"Shortly after the Union budget, economist Pravin Krishna and I had warned in these pages of the protectionist folly of reversing a quarter-century of trade liberalisation and embarking on the path of renewed trade protection (https://goo.gl/GfH36U). Relatively few voices were calling this out at that time amid general praise for the budget. Then, on 25 July, Arvind Panagariya—one of the world’s leading trade policy economists, and until last year vice-chairperson of NITI Aayog —joined the battle, arguing in a sharply worded column in the Times of India of the damaging effects of the government’s protectionist turn. The article’s title summarised his argument well: “India’s trade policy folly: Current turn to import substitution will take economy down from turnpike to dirt road”.
Panagariya’s column followed hot on the heels of the departure of Arvind Subramanian as chief economic adviser, marking the departure of the last of a trio of American-trained and -based economists from senior positions in the current government. The other two were Panagariya himself and, earlier, Raghuram Rajan, who left when his contract as Reserve Bank of India governor was not renewed in 2016.
These departures were welcomed by nationalist outfits with ties to the ruling Bharatiya Janata Party (BJP) and its ideological parent, the Rashtriya Swayamsevak Sangh (RSS)—in particular, the Swadeshi Jagran Manch (SJM), which has staunchly opposed economic reforms, of labour law in particular. The SJM’s chief, Ashwani Mahajan, was quoted by Reuters on 12 July as saying that the country would not lose if these “foreign economists” were to leave, and that India’s problems could only be solved by those “connected to the soil”. These views chime with the Swadeshi bent of sections of the RSS and BJP, who seem to believe that India is somehow immune from the laws of conventional economics."
Read the full article here.