Friday, November 19, 2021

Neither open nor closed, our economic policy is ajar.

"In view of India's turn to import substitution and protection, it is worth asking why economists view trade openness as one of the most critical elements in a country's development policy," wrote Prof Arvind Panagariya. Duties on imported goods keep changing in every budget and Budget 2021 was no exception, Moneycontrol. Last year, during the lockdown inspired by Covid-19, Prime Minister Narendra Modi announced a policy of 'Atmanirbhar Bharat Abhiyan' which means 'Self Reliant India', wikipedia. "Raising the pitch for a self-reliant India, defence minister Rajnath Singh...asserted that the country was heading towards 'Atmanirbhar Bharat', which not only means eyeing 'Made in India' products, but also aiming to make for the world," TOI. There is a difference between self-reliance and self-sufficiency said Swaminathan Aiyar. "Self-sufficiency is what Nehru and Indira Gandhi tried in the 1960s and 1970s. It was horrible and a terrible flop. We had only a 3.5% Hindu rate of growth. The number of poor people doubled in 30 years after independence." Modi talks about cutting off imports but wants to remain in the global value chain. "Being in a chain means importing as well as exporting." However, "In a break from the recent past, India's average applied import tariff dropped to 15% in 2020 from as high as 17.6% in the previous year, recording the sharpest annual fall in about a decade and a half," FE. "There are at least five sources through which free trade contributes to a country's development," wrote Panagariya. If local cost of production is high, importing a product keeps costs down, competition leads to specialisation in some products, one can choose imports with higher technology which can be accessed by reverse engineering, competition forces local businesses to adopt best practices, and finally, free trade leads to comparison with the best in the world and forces improvements in local infrastructure. India's imports of telephones has fallen from $7.5 billion in 2014 ( year Modi was elected, wikipedia) to $2.2 billion in 2020, while exports have risen from $0.6 billion in 2014 to $3.0 billion in 2020. For Vietnam, less than one-tenth the size of India, exports of telephones have risen from $0.9 billion in 2009 to $31.2 billion in 2020. "Its electronic goods exports stood at $122 billion in 2020 against India's $12.8 billion," wrote Panagariya and Deepak Mishra. "From January 15, 2022, a law giving 75% of reservation for local residents in private sector jobs will come into effect in Haryana," wrote Roshan Kishore and Abhishek Jha. Gurugram, a city in Haryana is the reason. With economic reforms, companies, especially in IT services, finance and new startups, set up offices in Gurugram. This led to a rapid expansion in white collar jobs with high salaries. Most of the locals were not suitable for these jobs so people from outside the state and even outside the country benefited. Builders bought land from locals to build very expensive luxury apartments in gated communities, creating an enormous difference in living standards, leading to opposition to globalisation. "Market access for products, including those which have a geographical indication (GI) tag, is going to be a key issue in India's trade negotiations with the EU, US, UK and Australia," wrote Arpita Mukherjee. "While our trading partners are comfortable giving market access to GI products from from India, Indian policies on import restrictions, access to GI products and government procurement need a review." Our government wants to be closed and open at the same time. Kind of ajar.           

No comments: