Prime Minister Narendra Modi is fond of creating new words from the first letters of words which are called Acronis. His words become viral, not just because he is full of energy and promoting them in an incredible way. At this time there is a discussion around self-reliant India, which some are referring to protectionism, and some symbol of self-reliance.
Critics criticizing protectionism are reminiscent of the seventies to seventies – when India was a poor country. It was not easy to do business here, as India did not trust itself due to its inefficient economy.
On the other hand, the fans deny this disappointment and say that Modi is calling for a new India. Such a nationalist strategy is also needed to compete with China so that we can become an economic superpower – since this is our destiny.
what the FAC? We are returning to the fifties or moving strongly towards 2050
It is very easy to answer. There is no doubt that an echo of the economic thinking of Nehru’s era in self-reliant India is heard:
- In the fifties, the Nehru / Mahalanobis duo favored Infant Industries. Now in 2020, Modi / Sitharaman is insisting on making ‘champion sectors’. These couples had their own arguments. He said that worldwide competition can take some industries. So we should give them ‘protection’ – with the help of tariffs, quotas, restrictions on imports / licenses and subsidies.
- There is a lot of similarity between the methods of these two pairs. If our TV and mobile phone manufacturers are bearing the brunt of Korean and Chinese imports, then the import duty should be increased. This will benefit our domestic traders. Or import license will be required. So that foreign goods are available to the youth to a certain extent. This was the model of Nehru / Indira adopted by Modi / Sitharaman.
- If you are having trouble raising capital, one thing happens, direct lending. Exemption from preferential capital allocation, statutory guarantee, ‘bad loan thresholds’ at low interest rate for the primary sector – you name it, we have it all.
- If this does not work then what would be better than direct cash? Modi / Sitharaman calls it PLI (Production Linked Incentive). Nehru / Indira had other schemes – Duty Drawbacks, EPCG (Export Promotion Capital Goods Scheme), Excise Refund, Discounted Loans, etc. – Cash to exporters in this way. Subsidies were given. Wait when Modi / Sitharaman will announce another form of PLI – I sincerely hope that soon new meanings of each letter of this acronym will be revealed and new plans will be revealed.
But, I am talking here something inappropriate. Of course, the seeds of protectionism are buried in the surface of both models, Nehru / Indira’s argument about this was defensive. Our country was small and weak in the fifties. In contrast, Modi / Sitharaman’s posture is aggressive. Today we are a strong economy. So the result of protectionism is going to be very different. For example, steroids may not save a dying patient (the economy of the fifties), but a mighty wrestler can get a medal in the Olympics that we are today (GDP $ 2.5 trillion and foreign exchange reserves of $ 0.5 trillion).
So will Modi / Sitharaman’s protectionism bring us success?
Probably not, because a protected economy, red tape, and corrupt bureaucracy, can never flourish with the skepticism and discretion of bureaucrats. It is the easiest to target.
We must ensure that self-sufficient India makes the country a superpower, which is its destiny.
One thing is most important – self-reliant India will have to join hands with TRUST. WHAT IS TRUST- Let’s understand this acronym
T … for trusting market forces (relying on market forces)
India’s bureaucrats have always doubted the regulated market. That is why they have been micro managing the results. Know how:
- There is an anti-profiteering authority. Its job is that the super profits from the new GST regime can be extracted from the corporates. Would you believe Can government officials calculate the ‘super profits’ of companies trading in a free market? So what is the result – strange kind of fines, legal fees, recoveries and corruption. On the other hand, if you really want to create a competitive market, then ‘super profits’ will disappear automatically, but when will our policy makers understand this?
- Now see what a mess he has made in our e-commerce policy. This is called the ‘market place model’. Under this, foreign companies like Amazon and Walmart cannot sell goods directly to consumers. They have to provide a trading platform to the ‘third party’ in which their equity stake is a maximum of 26%. Its purpose is to control foreign ‘satanic’ plans. Despite this, these companies offer huge discounts and freebies.
- This is my favorite – we do free pricing of energy, including oil, but control entertainment tariffs. We have not yet been able to decide whether pharma prizes are free, controlled, limited or something else. Global producers control some essential medicines.
- We are fond of banning, banning again, banning once again. In the nineties, unlisted Indian companies could not float shares in other countries. He was approved in early 2000. Then in the middle of 2000, he was banned. Now they will be approved again. Similarly, there are put / call options for foreign investors. Then there is also dividend distribution tax. And there is also the matter of long-term capital gains tax on listed equity shares.
There are millions more examples that show how confused or confused our policy makers are.
R … recapitalization, not destroying, assets (recapitalize, not delete assets)
We let one important asset go bankrupt after another, while we should have saved them all. It started with ILFC but then reached DHFL, other real estate companies, Jet Airways, PMC – who will be ahead in this order, do not know. I have been writing and warning since this time. So, punish the wrongdoers – save the asset.
U … Un Criminalizing Business
The ‘Criminalization’ of the business world has become incalculable these days. People are being held down on small mistakes. It must be stopped. Really.
S … For Sovereign, Not Supreme Court, Making Economic Policy (Not Supreme Court, Government should make economic policy)
See Supreme Court order on AGR (Adjusted Gross Revenue) penalty. First, the government makes a vague rule under which non-operating income such as rent and foreign exchange benefits can be added to the calculation of the shareable operating revenue of the telecom company. When the Supreme Court upholds this rule, talks about recovery of Rs 1.50 lakh crores and poses an economic risk to the crisis-hit telecom companies, the government instead of correcting its mistakes takes silence.
You can also question the validity of compound interest on loans, which were covered under the Moratorium due to covid.
There are many instances where court orders have given a major blow to the Indian economy. That is why the Modi government should take responsibility for its policy errors and correct them.
T … for tax terrorism
Much has been written on this – is anyone saying anything about Vodafone and Cairn? To be honest, we do not need to provide any proof of government harassment.
Finally, Modi / Sitharaman should build a self-reliant India building on the foundation of TRUST. Only then India can become an economic superpower. Otherwise, everything is illusion.