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T N C Rajagopalan: Panagariya effect on export policy?

The Niti Ayog Deputy Chairman is known as a free-market economist averse to Preferential Trade Agreements

TNC Rajagopalan 

TNC Rajagopalan

Will the constitution of Niti Aayog, the National Institution for Transforming India, with Arvind Panagariya, as its Deputy Chairman, open a very different approach to our

Panagriya is known as a free-market economist, in the sense that his stress on encouraging private businesses as a means to higher economic growth is recognised. He is also acknowledged as protégé of Jagdish Bhagwati, a celebrated economist on international trade matters. He is known to be averse to (PTA) and perceived as an opponent of trade-distorting subsidies. His views might influence in three different ways.

As far back as 1996, Panagariya and Bhagwati, in their book, ‘The economics of preferential trade agreements’, had advocated that the United States reject preferential trading in favour of the more beneficial goal of non-preferential trading. In his book, ‘Termites in the trading system’, Bhagwati, had argued that PTAs endanger the world trading system. He argued against the near-destruction of the non-discrimination principle, at the heart of the post-war trade architecture, and its replacement by what he called the spaghetti bowl of a maze of preferences. Panagriya and Bhagwati have extensively discussed and talked at various forums on how PTAs have undermined the prospects for multilateral freeing of trade, serving as stumbling blocks, instead of building blocks, for the objective of freer international trade.

So, it is reasonable to expect that as the de facto chief of the national policy think tank, Panagariya might steer India away from several PTAs and more in favour of the multilateral trading system represented by the World Trade Organization (WTO). As it is, many in India have questioned whether the various PTAs have benefited producers and consumers. Some have even asked if India should terminate its agreements. Panagariya might subject all such agreements, including the so-called ‘Look East’ or ‘Act East’ policies, to stringent scrutiny.

Second, he might take a closer re-look at India’s stand on various issues at the His belief that multilateralism is better than regionalism might not go down well with many who consider any shrinking of policy space due to binding international agreements as undesirable. He could have an uphill task in bringing others to his point of view and find that articulating one’s view as an academic is different from actually influencing national policies. Even so, it is comforting that his keen understanding of the nuances of various issues at the and global perspective on how the relevant issues play out in different countries will help objective analysis and meaningful discourse on the subject.

Third, Panagariya might take a view that export subsidies must be phased out. Most economists believe non-essential subsidies must be. One objective of is to facilitate negotiations that will phase out trade-distorting subsidies. As a strong votary of negotiations for multilateral trade agreements and supporter of the basic objectives of WTO, Panagariya might prefer to do away with export subsidies over a period of time. And, prefer to divert the funds for enabling infrastructure and reform of the regulations, for enhancing the productivity of local producers.

First Published: Sun, January 11 2015. 16:19 IST