February 25, 2021

The relevance of a century-old Indian report on protectionism

In LiveMint, Niranjan Rajadhyaksha discusses how the 1922 Indian Fiscal Commission report provides lessons about protectionism and tariffs.


Excerpts below:


"The report of the Indian Fiscal Commission is still worth reading. It called for the protection of select industries based on three criteria. First, India should have natural advantages in the industry that was to be protected. Second, that industry would not develop rapidly enough or even not at all without such protection. Third, it should eventually be ready to face global competition once protection was removed.


There were some other principles as well. Protection should not impose a heavy burden on domestic consumers through higher prices. Raw materials and capital goods should be imported free of any protective duties. Semi-manufactured goods used in Indian industry—or intermediate goods in modern parlance—should be taxed as lightly as possible. There should be no tax on exports. Most importantly, a permanent Tariff Board should be set up to advise the legislature on the claims of various industries for protection."


Read the full article here.

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