Protectionism - An Anachronistic diktat

I developed this habit of noticing things on road, in an 'economics' sense, when I get my cherished ride with my dad. This was an inspiration derived from my economics professor in college. And as with many professors in economics, his views were not as pro-liberalism.

It was at my age 15. I had this urge of getting the best value for the money whenever I purchased something. Or I must say I enjoyed the articulation & evaluation of goods. This however, was in stark contrast to my dad's ages, when he had to choose among two brands (maximum) and many industries had a virtual monopoly market. Coming back, and so, I was evaluating my options for my dad's new bike. I did this, by literally counting out the bikes on road and striking it out on paper. But after two or three such counting, I felt that there was no necessity for such an exercise. TVS-Suzuki's Max R 100 was the maximum running, on road. Next came Splendor. This was about a decade ago.

And today, coming back to my habit of noticing things on road, in an 'economics' sense, when I get a ride with my dad. I had read earlier that Maruthi sells every second car in India. Honda & Hyundai sales are growing exponentially. Luxury car makers are finding bookings equal to their expected annual sales on day one. It kept me wondering about foreign brands that set up shop or JVs in India.

Way back, post-independence, we followed import substitution. This was necessary then, because Indian industries were in a pathetic condition, considering the long gone freedom. It worked, or so, many professed. I am in no way competent to contest that. But this far, are we still following protectionist policies? By import substitution, we meant to put a cap on imports of goods so that Indian firms had the time to recover to produce competitive goods. This should ideally had given many Indian firms the much needed breather time for getting on par with foreign brands. But thinking of my father's era, I feel that this has actually led to a virtual monopoly of Indian firms. The other extreme.

After the liberalization in '91, Indian firms started fumbling, but then on, JVs did very well. But by way of JV, is it the foreign brands that were actually competent and is the Indian firm giving the necessary technical inputs? The relevance of the earlier question is in the light of the fact that TVS products lost their value post their decoupling with Suzuki, in 2001. What started as a venture in 1980 and tied with Suzuki in 1987, became a pure Indian entity in 2001. To quote an incident, I was looking through old used vehicles, when I wished to choose a MAX R 100, a tribute to my endeavor of finding out the best bike to buy for my dad, a decade ago. I was told to select a vehicle that’s at least 8 yrs old. This was exactly when TVS came off the Suzuki JV. This went as easy proof that vehicles produced by our Indian entity, TVS Motors, was not technically competent enough, considering that its a simple repurchase from junkyard. However, as time went by, TVS has adapted to the change and is now a competent brand, whatsoever.

This brings us to the question, should we still continue to protect native products? When are we going to allow native industries to face competition? Though liberalization has happened, we still have FDI caps in many sectors, telecom & commodities to quote a few. The import substitution era hadn't created firms like TVS. Only liberalization has done the needful. When we continue to protect, we might make them even more incompetent.


Allow the child to grow. Keep carrying it, it will never even crawl.