Opinion | Why India Inc Shouldn’t Lobby For Protectionism
Lower tariffs have the potential to galvanise the Indian economy
There is a line, Haye mar jaayenge/hum to lut jaayenge/aesi baaten kiya na karo, in the famous Urdu poem, Aaj Jaane Ki Zid Na Karo. Written by the Pakistani poet Fayyaz Hashmi, the poem is beautifully sung by Farida Khanum. The line was the sum and substance of what Minister of Commerce & Industry Piyush Goyal told export promotion councils (EPCs) in his recent interaction. Not in these words of course.
His message was prosaic—and correct. “Reflecting on the reciprocal tariffs, he has cautioned the EPCs to come out of their protectionist mindset and encouraged them to be bold and ready to deal with the world from a position of strength and self-confidence," an official press release said.
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Last month too, Goyal had exhorted corporate India to shed its protectionist mindset and focus instead on becoming globally competitive.
US President Donald Trump has promised to impose sweeping levies on India from April 2. “India charges us 100 per cent tariffs; the system is not fair to the US, it never was. On April 2, reciprocal tariffs kick in. Whatever they tax us, we will tax them. If they use non-monetary tariffs to keep us out of their market, then we will use non-monetary barriers to keep them out of our market," Trump said early this month while addressing a Joint Session of the US Congress.
This is even though India and the US have decided to negotiate the first tranche of a Bilateral Trade Agreement (BTA) by fall (September-October) 2025. The proposed pact is quite comprehensive in scope, aimed at increasing bilateral trade, augmenting market access, decreasing tariff and non-tariff barriers, and boosting supply chain integration. Goyal said that the BTA with the US “will be the mother of all deals."
Trade talks with Washington are on, and there has been no sign of major disagreements between the two countries. And yet, political and intellectual elites are angry and anxious; consequently, markets are in ferment. So, the Congress has claimed that the Narendra Modi government’s “trade policy is disastrous." Congress media department chairman Pawan Khera is aghast at “Modiji’s surrender."
Most intellectuals, who are still wedded to the postmodern woke doctrines, are also incensed not just because Trump is challenging and changing their rules but also because India is not resisting the US President’s threats and statements. Trump’s America is just having its way too easy; this galls the Left-liberal establishment.
Four points need to be made here. First, just because Trump says something doesn’t mean that it is incorrect. Former chief economic adviser Arvind Subramanian said two months ago, “India has been protectionist since about 2018." Other experts have also made similar observations. For too long, sections of our industry have enjoyed protection in the form of high import duties and non-tariff barriers (NTBs) like quality control orders (QCOs).
Second, if India lowers its duties and reduces NTBs, it may help American firms that want to enter our market; but less protection will also—indeed more so—give a fillip to our economy. This will, perforce, make our companies become more competitive; they will become more inclined to adopt newer technologies to gain a competitive edge. Besides, this will also mean more choices and lower prices for consumers.
Third, less protection will also help micro, small and medium enterprises (MSMEs). While discussing protectionism, we should never lose sight of the interests involved. The economy is not a monolith; quite apart from various sectors, there is an important categorization based on size. There are a small number of big companies controlled by tycoons, and there are a big number of small companies run by businesspersons you and I come across in everyday life. When someone says that the economy should be protected, we must find out whose interests they are talking about. The steel industry may want higher tariffs, but the user industries—in which MSMEs are preponderant—oppose that. In other words, the interests of one sector or lobby should not be confused with the national interest.
And, finally, we should not get worked up because we are forced to tweak our economic policy because of external pressure. It is a well-known fact that the tectonic shift in India’s economic policy in 1991 was goaded by the International Monetary Fund and the World Bank. The ensuing liberalisation was fiercely resisted by both the Left and the Right. Doomsday scenarios were presented by top intellectuals at that time; we were told that we would become a victim of neo-imperialism, multinational corporations would gobble up Indian companies, and so on.
What actually happened? India emerged stronger after the crisis; instead of getting swallowed by MNCs, many Indian companies themselves became MNCs; India is expected to become the third-largest economy in the foreseeable future; tens of crores of people were lifted from abject poverty.
Likewise, lower tariffs have the potential to galvanise the Indian economy. So, instead of crying Haye mar jaayenge/hum to lut jaayenge…, the captains of industry should brace for the future.
The author is a freelance journalist. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect News18’s views.
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