Day 69 – Q 3. In an era where connectivity between men has increased, why do you think countries are opting for more protectionist policies rather than being more global? What impact can it have on India?
3. In an era where connectivity between men has increased, why do you think countries are opting for more protectionist policies rather than being more global? What impact can it have on India?
Protectionism is the economic policy of restricting imports from other countries through methods such as tariffs on imported goods, import quotas, and a variety of other government regulations. In recent times some protectionist measures taken such as USA opting out of TPP (Trans Pacific Partnership), restrictions on H1B visa, BREXIT etc. brings to light that challenges which protectionist measures are posing to globalised world.
Reasons for protectionist policies:
- Global slowdown since 2008 financial crisis.
- To correct balance of payments disequilibrium as demand for imports is dampened and exports promoted. Example is US-China trade war.
- To prevent dumping, this is where economies sell goods in overseas markets at a price below the cost of production.
- Unsound fears of xenophobia, Islamophobia etc.
- Rise of right wing politics at global level leading to political Leaders en-cashing on fears of natives for political mileage.
- To safeguard domestic employment as protectionist policies reduce import penetration.
- Also employed to give boost to domestic manufacturing.
Impact on India:
- Dumping to India will increase if countries like US impose trade restrictions.
- Financial instability risks – corporate vulnerability is enhanced as global trade and growth decline as indicated by Global Financial Stability Report. India is already burdened with the twin balance sheet problem, this will add to its woes.
- Decline in exports which are already suffering.
- Could trigger capital outflows.
- Unemployment – BPO (Business Process Outsourcing) shifted to home countries.
- Negative impact on IT industry due to restrictions imposed on H1B visa as Indian IT professionals constitute major beneficiaries.
- Effect on foreign remittances of which India is major beneficiary.
- Surge in Hate crimes against Indians may rise due to such prevailing rhetoric in these countries.
This sudden surge in protectionist measures in globalised world also presents an opportunity for India to diversify its engagements with the other nations with which there exists enormous potential for cooperation and collaboration and expand its reach to the unchartered territories.
Best answer: P29