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Swamy Was Silly On Rajan But He Has A Point On Arvind Subramanian

22/06/2016 2:51 PM IST | Updated 18/07/2016 9:05 PM IST
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In this photograph taken on May 9, 2016, Subramanian Swamy, an Indian politician and a member of the Rajya Sabha, the upper house of the Indian parliament, gestures during an interview with AFP in New Delhi. He's been called India's Donald Trump: a media-savvy right-wing populist who is unafraid of upsetting everyone from the ruling elite to religious minorities as he rails against corruption. And after returning to parliament following a 15-year absence, Subramanian Swamy says he won't temper his shoot-from-the-hip style that has made him one of India's most popular if divisive politicians. / AFP / MONEY SHARMA / TO GO WITH AFP STORY BY BHUVVAN BHAGGA (Photo credit should read MONEY SHARMA/AFP/Getty Images)

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 Global Development.

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?

ALSO READ: After Rajan's Exit, Subramanian Swamy Is Gunning For Chief Economic Advisor

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 in India.

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."

arvind subramanian

(Chief economic adviser at India's Finance Ministry, Arvind Subramanian, speaks at the Global Business Summit in New Delhi, January 17, 2015. REUTERS/Anindito Mukherjee)

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.

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 protectionist.

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 multilateralism.

Perhaps India should stop shopping for people with a Rajan/Arvind template.

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 Economic Survey.

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 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.­

subramanian swamy

(BJP leader Dr. Subramanian Swamy addressing a press conference at Delhi Pradesh BJP office on November 5, 2013 in New Delhi, India. Swamy said the AAP was an 'anti-national' party and would struggle to win even a single seat in Delhi. Photo by Virendra Singh Gosain/Hindustan Times via Getty Images)

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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