While there are many good grounds on which to question India's integration into the world economy, the Confederation of Indian Industry's pre-budget arguments to the finance minister to continue to protect Indian industry by not cutting peak tariff rates further, ought to rank as amongst the more disingenuous. Small scale farmers worried about the corporatization of agriculture, consumers worried about drug prices, the poor worried about inequality and citizens worried about democracy have worries that are at least prima facie plausible. But it seems a little pathetic when the captains of Indian industry, the creators of a system of protection that lasted more than four decades, the biggest beneficiaries of our decrepit licence-quota raj system, claim the exalted moral status of victims of globalization. They have emerged as the unexpected champions of protectionism. While of course it would be grossly unfair to indict any large class of people and treat them as if they were homogeneous, it is fair to say that many of our old industrial entrepreneurs are deeply complicit in the system that produced poor economic performance. Their demand for more protection, their claim to a perpetual infant status, has little to do with the interests of the nation, or with fairness in trade. It has more to do with the last remnants of the licence quota raj in big industry, clinging on to state sponsored protectionism, rather than reforming themselves. And what better way to do so than to wear the garb of swadeshi? There are of course real issues in the fairness of international trade and the access that developing countries get to the markets of the developed world. But it is odd to argue that it is the Bajajs of Indian industry who are the victims of this unfairness. The arguments in favour of continued protection of Indian industry seem to run as follows. The main argument is that given the cost structure Indian industry faces: poor infrastructure, high interest rates and so on, subjecting it to international competition will be unfair. In one sense this argument is, literally speaking, true. It is true that the state's lower investment in infrastructure and in human resources are all beginning to hamper Indian industry and make it less competitive. But the adverse costs that Indian industry faces are a consequence of not liberalizing the economy earlier. Low productivity, outdated technologies, unprofessional management, poor research and development, lack of proactive marketing: the real weaknesses of Indian industry are a direct consequence of being protected and coddled for so many years. It has also been almost ten years since India started its process of economic liberalization: much of the Indian industry now seeking protection did very little to adapt itself to the changing environment. The CII ought to ask itself: is ten years not slow enough for the pace of reform? Indian industry has often made this argument that internal liberalization should precede external liberalization. This would allow Indian industry to tap the Indian market, generate more resources and be prepared for external challenges. This argument is good, but only in theory. The main problem is that Indian industry's idea of entrepreneurship has generally been ill-suited to a genuinely competitive market economy. Most Indian industrial houses made their fortunes by manipulating the state, and their entrepreneurship consisted largely in being able to subvert state rules for their own ends rather than creating products that someone might actually want. Some were masters at this game, transformed themselves to become genuine corporations capable of competing on a global scale. But most Indian industry, judged by its own whining, seems ill-prepared for the entrepreneurial challenges of a genuine market economy. The trouble with domestic liberalization in the absence of external liberalization is this. Domestic liberalization alone is less likely to have a transformative impact on the culture of entrepreneurship in India. It is most likely to benefit only existing large Indian industrialists by allowing them to increase their domestic market shares, but is unlikely to force them to do the things that viable long term corporations need to do: professionalize their management, constantly innovate, invest in research and development, and have proactive market strategies. The main problem with Indian industry is probably as much cultural as it is economic. The future of Indian companies will not only depend upon the availability of markets, but also their capacity to function differently in terms of their own internal organization. It is a sad truth about our institutions that they seldom reform unless subject to serious external pressure, and Indian industry most of all needs to be subject to that pressure. Let the real entrepreneurs win. It is also hardly the case that Indian industry can claim to have been models of corporate social responsibility. Indeed the debate over the proper social role of corporations, their commitments to creating public goods, their ability to invest in education have been made possible largely by a new generation of entrepreneurs in the information technology sector whose philanthropic energies seem more constructively directed than those donning the mantle of swadeshi. In part, the case for external liberalization, whatever its economic merits, rests upon a confidence that India has the entrepreneurial capacity to take advantage of its integration into the world economy. The best argument for not giving the industrialists of the CII protection is the one given by the CII itself. In effect, by asking for more protection, by raising the spectre that Rahul Bajaj has raised, that most members of the CII will be reduced to traders, the CII has made a powerful case that it does not deserve protection. For in a roundabout way, it has admitted that those whose interests it represents do not have the capacity to compete. If they do not have the capacity to compete, it is unlikely that they will do much for the Indian economy, protected or otherwise. If they do there is little reason to whine and be afraid. All of this is not an argument against seeking nuance in the terms of our engagement with the world economy. But it is to suggest that this plea for nuance and protection is ill-deserved in the case of Indian industry, or at least that part of the industry the CII seeks to represent. After all, one of the few unnoticed facts about the Indian economy in the last few years is this. We have been able to maintain relatively low rates of inflation despite running high fiscal deficits. There is something of a case to be made that this is due to import liberalization and lowering of tariffs. Indian industry, for a long time, ill- served Indian customers. Perhaps even more than the state they exemplified our corruption, inertia and closed minds. The only way to reform them is to subject them to external competition. The author is professor of philosophy, law and governance, Jawaharlal Nehru University, New Delhi