Is increasing protectionism endangering growth? CNBC-TV18 analyses India's trade policies in a very special edition of Indianomics. CNBC-TV18’s Latha Venkatesh spoke to Arvind Panagariya, former VC of NITI Aayog, and David Rasquinha, MD & CEO of India Exim Bank, on the problems with India's production linked incentive (PLI) scheme and why India turning protectionist will not bode well for GDP growth.

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On the PLI scheme, Panagariya said, “This poses the same dilemma -- are we substituting PLI scheme for genuine reforms that need to be done? Certainly, between tariffs and PLI, I would prefer PLI, tariffs are more damaging. But what happens even with PLI is that - is that going to bring in truly global scale firms into play? As far as our own domestic firms are concerned, I fear that we will end up bringing in firms that are still not of global scale and therefore they will never become truly export powerhouses.”

He further added, “Also these schemes really are about how much investment you can do, then automatically biases the scheme towards highly capital intensive sectors and so the job creation then gets the back seat in that kind of process so those are the kinds of reservations that I have.’

On trade, David Rasquinha said, “This has become a bit of a global phenomenon and there was a strong consensus in the economic profession and in the policymakers that free trade, fair trade call it what you like, but trade or enhancement of trade was an economic good that benefited everybody."

"There would be some losers, there would be some winners but the number and the size of the winners would far exceed the losers that was more or less axiomatic. Today that is not really considered as axiomatic, there is no replacement theory that does a better job but somehow the populist tendency seems to think that trade is not necessarily something as good as it was perhaps because the losers do have a louder voice as compared to the winners.”

“I would love to think that India could stand on its own against it but remember we are just 1.7 percent of global merchandise trade we are better in services but we are still a small player, unfortunately.”

For full interview, watch accompanying video...

(Edited by : Bivekananda Biswas)

First Published:Mar 22, 2021 5:08 PM IST