New Delhi: NITI Aayog vice-chairman Rajiv Kumar on Wednesday criticised former chief economic adviser Arvind Subramanian for a recent article that pointed out flaws in the Narendra Modi government’s Atmanirbhar Bharat initiative.
Subramanian, in an opinion piece co-authored with Pennsylvania State University’s assistant professor of economics Shoumitro Chatterjee, pointed out the pitfalls of looking too inward and ignoring the potential of India’s export story.
“Is the inward turn strong? Is the underlying diagnosis-cum-prognosis correct? Will it work? Based on new research, our simple answers are, respectively: Yes; no; and not really,” said Subramanian and Chatterjee in an article.
In particular, both economists pointed a finger at New Delhi’s decision to increase tariffs and tilt the level-playing field decisively in favour of domestic manufacturing in some sectors: “Leaving aside the spate of China-related restrictions, tariffs have been increased substantially, trade agreements have been put on hold, and a spate of production subsidies are being offered.”
To which Kumar, the de facto boss of the government think-tank, in two tweets, responded sharply.
“Very surprised to read @arvindsubraman’s co-authored piece this morning criticising #AatmaNirbharBharat. It effectively started during his tenure as Chief Economic Advisor which as he writes saw the highest increase in import tariffs in 2018 to nearly 18 per cent,” Kumar said in a tweet.
“Not fair or honest to take one stand when within the government and the opposite after leaving it,” Kumar added.
How much have tariffs increased?
In their policy paper, Chatterjee and Subramanian highlight and break down the Modi government’s sharp reversal in tariff policy.
“Between 1991 and 2014, average MFN tariffs declined from 125 percent to 13 percent (Singh 2017). Since 2014, there have been about 3,200 tariff increases at the HS-6 digit level (on most-favoured-nation imports), a strikingly large increase. As a result, the average tariff has increased from 13 percent to nearly 18 percent. The largest increases occurred in 2018 when there were nearly 2,500 tariff increases amounting to nearly 4 percentage points.8 We estimate that the tariff increases affected import categories that amount to about $300 billion or about 70 percent of total imports,” they note.
While these tariff increases don’t apply to imports under free trade agreements (FTAs), both economists point out that they will have significant impact nevertheless.
“For one thing, imports under FTAs are not the same as imports from countries with FTAs. The reason is that many sensitive goods are excluded from these arrangements. For these items, an increase in MFN duties is an increase in the duties on all imports of the particular item. Even if the goods in question do enter duty-free under FTA, tariff increases still have deleterious effects.