Protectionist Ill-Winds

Protectionism has suddenly become the watchword of the government of India and sections of Indian industry. Various industry associations have been raising the bogey of cheap Chinese goods flooding the Indian market and ruining Indian industry. India’s commitment to phase out the remaining quantitative restrictions on imports by April 1, 2001 is spurring industrial lobbies to raise their demand for greater protection to a feverish pitch. Various ministers have been reassuring Indian industry with promises of higher import duties and non-tariff barriers. The government has announced several dumping investigations, some of them suo motu, and levied anti-dumping duties on several goods. Imports from China have been the favoured targets of such verbal and duty assaults. So much so that the government of China has felt constrained to formally speak about trade restrictions hurting bilateral relations.

Recently, the prime minister himself gave legitimacy to this rising tide of protectionism by issuing a call to shun foreign goods and revive the spirit of ‘swadeshi’. He announced with pride his government’s decision to raise the import duty on some products to 300 per cent after quantitative restrictions on their imports were removed. The fact that the prime minister was addressing a delegation from his constituency of Lucknow while issuing this call does not detract from the damage that such posturing does to the project of economic reform. Protectionism is repudiation of not only trade reform but of the entire reform process. It sends extremely negative signals to domestic and foreign investors. Two things deserve to be noted about Vajpayee’s statement. One, it follows a series of actions and statements by a host of government functionaries designed to check imports. Two, a statement by the prime minister gives these actions of lower level functionaries the stamp of political legitimacy and makes protectionism the official policy of the government. This is a significant development and its significance is wholly negative.