and consumers bear the brunt of any trade restriction between Indian and China.
Conclusion: For India to be a thriving knowledge economy, a globally competitive economic powerhouse, well defended against hostile neighbours – it must abandon its protectionist folly and embrace free trade.
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