A backward turn (Indian Express)

Mains Paper 2:National
Prelims level: Protectionism
Mains level: Highlights the disadvantages of protectionism

Context:

• Ever since the prime minister’s speech exhorting the country to march towards an Atmanirbhar Bharat, there has been an unease.
• Lurking behind the rhetoric of “self-reliance” was an attempt to reorient the economic structure towards ensuring “self-sufficiency” by falling back on the decades-old failed policy of import substitution.
• Subsequent calls by the government to citizens to buy Indian, and the setting up of “targets” towards building self-reliance.
• This was done in certain sectors so that “unnecessary” imports can be reduced.
• It indicates that the shift towards protectionism, that began over the past few years with the NDA government raising tariffs.
• It’s threatening to undo decades of trade liberalisation may be underway.

Disadvantages of protectionism:

• Protectionism ends up.....................................................................................

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Appropriate policy response:

• A more appropriate policy response is to focus on boosting competitiveness.
• To building infrastructure,
• To ensuring cheap power,
• To reforming land and labour markets, and
• To creating conditions for companies to compete in global markets.
• India should be striving to embed itself in global value chains, not becoming more inward-looking.
• Companies, especially in the post COVID world, looking to shift away from China, will look for policy stability.
• They are unlikely to relocate to countries that are susceptible to sudden tariff impositions.
• Further, as research has shown, India’s trade balance has widened in part due to imports of raw materials, intermediate products, and capital goods, implying that the imposition of tariffs will also hurt export competitiveness.

Way forward:

• India needs to raise its share in world trade beyond 2 per cent.
• Doing so requires.............................................................................

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Prelims Questions:

Q.1)With reference to the 'Mudra Shishu loan', consider the following statements:
1. A 1500 crore interest subvention for small business and cottage industries has been announced under Mudra Shishu loan.
2. The government will offer 6% interest rate subvention for a period of 12 months to prompt loan payees under the Mudra scheme.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer...........................

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Mains Questions:
Q.1)What are the major disadvantages of protectionism? What are the appropriate policyresponsesneeded to boosting competitiveness?