[Ip-health] Swamy Was Silly On Rajan But He Has A Point On Arvind Subramanian
kumargopakm at gmail.com
Wed Jun 22 05:10:24 PDT 2016
After badmouthing the outgoing Reserve Bank governor Raghuram Rajan,
Subramanian Swamy’s new target is the Prime Minister’s Chief Economic
Advisor Arvind Subramanian.
In Rajan’s case, Swamy was apparently batting for the BJP’s collective
interest. Is he doing the same for Arvind as well because he is one of the
hopefuls to head the RBI?
Whether Swamy has the tacit support of the powers that be in the BJP -
particularly the finance ministry and even the PMO - or not, he is probably
right in this case. Rajan, although more or less from the same school of
economics, has been politically relevant to a plural, secular India; but
Arvind had a professional past and a economic philosophy that do not befit
a strategic role in Indian economics or politics.
Most part of the story is rather old and Swamy is in fact a bit late in
pushing them now. It dates back to Arvind’s days in the US as a senior
fellow at the Peterson Institute for International Economics and Center for
In March 2013, in a crucial testimony before the 'Ways and Means Committee
of the United States Congress', which was hearing on US-India trade
relations, he spoke for protecting American rights in India. According to
him “protectionism” and “recourse to localisation”, the pejorative western
euphemisms of our struggle for survival, in India favoured domestic
providers over foreign providers and hence were challenges to the US.
This is what he had said
“US business faces three major challenges in India. Two challenges common
to all foreign business are: first, the weak and uncertain regulatory and
tax environment that affects the civil nuclear industry, infrastructure,
pharmaceuticals, and more broadly the operations of foreign multinationals
Second, although the broad macroeconomic picture is one of opening and
surging trade and investment, protectionism in selected sectors has
re-surfaced. India is seeking increasing recourse to localization -- in
banking, telecommunications, retail, and solar panels among others -- which
favours domestic providers of inputs and equipment over foreign providers.
Thus, broad trade and macroeconomic policies toward foreigners are moving
in the right direction but sectoral policies have experienced setbacks.”
He went on to add: "American firms are increasingly facing implicit but
substantial discrimination in India’s large and growing market because of
India signing (or on the verge of signing) free trade and economic
partnership agreements with its largest trading partners that are all major
competitors to the US: Europe, Japan, Singapore, ASEAN, and possibly
ASEAN-plus 6. Soon, if not already, this discrimination may be the bigger
challenge for US business than some recent sectoral measures.
These RTAs are neither as comprehensive in their coverage across and within
sectors as the FTAs negotiated by the United States, nor as expeditious in
the time frame for implementation. But they provide more favorable access
to non-American suppliers and because India’s tariffs and barriers can be
high, the discrimination can be substantial. Combined with the fact of
India’s large and growing market, US suppliers can really be disadvantaged."
This was exactly the language the Big Pharma and other business monopolies
from the US and EU had been using against India. They had a problem with
India’s legitimate use of TRIPS flexibilities that seek to ensure fair drug
prices, and instruments for industries and agriculture that were essential
for India’s survival. He echoed the western criticism that they were
Arvind was obviously advising the US on how to do business with India. And
his tone and tenor was that of an American trade specialist who was quite
keen on protecting his country’s interests. And this man should never have
been given a strategic role in India’s policy space. In fact, even the RSS
swadeshi think-tanks didn’t want him, but probably the fetish for the
IMF/WB roster done the Modi government in.
Arvind is also a strong advocate for the TPP (Trans-Pacific Partnership
Agreement), which activists in India and elsewhere are extremely wary of.
The TPP is a short cut to nullify all that India has legitimately
safeguarded in terms of international trade. As Shailjia Singh, an
assistant professor at the Centre for WTO studies, wrote in The Hindu
“By not being part of the TPP, India will certainly incur losses on account
of trade diversion. Yet, joining the TPP is not an option for the country.
This would entail very heavy costs. Medicine prices, for instance, would
see steep increases. That is precisely why mitigating such projected losses
from the TPP should be a government imperative. This can only be achieved
by a cohesive trade policy approach on the international as well as
domestic front, aimed at protecting and promoting India’s trade interests.”
In other words, India stands to lose more than what it’s purported to gain.
TPP is an American pivot and there is immense pressure on India. Through
the TPP, and more specifically through its investor-state dispute
settlement (ISDS) mechanism, the Indian intellectual property regime and
WTO-enabled safeguards will come under tremendous stress. It’s a classic
example of unfair plurilateralism short-circuiting the benefits of
Arvind obliquely voices this pressure when he asks: “It’s not just about
economics. Especially with (the current) prime minister, what India you
want to project: an India that is out of everything or an India that is
part of everything? And the same pro-TPP position also finds a place in the
And finally, the whole idea of importing US-based expats from the IMF/WB
rosters. It’s high time countries like India looked at them with
circumspection than blind faith, particularly when these institutions are
self-admitting to their failures that had once been prescribed as sure
recipes for success such as the Chilean model of reforms.
In a recent paper, the IMF admitted to
<http://www.imf.org/external/pubs/ft/fandd/2016/06/ostry.htm> its folly of
overselling neo-liberalism. “Instead of delivering growth, some neoliberal
policies have increased inequality, in turn jeopardizing durable
expansion”. The paper even concluded that Joseph Stiglitz was a better fit
for the world than Milton Friedman. What Indians should take note is this
self-deprecating point from the high priests of international economic
policy: “policymakers, and institutions like the IMF that advise them, must
be guided not by faith, but by evidence of what has worked.
Perhaps India should stop shopping for people with a Rajan/Arvind template.
Many developing countries have done it and paid the price. We have had
great Indian talent advising the country and we still have more of them. We
need home-grown development economists (overseas training is not a bad idea
though) balancing the need and quest for growth. Even its creators have
dubbed the pure neoliberal model as a failure. For an optimum mix of growth
and welfare, India needs Indians who are not tied to the American agenda
that masquerades as policy.
In that limited sense, Swamy is right.
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