Over the past few years, India is gradually reversing its policy of tariff reduction to one favouring protectionism. This does not bode well for the long-term growth prospects of the economy. Import substitution is alluded to as a priority for the government on the grounds of protecting India’s infant domestic industries. This is precisely the reason we were unable to join a progressive trade grouping like the RCEP. In today’s age of global value chains, increasing tariffs and staying out of international trade agreements will work against our exporters, depress export potential and hamper growth. Policymakers will need to change track if India is to recover from the slowdown it is experiencing. Conditions should be created that prompt domestic industries across firms to become globally competitive. It is to be hoped that these protectionist trends get reversed in the forthcoming Budget.
July 27, 2020