Continue with reform process: Montek Singh Ahluwalia 

‘We should remain open, resist temptation to raise protective duties’

Former Deputy Chairman of the erstwhile Planning Commission Montek Singh Ahluwalia, who played a key role when India set out on major economic reform process in the early 1990s, has cautioned against deviating from the path and resorting to protectionist measures.

“We have a long way to go... certainly [should] not say because of what happened [elsewhere] it is good for us to close down. It would be a horrendous mistake. We should remain open and resist the temptation to raise protective duties,” Mr. Ahluwalia said delivering the inaugural Abhay Tripathi Memorial Lecture, on ‘Economic reforms: Yesterday, Today and India@75’, at the Dr.MCR HRD Institute of Telangana here.

Pointing to significance of accelerating the process as “what we achieved in 30 years should have been achieved in 15 years,” the well-known economist said there is more interest in reforms now than before as the world begins to look beyond China for manufacturing and sourcing products. The COVID-19 pandemic had only accentuated the process of diversification in the supply chain that until now was heavily dominated by China.

While the rest of the world will continue to do business with China, there will be a tendency to diversify supply chains or adopt a China plus one strategy. “It becomes an opportunity for India... [thus] our own policies have to be open,” he said, adding how the Russian invasion of Ukraine and Chinese support for it has added a new dimension to a world already facing multiple challenges.

“We also need to recognise there are no magic bullets as you move into a more complicated world and a more complicated economy,” he added.

Responding to a query on whether the Centre had carried out all the big bang reforms and was it upto the States now to carry the process forward, Mr. Ahluwalia said a lot remains to be done by the Centre, especially on the Goods and Services Tax in terms of making it an ideal GST. “[While] both the Centre and States are involved, the Centre can take the lead. On Customs duties, we are making a mistake by raising... should go back to lowering the duties on industrial products in order to make the economy competitive. A lot of procedural changes [are required]... need to benchmark ourselves against what is going on in the rest of the world,” he said.

“To my mind a completely non-controversial reform which would make a huge difference is if we could get rid of the dual regulation of public sector banks by the RBI and the Ministry of Finance. The RBI should be the only regulatory agency over the public sector banks,” Mr. Ahluwalia said.