Panagariya said that the argument that protection would help MSMEs needs to be carefully scrutinised.
Former NITI Aayog vice chairman, Arvind Pangariya raised concerns over the Prime Minister Narendra Modi led government. In an article written in the Economic Times, Pangariya sounded alarm over the government's new trade template for India following the 2018-19 Union Budget.
Pangariya wrote, "When the government 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."
Pangariya also quoted revenue secretary Hasmukh Adhia as having said that the duties have been levied, not to raise revenue, but to provide protection to micro, small and medium enterprises (MSMEs).
According to Pangariya, Hasmukh Adhia really meant that the more tariff hikes are on the cards.
Panagariya said that the argument that protection would help MSMEs needs to be carefully scrutinised.
"Did we not do nearly everything to promote our small-scale enterprises in the past? Until 2001, we had a near ban on the imports of most products produced by them. The enterprises also had the exclusive lock on the production of most of the items they produced via the small-scale industries (SSI) reservation. We followed these policies for 50 years and yet produced no notable success," he wrote, adding that "In the end, both import ban and SSI reservation were ended as a part of our reform programme."
"Defenders of the revival of protection would probably argue that this time it is different, because the economic environment today is not the same as that under licence-permit raj in the 1970s and 1980s. But haven't we heard this before? Didn't our bureaucrats tirelessly tell us prior to 1991 that the experience of Singapore, South Korea and Taiwan didn't apply to us because we are different?", Pangariya asked.
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 "Former NITI Aayog vice chairman Arvind Pangariya raises concerns over PM Narendra Modi's economic policy")
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