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Former NITI Aayog VC Arvind Panagariya Voices Concern Over Budget, Branded 'Foreigner'

Panagariya, who was the blue-eyed boy of the establishment, castigated the government's budget and said it signaled a return of the pre-1991 protectionist 'License Raj' of the Indian state.

Uday Singh Rana | News18.com

Updated:February 12, 2018, 6:20 PM IST
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Former NITI Aayog VC Arvind Panagariya Voices Concern Over Budget, Branded 'Foreigner'
File photo of former Niti Aayog vice chairman Arvind Panagariya. (Image: Reuters)
New Delhi: Arvind Panagariya, the Indian-American economist who served as the vice-chairman of the NITI Aayog, wrote a column for the Economic Times dissecting the Union Budget 2018. But what surprised observers was that Panagariya, who was the blue-eyed boy of the establishment, castigated the government's budget and said it signaled a return of the pre-1991 protectionist 'License Raj' of the Indian state.

"When GoI raised custom duties on a number of products in December 2017, as an eternal optimist, I took the view that this had been done for revenue reasons. But increases in duties on a long list of products ranging from kites and footwear to cellular mobiles phones and motor vehicles in Budget 2018 have ended that optimism," Panagariya wrote in his opinion piece.

"Indeed, revenue secretary Hasmukh Adhia has explicitly stated that the duties have been levied, not to raise revenue, but to provide protection to micro, small and medium enterprises (MSMEs)," Panagariya wrote in his opinion piece.

According to pro-government economists, Panagariya is not only misplaced in his fear of protectionism, but his words are also surprising. Ashwani Mahajan of the RSS-backed Swadeshi Jagran Manch said he is wrong to compare the situation of today to that of before 1991.

"Today, there is a global tide of protectionism. If the world is open for business, it still makes sense for us to remain open as well. If the world is retreating, we should also protect our business. After 1991, MSMEs suffered massively. I congratulate this government for trying to repair this damage," he said.

BJP MP Subramanian Swamy said the criticism from Panagariya is surprising because for three and a half years, he himself was a part of the establishment and was privy to all discussions that take place inside the government.

"I don't know why he is so surprised at this budget. And it is not like he was sacked, in the way Raghuram Rajan was. He (Panagariya) himself wanted to leave because he was worried he might lose his job at Columbia University," said Swamy.

Mahajan alleged that Panagariya, even when in the government, had tried to "lobby" against several of the government’s key initiatives. "It was in the BJP's 2014 election manifesto that the party would raise the Minimum Support Price by 50% if it came to power. Why do you think it took the government this long to announce this measure? It was because a lobby had been created against the MSP proposal. Panagariya was opposed to raising MSP," he said.

Both Mahajan and Swamy said Panagariya, in hindsight, was unsuited to head the NITI Aayog since he was a "foreigner" who did not understand the ground realities in India. Mahajan said, "Foreign economists often bat for the trickle-down model of growth, even if it means jobless growth. In my opinion, growth should be inclusive."

Swamy said, "I think it would have been better if we had had someone like Dr. Vaidyanathan instead, who is a pakka swadesi economist."

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