Should India Shun Protectionism?

Table of Contents

Indian Protectionism

After independence in 1947, India spent decades trying to survive without international trade.
India eventually ditched its model of local production for local consumption following a currency crisis in the early 1990s.
The BoP crisis of 1991 forced policymakers to ask the International Monetary Fund (IMF) for help. The IMF cash came with conditions: India had to open up to foreign investment, cut red tape and remove trade barriers.

Between 2010-2020, the simple average of India’s tariffs rose by 25% – from 8.9% in 2010-11 to 11.1% in 2020-21. The proportion of India’s tariff lines exceeding the 15% mark rose from 11.9% to a staggering 25.4% over the same period.
This year also in budget 2021-22, we have increased import tariffs on more than 50 items for a third straight year. The list includes a variety of automobile and electronic parts.
The USTR has repeatedly called India out for having an average applied tariff rate that is “the highest of any major world economy.“ It describes Indian trade policy as opaque, unpredictable, and says it often leaves US firms drowning in paperwork.