Will Modi government listen to own economists?
On the heels of first Niti Aayog vice-chairman Arvind Panagariya's rap on the knuckles – he has criticised the Union budget for ushering in a pre-1991 protectionist "licence raj" -the chorus against the protectionist policies is becoming louder by the day.
Among those protesting are the stock exchanges abroad which are upset at a move by Indian exchanges to stop licensing its products and data to them, to prevent trading from migrating overseas.
"World stock exchanges have protested governmentinspired NSE/BSE restrictions on sharing data with other exchanges as protectionist," tweeted former finance Minister P Chidambaram of the Congress.
In another tweet, he said: "The chorus of dissent against the Budget provisions is growing. Dr Arvind Panagariya has spoken against protectionist custom duties."
He also underlined that "every economist of the government is speaking against budget provisions."
"Dr Urjit Patel, Governor, RBI, warns of five taxes on capital and how it will inhibit capital investment.
"Dr Rajiv Kumar, ViceChairman, Niti Aayog, hopes that these measures are 'temporary'!
"Dr Surjit Bhalla, another member, PMEAC (PM's Economic Advisory Council), speaks against LTCG (long term capital gain) tax (of 10%). [The LTCG tax was abolished on 2004.]
"Dr Rathin Roy, member, PMEAC, joins Dr Panagariya."
The stinking analysis of the Budget in The Economic Times on Monday by Dr Panagariya, an IndianAmerican economist, came as a big surprise as he had strongly backed Narendra Modi in the run-up to the 2014 Lok Sabha elections and was chosen by the government to head its new
policy making body, the Niti Aayog, replacing the planning commission. He later quit the Aayog for personal reasons.
Panagariya wrote in his article that "the Budget has resurrected a policy that had been consigned to the dustbin of history and economics."
"Increased protection to mobile phones ‘helps local mobile producers, but raises the price that consumers pay. Some consumers are entirely priced out, undermining progress towards digital India," he wrote.
The government, however, may not listen to these criticisms since it is under pressure from the RSS to shoot down imports in order to push its policy of Make in India. The ruling BJP leaders point out how cheaper Chinese imports have already ruined many Indian industries.
The Swadeshi Jagran Manch, the economic wing of the RSS, which had launched an all-out attack on Panagariya on some of his recommendations while in the Niti Aayog, insisted that the government should ignore the protectionist charge.
"When the entire world is moving towards protectionism, why India should be different," asked its national convener Ashwani Mahajan, claiming that "people like Panagariya didn't allow the government to do many things in the interest of the country."