India does not need Bombay Club version 2.0 (remembering Bombay Plan of 1944-45 too..)

Sharp Mint edit which says we should say no to Bombay Club 2.0:

The siren calls for protectionism can be heard once again in some parts of Indian industry. In interviews to the Business Standard newspaper last week, several business leaders, such as Rahul Bajaj, Anil Agarwal, Sajjan Jindal, Harsh Goenka, and Harsh Pati Singhania, have called for policies that would, in effect, roll back the trade reforms that integrated India into the world economy after 1991. The Narendra Modi government must not heed such advice.

The current buzz brings backs memories of the Bombay Club that criticized the economic reforms unleashed by the P.V. Narasimha Rao government, arguing that the rapid opening up of the Indian economy would hurt domestic industry since it suffered from poor infrastructure, high domestic taxes, and expensive loans. Internal reforms should precede external reforms. There were also fears that making it easier for foreign companies to invest in India would lead to acquisitions rather than new industrial capacity.

The escalating trade war sparked off by the brinkmanship of US President Donald Trump is the primary reason why domestic protectionist sentiment has reared its head again. Many Indian businessmen argue that India also has to face unfair competition from Chinese imports, a valid concern given how China uses trade policy as an arm of strategic expansion. However, issues such as Chinese dumping should be sorted out at the World Trade Organisation rather than through unilateral action such as higher taxes on imports.

The economics of protectionism is all wrong. Most economists across the ideological spectrum agree that free trade increases human welfare. A prosperous autarky is a contradiction in terms—the real world is not like Wakanda, the fictitious country in the recent Black Panther movie, that magically manages to have prosperity as well as advanced technology despite having no trade with the rest of the world.

This reminded me of the Bombay Plan prepared by eight leading Indian industrialists in 1944-45 which shaped 5 year plans in India. Though, The Bombay Plan’s role in shaping  National plans is barely acknowledged.

This leads to this curious historiography of role of Bombay industrialists in economic policy. They seem to have supported government’s role and need for protection, far more than imagined. Despite amassing large wealth in both first phase of globalisation (1873-1913) and several other activities in second phase (1991 onwards), the Bombay industrialists seem to have preferred a more protected environment time and again.

This role of key industrialists in Indian policy requires broader and deeper research…

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