India's mask of economic liberalism is off

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India's mask of economic liberalism is off

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• Junking globalisation: In Nov 2020, India's external affairs minister (EAM) Jaishankar disapproved of the idea of free trade and globalisation. It sounded like a blast from the past, where politicians used to shield domestic industry from competition (via protectionist barriers). He expressed surprise as to how India ever allowed others to push subsidised products into its markets. He claimed it had led to de-industrialisation of some sectors. 
• Minister's core argument: Mr Jaishankar claimed that India decided to stay away from the RCEP primarily to avoid any such mistake. There are many flaws in his arguments.
• Flaws in the argument:

1. By staying out of the RCEP, India has pushed itself to the margins of the global and regional economy. The WTO has gone slow on multilateralism, and the faster route is FTAs. (Free Trade Agreements) India's East-Asian rivals are deeply embedded in such mega-FTAs, and are part of global value chains.
2. Did India really open as as was claimed? The applied MFN tariffs of India are 13.8%, the highest for any major economy. Even on the UNCTAD import restrictiveness index, India is in the "very restrictive" category. (UNCTAD - UN Conference on Trade nd Development)
3. Jaishankar contradicted himself by blaming the FTAs, because the Economic Survey 2020 spoke of India benefiting from FTAs. If any deindustrialisation did happen, it was due to lack of competitiveness and absence of structural reforms.
4. When the minister blamed earlier governments for working as per agenda set by others, he failed to mention by his government wasn't able to get a favourable agenda set in the RCEP despite six years of negotitations!
5. It was a bad idea to overlook and reject the many benefits that have come to India as a result of globalisation and openness. Post 1991, India has benefited from the economic globasliation process in a big way. Poverty rates have dropped significantly, from 40% in 2004-05 to just about 20% in 2011-12. And how was that made possible? Rapid GDP growth rates of 8% per annum due to sharp trade growth.

• The larger truth: This speech by the EAM shows the larger ideological anchor of the present government. The general feeling when Modi arrived in 2014 was that his govt will be socially conservative but economically liberal. That feeling existed despite the RSS being openly in favour of Swadeshi and not Videshi. It has all changed now, and with higher tariffs, dumping of FTAs, and "vocal for local", India is moving decisively away from free trade.
• The mask is off: The mask of economic liberalism has been taken away, and it will be naive to expeat that foreign investment will flow in large quantities into India now.

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