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'Protectionist' rap on budget

New Delhi: Former Niti Aayog vice-chairman Arvind Panagariya has said the Narendra Modi government's latest budget signals a return of the pre-1991 protectionist "Licence Raj".

"Budget 2018 resurrected a policy that had been consigned to the dustbin of history and economics," Panagariya wrote in The Economic Times on Monday.

The comments are significant because the Indian-American economist had strongly backed Modi in the run-up to the 2014 Lok Sabha polls and was chosen by the Modi government to head its policy-making body, the Niti Aayog.

"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 phones and motor vehicles in Budget 2018 have ended optimism," Panagariya wrote.

Increased protection to mobile phones "helps local mobile producers, but raises the price that consumers pay. Some consumers are entirely priced out, undermining progress towards digital India", Panagariya wrote.

The RSS economic wing, the Swadeshi Jagran Manch, responded sharply to the comments. "We stand vindicated. People like Panagariya didn't allow the government to do many things in the interest of the country. When the whole world is moving towards protectionism, why should India be different?" Swadeshi Jagran Manch national convener Ashwani Mahajan said.

The Manch had launched an all-out attack on Panagariya while he was at the Aayog and had celebrated his exit when he left citing personal reasons early last year.

Panagariya rubbished the logic of protecting medium and small enterprises. "Until 2001 we had a near ban on the imports of most products produced by them.... We followed these policies for 50 years and yet produced no notable success."

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