Easing Trade Barriers Helped India Prosper

Context: Raising protectionist barrier policies will result in certain challenges, once already experienced by India in the past.

Issues related to rising protectionist barriers:

• Reversal of economic liberalisation: Raising protectionist barriers to free the country from dependence on Chinese imports has resulted in a reversal of the policies of economic liberalisation.

• Ignoring the benefits of Liberalisation: gained between 1991-92 and 2018-19.

• Foreign exchange reserves have gone up from $9.8 billion to $413 billion.
• The per capita income (in rupees) of the Indians has gone up around 18 times.
•  India’s real GDP is 10 times what it was in 1990 and 300 million people have been lifted out of poverty.

• Comparative Advantage Ignored: Under conditions of protection, the idea of ‘comparative advantage’, a country focusing on producing what it is good at, is ignored.
• Lack of trust between industry & military:  Indian defence industry feels that there is no commitment on the part of the defence forces to buy what they produce.
• Declining global competitiveness: Growing list of products being put behind trade barriers will take Indian manufacturing away from global competitiveness. 
• Return of license raj: The choice of items for protection through tariff or non-tariff barriers will be done through a process of administrative decision-making involving politicians and bureaucrats.

Way Forward: Combination of protectionism and liberalisation

• Ease-of-doing business: There is a need to remove redundant laws which affect the ease of doing business by focussing on simple procedures and clear laws.

• Reducing production costs: Each manufacturer has to work on improving quality and reducing the costs. 

• Adopting appropriate manufacturing systems and low-cost automation.